pac-20f_20191231.htm

(Name, telephone, e-mail and/or facsimile number and address of company contact person)

*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:

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ☐ No ☒

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). N/A

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards* provided pursuant to Section 13(a) of the Exchange Act. ☐

*The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As previously reported by Grupo Aeroportuario del Pacifico, S.A.B de C.V. in its current report on Form 6-K as filed with the U.S. Securities and Exchange Commission on April 24, 2020, the filing of this annual report on Form 20-F for the period ended December 31, 2019 was delayed due to circumstances related to COVID-19. As a result of the COVID-19 pandemic, has caused severe disruptions in travel and transportation, as well as limited access to the Company’s facilities, resulting in limited support from its staff. This has, in turn, delayed the Company’s ability to complete the 2019 Annual Report and the 20-F Report, as a result, the Company included the risk factors section in the report.

The Company is relying on the U.S. Securities and Exchange Commission Order Under Section 36 of the Securities Exchange Act of 1934 Granting Exemptions from Specified Provisions of the Exchange Act and Certain Rules Thereunder (SEC Release No. 34-88318) dated March 4, 2020, as amended, on March 25, 2020 (SEC Release No. 34-88465) to file this annual report on the date hereof.

This annual report on Form 20-F contains forward-looking statements. We may from time to time make forward-looking statements in our reports to the Securities and Exchange Commission, or the SEC, on Forms 20-F and 6-K, in our annual reports 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 financial analysts, institutional investors, representatives of the media and others. Examples of such forward-looking statements include:

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 projections, plans, objectives, expectations, estimates and intentions expressed in forward-looking statements. These factors, some of which are discussed below 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, Jamaica 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 eventualities related to other risks and uncertainties, including the duration and severity of the recent coronavirus (“COVID-19”) outbreak and its impacts on our business; may cause actual results to differ materially from those expressed 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.

The following tables present selected financial and other data for each of the periods indicated. This data should be read in conjunction with, and is qualified in its entirety by reference to, our audited consolidated financial statements referred to in Item 18 hereof and included elsewhere in this document, including the notes thereto. Our audited consolidated financial statements are prepared in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB.

References in this annual report on Form 20-F to “U.S. dollars” or “U.S.$” are to the lawful currency of the United States of America. References in this annual report on Form 20-F to “pesos,” “Mexican pesos” or “Ps.” are to the lawful currency of Mexico. References in this annual report on Form 20-F to “Jamaican dollars” or “J$” are to the lawful currency of Jamaica. We publish our audited consolidated financial statements in Mexican pesos.

This annual report on 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.18.8600 to U.S.$1.00, the noon buying rate for pesos on December 31, 2019, as published by the U.S. Federal Reserve Board. On May 22, 2020, the exchange rate for pesos as published by the U.S. Federal Reserve Board was Ps.22.7380 to U.S.$1.00.

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. When we refer to “terminal passengers,” we mean the sum of all arriving and departing passengers on commercial and general aviation flights, other than transit passengers. “Transit passengers” are those who are generally not required to change aircraft while on a multiple-stop itinerary and who generally do not disembark from their aircraft to enter the terminal building. When we refer to “total passengers,” we mean the sum of terminal passengers and transit passengers. When we refer to “commercial aviation passengers,” we mean the sum of terminal and transit passengers, excluding general aviation passengers, such as those on private, non-commercial aircraft. This annual report on Form 20-F contains references to “air traffic movements,” which represent the sum of all aircraft arrivals and departures of any kind at an airport.

In reviewing this annual report, you should take into account the fact that certain margin and ratio calculations that utilize “total revenues” or “total operating costs” will reflect the effects of International Financial Reporting Interpretation Committee 12 Service Concession Arrangements (“IFRIC 12”), which provides the accounting treatment to be followed for service concession contracts for services considered to be public in nature. We recognize revenues and the associated costs of improvements to concession assets that we are obligated to perform at the airports as established by our Master Development Programs for our Mexican airports and by our Capital Development Programs for our Jamaican airports. The amount of revenues for these services are equal to the amount of costs incurred, as we do not obtain any profit margin for these construction services. The amounts paid are set at market value. As a result, revenues from improvements to concession assets do not have a cash impact on our results and do not represent a cash inflow. Furthermore, they are not directly related to our passenger traffic, which is the main driver of our revenues.

Consequently, changes in total revenues, total operating costs, operating margin, total revenues per terminal passenger and other ratios included in this annual report, as well as other ratios potentially useful to investors, may not be comparable between periods. In such instances we have included a parenthetical notation with comparable amounts or measures. Nominal results for amounts used in calculating certain margins, such as income from operations, are not affected by the adoption of IFRIC 12 and are therefore comparable. See “Item 5, Operating and Financial Review and Prospects – Critical Accounting Policies.”

As a result of our acquisition of Desarrollo de Concesiones Aeroportuarias, S.L. (“DCA”) in April 2015, our selected consolidated financial and operating data for the fiscal year ended December 31, 2015 includes the consolidation of DCA’s financial and operating data from April 1, 2015. Therefore, financial and operating data for the fiscal year ended December 31, 2015 may not be directly comparable with financial and operating data for prior or subsequent fiscal years. DCA has a 74.5% stake in MBJ Airports Limited (“MBJA”), the entity that holds the concession to operate the Sangster International Airport in Montego Bay, Jamaica (the “Montego Bay International Airport” or “Montego Bay airport”). MBJA uses the U.S. dollar as its functional currency, and its financial statements are prepared in accordance with IFRS. As a result, consolidation of MBJA’s financial statements with GAP’s financial statements do not require any substantial accounting changes.

On October 10, 2019, we took control of the operation, management and administration of the Norman Manley International Airport (“NMIA”) located in Kingston, Jamaica, pursuant to a concession agreement that we signed with the Government of Jamaica on October 10, 2018 (the “NMIA Concession Agreement”). PAC Kingston Airport Limited (“PACKAL”), our wholly owned Jamaican subsidiary incorporated in September 2018, holds the concession for the operation of NMIA. As a result of taking over the operation and management of NMIA in October 2019, our selected consolidated financial and operating data for the fiscal year ended December 31, 2019 includes the consolidation of PACKAL’s financial and operating data from October 10, 2019. Therefore, financial and operating data for the fiscal year ended December 31, 2019 may not be directly comparable with financial and operating data for prior fiscal years. PACKAL uses the U.S. dollar as its functional currency, and its financial statements are prepared in accordance with IFRS. As a result, consolidation of PACKAL’s financial statements with GAP’s financial statements do not require any substantial accounting changes.

		Year ended December 31,
	2015				2016				2017				2018				2019 (1) (13)				2019 (1)
		(thousands of pesos, except per share and per ADS data)																			(thousands of U.S. dollars; except per share and per ADS data) (1)
Profit or loss and other comprehensive income data:
Revenues:
Aeronautical services (2)	Ps.		5,419,022		Ps.		7,037,920		Ps.		8,280,522		Ps.		9,499,154		Ps.		10,547,720		U.S.$	559,264
Non-aeronautical services (3)			1,849,252				2,393,604				2,772,905				3,183,532				3,771,500			199,973
Improvements to concession assets (4)			838,635				1,676,037				1,312,491				1,440,204				1,906,801			101,103
Total revenues			8,106,909				11,107,561				12,365,918				14,122,890				16,226,021			860,340
Operating costs:
Costs of services:
Employee costs			502,794				584,560				663,360				773,630				877,068			46,504
Maintenance			302,203				346,805				505,352				528,929				578,510			30,674
Safety, security & insurance			249,752				282,310				317,023				386,079				428,208			22,705
Utilities			192,158				222,891				278,895				334,994				380,370			20,168
Other			311,351				345,805				345,777				430,090				480,708			25,488
Total costs of services			1,558,258				1,782,371				2,110,407				2,453,722				2,744,864			145,539
Technical assistance fees (5)			236,507				301,820				357,451				411,477				461,549			24,472
Concession taxes (6)			483,086				764,349				944,197				1,076,350				1,318,220			69,895
Depreciation and amortization:
Depreciation (7)			206,724				300,880				324,460				400,205				446,517			23,675
Amortization (8)			949,711				1,047,507				1,119,102				1,169,432				1,329,620			70,499
Total depreciation and amortization			1,156,435				1,348,387				1,443,562				1,569,637				1,776,137			94,175
Other (income) expense			(254,612	)			(295	)			(83,921	)			(73,152	)			1,212			64
Cost of improvements to concession assets (4)			838,635				1,676,037				1,312,491				1,440,204				1,906,801			101,103
Total operating costs			4,018,309				5,872,669				6,084,187				6,878,238				8,208,783			435,248
Income from operations			4,088,600				5,234,892				6,281,731				7,244,652				8,017,238			425,092
Finance cost - net			(456,810	)			(603,032	)			(99,389	)			(236,033	)			(671,132	)		(35,585	)
Share of loss of associates			(13,704	)			(11,728	)			(10,620	)			(947	)			79			4
Income before income taxes			3,618,086				4,620,132				6,171,722				7,007,672				7,346,185			389,511
Income tax expense			847,309				1,266,573				1,440,641				1,869,041				1,891,443			100,289
Profit for the year			2,770,777				3,353,559				4,731,081				5,138,631				5,454,742			289,223
Other comprehensive income
Exchange differences on translating foreign operations		482394					773,453				(226,494	)			(103,569	)			(269,440	)		(14,286	)
Remeasurements of employee benefit – net of income taxes		n/a				10773					(2,602	)			(161	)			(1,404	)		(74	)
Cash flow hedges, effective portion of changes in fair value, net of income tax		n/a				n/a				n/a				n/a					(172,094	)		(9,125	)
Total comprehensive income for the year			3,253,171				4,137,785				4,501,985				5,034,901				5,011,804			265,737
Profit for the year attributable to:
Controlling interest			2,726,020				3,281,884				4,649,120				5,037,368				5,360,152			284,207
Non-controlling interest		44757					71,675				81,961				101,263				94,590			5,015
Profit for the year			2,770,777				3,353,559				4,731,081				5,138,631				5,454,742			289,223
Total comprehensive income for the year
Controlling interest			3,141,513				3,948,323				4,451,659				4,936,526				4,937,027			261,772
Non-controlling interest		111658					189,462				50,326				98,375				74,777			3,965
Total comprehensive income for the year			3,253,171				4,137,785				4,501,985				5,034,901				5,011,804			265,737
Basic and diluted earnings per share (9)	Ps.	5.1867			Ps.	6.2443			Ps.	8.8457			Ps.	9.5845			Ps.	10.1986			U.S.$	0.5408
Dividends per share (10)	Ps.	3.32			Ps.		4.0700		Ps.		5.7200		Ps.		7.6200		Ps.		8.4200		U.S.$	5.4075
Basic and diluted earnings per ADS (9)	Ps.	51.867			Ps.		62.4430		Ps.		88.4577		Ps.		95.8448		Ps.	101.9863			U.S.$	0.4464
Dividends per ADS (10)	Ps.		33.2000		Ps.		40.7000		Ps.		57.2000		Ps.		76.2000		Ps.		84.1954		U.S.$	4.4642
Other operating data:
Total terminal passengers (thousands of passengers) (11)			30,319				36,549				40,709				44,948				48,709
Total air traffic movements (thousands of movements)			462				513				527				552				557
Total revenues per terminal passenger (12)	Ps.		267		Ps.		304		Ps.		304		Ps.		314		Ps.		333		U.S.$	18
Aeronautical and non-aeronautical services per terminal passenger	Ps.		240		Ps.		258		Ps.		272		Ps.		282		Ps.		294		U.S.$	16
Statement of financial position data:
Cash and cash equivalents	Ps.		2,996,499		Ps.		5,188,138		Ps.		7,730,143		Ps.		6,151,457		Ps.		7,500,193		U.S.$	397,677
Total current assets			3,386,683				5,998,574				8,980,159				7,840,207				9,367,484			496,685
Airport concessions, net			12,240,167				12,384,923				11,754,661				11,412,118				10,821,596			573,786
Rights to use airport facilities, net			1,100,394				1,043,695				986,995				930,296				873,598			46,320
Total assets			31,473,399				36,051,462				39,517,532				39,550,502				41,577,804			2,204,549
Current liabilities			4,658,310				1,941,299				2,295,147				2,172,523				4,676,566			247,962
Total liabilities			9,317,356				13,646,893				17,440,763				17,778,353				20,908,361			1,108,609
Total equity attributable to controlling interest			21,273,951				21,333,015				21,028,215				20,708,985				19,628,172			1,040,730
Common stock			12,528,780				10,778,613				9,028,446				7,777,576				6,185,082			327,947
Non-controlling interest		882092					1,071,554				1,048,554				1,063,165				1,041,271			55,211
Statement of cash flows data:
Net cash flows provided by operating activities	Ps.		4,904,753		Ps.		5,641,203		Ps.		6,168,702		Ps.		7,235,619		Ps.		8,164,057		U.S.$	432,877
Net cash flows used in investing activities			(3,669,927	)			(1,816,557	)			(1,938,575	)			(2,550,411	)			(2,586,095	)		(137,121	)
Net cash flows (used in) provided by financing activities			166,171				(1,771,185	)			(1,687,316	)			(6,166,694	)			(4,231,529	)		(224,399	)
Effects of exchange rate changes on cash held:		n/a				138178					(806	)			(97,200	)			2,303			122
(Decrease) increase in cash and cash equivalents			1,400,997				2,191,639				2,542,005				(1,578,686	)			1,348,736			71,513

Developments relating to the outbreak of the COVID-19 may have a material adverse impact on our financial condition or results of operations.

In December 2019, a novel strain of coronavirus, known as COVID-19, was reported to have surfaced in Wuhan, Hubei Province, China. In January 2020, COVID-19 spread to other countries, including the United States, and efforts to contain the spread of this COVID-19 intensified. On March 11, 2020, the World Health Organization (the “WHO”) declared the COVID-19 outbreak a pandemic. On March 19, 2020, the United States issued a travel advisory recommending that travelers avoid all international travel. The following day, on March 20, 2020, the United States closed its border with Mexico, except to essential travel and trade and commerce. On March 31, 2020, Mexico’s Ministry of Health issued a release suspending all non-essential activities in the country through April 30. On April 21, such suspension was extended through May 30, 2020. The Mexican government has implemented various measures to control the spread of COVID-19, including extraordinary actions, such as school closures and the suspension of non-essential activities, in the regions most affected. For purposes of these measures, airports are considered essential and our airports remain operational. Regarding our operations in our airports in Jamaica, the Government suspended all incoming international flights for a period of 14 days, starting March 25, 2020, excluding transportation of cargo and merchandise, and only allowed the departure of commercial flights, extending the suspension until May 31, 2020.

In 2003, an outbreak of a coronavirus known as severe acute respiratory syndrome (SARS) originating in China became an epidemic and resulted in a slowdown of passenger air traffic due contagion fears. COVID-19 is negatively affecting global economic conditions, including materially reducing demand for, and availability of, worldwide air travel and therefore may have a material adverse effect on our business and results of operations. For the month of April 2020, passenger traffic decreased 91.5% compared to passenger traffic during the same period the previous year.

The COVID-19 outbreak, and measures taken to contain or mitigate it, have had adverse consequences for the global economy, including on demand, operations, supply chains and financial markets. COVID-19 has led to travel restrictions imposed by governments, flight cancellations, and a marked decline in passenger demand for air travel, domestically and worldwide. The potential for a period of significantly reduced demand for travel has and will likely continue to result in significant lost revenue. See “Item 5, Recent Developments – Developments related to the outbreak of COVID-19.” As a result of these or other conditions beyond our control, our results of operations could be volatile and subject to rapid and unexpected change. In addition, if the spread of COVID-19 were to continue unabated, our operations could also be negatively affected if employees are quarantined as the result of exposure to the contagious illness.

The extent to which COVID-19 could adversely impact our results will depend on future developments that are highly uncertain and hard to predict, including new information which may emerge concerning the severity of COVID-19, the actions taken to contain COVID-19 or treat its impact and other developments which may impact public perception of the virus, among others. Further spread of the virus or additional travel warnings and restrictions may adversely impact the frequency and pattern of our domestic and international passenger traffic, which may adversely affect our business, financial condition or results of operations. The ultimate severity of the COVID-19 outbreak is uncertain at this time and therefore we cannot predict the impact it may have on passenger traffic and our customer airlines. We cannot currently fully predict the impact that the COVID-19 outbreak will have on global air travel and the extent to which it may impact the demand for air travel in the regions in which we operate. Continued travel restrictions or operational issues resulting from the rapid spread of COVID-19 could have a material adverse effect on our business and results of operations.

Furthermore, we could incur in additional operating expenses and significant investments related to new regulatory procedures in order to preserve the health of the passengers and the airport community, which could not be recovered through our maximum tariffs, as a result of this pandemic.

Our revenues are highly dependent on levels of passenger and cargo traffic volumes and air traffic, which depend in part 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. Our principal source of aeronautical service revenues is passenger charges. Passenger charges are payable for each passenger departing from the airport terminals we operate (except certain exclusions in each of Mexico and Jamaica, described below under “Item 4, Information on the Company – Business Overview – Our Sources of Revenues – Aeronautical Services – Passenger Charges”) and are collected by the airlines and paid to us. In 2017, 2018 and 2019, passenger charges represented 54.6%, 54.9% and 52.9% respectively, of our total revenues (in 2017, 2018 and 2019 passenger charges represented 61.1%, 61.1% and 60.0% respectively, of the sum of our aeronautical and non-aeronautical revenues).

Passenger and cargo traffic volumes and air traffic movements depend in part on many factors beyond our control, including economic conditions in Mexico, Jamaica, the United States, Canada and Europe, the political situation in Mexico, Jamaica and elsewhere in the world, public health crises, the attractiveness of the destinations that our airports serve relative to those of other competing airports, fluctuations in petroleum prices, disruptions of global debt markets and changes in regulatory policies applicable to the aviation industry. See “Item 5, Recent Developments – Developments relating to the outbreak of COVID-19 may have a material adverse impact on our financial conditions or

results of operations.” 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.

A global economic and financial crisis may lead to high volatility and lack of liquidity in the global credit and other financial markets. Such a downturn in the global economy may lead to increased commercial and consumer delinquencies, lack of consumer confidence, decreased market valuations, increased market volatility, high financial risk premiums and a widespread reduction of business activity generally. These conditions may also limit the availability of credit and increased financial costs for companies around the world, including companies in Mexico, Jamaica and the United States. Such a recession could significantly affect our ability to access credit to finance our future projects, therefore adversely affecting our business. See “Item 5, Recent Developments – Developments relating to the outbreak of COVID-19 may have a material adverse impact on our financial conditions or results of operations.”

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 international airports at Los Cabos, Puerto Vallarta, Montego Bay) may vary as a result of factors beyond our control, including the level of tourism in Mexico and Jamaica. In addition, our passenger traffic volume may be adversely affected by the attractiveness, affordability and accessibility of competing tourist destinations in Mexico, such as Acapulco and Cancun, or elsewhere, such as Hawaii, Puerto Rico, Florida, Cuba, the Dominican Republic, the other Caribbean islands and destinations in Central America. The attractiveness of the destinations we serve is also likely to be affected by travelers’ perceptions of the safety and political and social stability of Mexico and Jamaica, particularly as a result of the uncertainty and safety concerns resulting from the Mexican government’s ongoing effort against drug cartels. 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. A reduction in tourism to the destinations served by our airports could directly and indirectly affect our revenues from aeronautical and non-aeronautical services.

Negative economic developments in Mexico could reduce domestic passenger traffic at our Mexican airports, which would adversely affect our business and results of operations.

Although a substantial portion of our revenues is derived from foreign tourism, domestic passengers have represented two-thirds of the passenger traffic volume at our Mexican airports for the last three years. Aside from our operation of the Kingston airport, our interest in the Montego Bay airport concession in Jamaica and the operation of DCA in Spain, all of our assets are located, and all of our operations are conducted, in Mexico. Because our revenues are largely dependent on the level of passenger traffic at our airports, any decline in domestic traffic could have an adverse effect on our business, results of operations, prospects and financial conditions. Therefore, if inflation or interest rates increase significantly or the Mexican economy is otherwise adversely impacted, our business, financial condition and results of operations could be materially and adversely affected because, among other things, domestic demand for transportation services may decrease. For more information on the potential impact of negative economic developments in Mexico, see “Item 3, Key Information – Risks Factors – Risks Related to Mexico – Adverse economic conditions in Mexico may adversely affect our financial condition or results of operations” and “Item 5, Recent Developments – Developments relating to the outbreak of COVID-19 may have a material adverse impact on our financial conditions or results of operations.”

Our business is particularly sensitive to economic conditions and other developments in the United States.

Our business is particularly sensitive to trends in the United States relating to leisure travel, consumer spending and international tourism. In 2017, 2018 and 2019, 88.8%, 88.1% and 89.7%, respectively, of the international terminal passengers served by our Mexican airports arrived or departed on flights originating in or departing to the United States and 67.8%, 68.6% and 70.3%, respectively, of the passengers served by our Jamaican airports arrived or departed on flights originating on or departing to the United States.

Thus, our business is highly dependent on the condition of the U.S. economy, and events affecting the U.S. economy may adversely affect our business, results of operations and financial condition. In 2017, 2018 and 2019, the U.S. gross domestic product (“GDP”) increased at a rate of 2.3%, 2.6% and 2.1%, respectively, according to the U.S. Bureau of Economic Analysis. If the U.S. economy falls into a recession or economic growth in the U.S. decelerates significantly, it would likely have a material adverse effect on our results of operations due to decreased passenger traffic travel to and from the United States. See “Item 5, Recent Developments – Developments relating to the outbreak of COVID-19 may have a material adverse impact on our financial conditions or results of operations.”

Any decision taken by the current U.S. administration, including any changes to U.S. laws and policies governing foreign trade and foreign relations, that could have a negative impact on the Mexican economy, such as reductions in the levels of remittances, reduced commercial activity among the two countries or a slowdown in direct foreign investment in Mexico, could adversely affect our business and our results of operations.

On October 1, 2018, Mexico announced that it had reached an agreement with Canada and the United States to replace the North American Free Trade Agreement (“NAFTA”) with the United States Mexico Canada Agreement (“USMCA”). The USMCA was signed on November 30, 2018. Mexico, the United States and Canada ratified the USMCA on June 19, 2019, January 29, 2020 and March 13, 2020, respectively. We cannot predict the impact of the USMCA on particular industries or government policies and the changes to international trade and travel that may result, and consequently, we cannot predict what effect it will have on our business and our results of operations.

Other trends and developments in the United States may also adversely impact the frequency and pattern of our international passenger traffic, which may adversely affect our business, financial condition or results of operations. For example, any development that could make travel to and from the United States less attractive to our passengers, including any tax reforms and changes to economic policies that could create tension between the Mexican and U.S. governments or reduce economic activity between Mexico and the United States, could negatively affect the level of passenger traffic in our airports and could have an adverse effect on our business and our results of operations.

Changes in U.S. immigration and border policy could adversely affect passenger traffic to and from Mexico.

Immigration reform and border policies, especially with respect to Mexico, continue to attract significant attention in the U.S. government and public arena. If new federal immigration legislation is enacted, such laws may contain provisions that could make it more difficult for Mexican citizens to travel between Mexico and the United States. Our Tijuana airport is connected to the U.S. border by the Cross Border Express, or “CBX,” an international bridge that allows passengers to cross directly to the United States. By facilitating transfers between the United States and Mexico for travelers holding a boarding pass to all flights departing from or arriving in Tijuana and reducing connection and waiting times at both the San Isidro and Otay Mesa border crossings, the CBX has been a main driver in increasing passenger traffic at our Tijuana airport since its inauguration in December 2015. Any changes to U.S. laws and policies that could affect the operation of the CBX, could adversely impact the passenger traffic at the Tijuana airport, which could have an adverse effect on our business and our results of operations.

In addition, new immigration and border legislation could lead to uncertain economic conditions in Mexico that may affect leisure travel, including travel to and from Mexico. Such restrictions could have a material adverse effect on our passenger traffic results.

Levels of passenger and cargo traffic volumes and air traffic at our airports are highly sensitive to the impact on airlines of international petroleum prices and access to credit.

Our revenues are closely linked to passenger and cargo traffic volumes and air traffic movements at our airports, which are determined by the operating levels of airlines at our airports. Airlines’ costs are highly sensitive to the price of petroleum and their access to credit to finance their operations. Increased costs may increase ticket prices and reduce fleets, thereby decreasing flight frequencies and negatively impacting passenger and cargo traffic volumes.

International petroleum prices have experienced significant volatility in the recent past. For example, European Brent crude oil spot prices increased from U.S.$50.57 per barrel on December 28, 2018, to U.S.$67.77 per barrel on December 31, 2019, with an average price of U.S.$64.28 per barrel during 2019, according to the U.S. Energy Information Administration. The price of fuel may be subject to further fluctuations resulting from a reduction or increase in output of petroleum, voluntary or otherwise, by oil-producing countries, other market forces, a general increase in international hostilities, or any future terrorist attacks. High fuel prices result in increases in airlines’ costs and may lead to airline financial difficulties and bankruptcies, higher ticket prices, cancellations of routes and decreases in frequencies of flights, and may decrease demand for air travel generally. Each of these may reduce passenger and cargo traffic at our airports.

Most airlines also depend on reliable access to credit at interest rates they can afford to finance their fleet of aircraft and make other large investments. As evidenced by the 2008-2009 global recession and financial crisis, high interest rates and disruptions in the global debt markets had an adverse effect on airlines’ ability to operate their fleets, forcing many to raise ticket prices, cancel routes, decrease the frequencies of flights or forego scheduled investments. Such reductions in operations by airlines lead to lower passenger and cargo traffic volumes at our airports, which may have an adverse impact on our results of operations.

See “Item 3, Key Information – Risks Factors – Risks Related to Our Operations – The loss of, or suspension of operations by, one or more of our key customers could result in a loss of a significant amount of our revenues” for a more detailed description of which of our major airline customers have recently reduced or cancelled operations at our airports.

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

In 2019, approximately 82.7% of the sum of aeronautical and non-aeronautical revenues was generated from five of our fourteen airports. The following table lists the percentage of the sum of aeronautical and non-aeronautical revenues generated at our airports in 2019:

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

International events, including acts of terrorism, wars and global epidemics, could have a negative impact on international air travel.

International events may negatively impact international air travel. Terrorist attacks, wars, other armed conflicts, and public health crises could negatively affect the frequency and pattern of air travel worldwide.

Any future terrorist attacks, whether or not involving aircraft, may adversely affect our business, results of operations, prospects and financial condition. Moreover, 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 or leisure travel trends, which may negatively affect our results of operations. Similarly, our Mexican and Jamaican airport operations could be negatively impacted by terrorist attacks on aircraft such as those which occurred with international airlines’ aircraft operating over Egypt and the Ukraine in 2015.

The COVID-19 outbreak is materially reducing demand for, and availability of, worldwide air travel and could therefore have a material adverse effect on our business and results of operations. See “Item 5, Recent Developments – Developments relating to the outbreak of COVID-19 may have a material adverse impact on our financial conditions or results of operations.”

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 armed conflict around the world, outbreaks of health epidemics 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.

Cyber-attacks or other interruptions of our security or information network could have an adverse effect on the operations of our airports and consequently on our financial results.

Cyber-attacks and their impact on our networks and systems, including the introduction of viruses, malware, denial of service, faulty software, equipment outages and other interruptions in or unauthorized access of company systems, have increased in frequency, extent and potency in recent years. We continuously evaluate our weaknesses, maintain security software and employ countermeasures to prevent breaches to our data and systems, and regularly review these preventive measures to avoid cyber-attacks and other interruptions to our business. For example, our information systems are protected from exogenous events with backup systems, including physical and software safeguards, such as malware protection, secure privileged access accounts, penetration tests and red team exercises, as well as inventory of authorized and unauthorized software and hardware. In addition, we have implemented secure Wi-Fi in all of our airports network and used “CyberArk” software to monitor the activity of all our users and the “SUITE Trend Micro” antimalware to enhance the security of our servers.

Nevertheless, any disruption, failure or security breach of our information technology infrastructure, including our back-up systems, could have a negative impact on our operations. The preventive actions that we employ to reduce the risk of experiencing a cyber-attack and to protect our network and information could be inadequate to stop a cyber-attack in the future, which could hinder our ability to protect the privacy of our clients and business and cause the unauthorized distribution of valuable financial information and confidential data relating our clients and business. The costs associated with a possible cyber-attack on our systems include increased expenses associated with reinforcing cyber-security measures, loss of business due to the interruption of services, litigation and damage to our reputation. Such outcomes could cause significant losses or decreases in the price of our shares. The potential losses related to cyber-attacks and disruptions of our network could also surpass our insurance coverage.

Security enhancements and requirements may require additional investments or result in additional expenses.

The air travel business is susceptible to, and has experienced, increased costs resulting from enhanced security and higher insurance. Following the events of September 11, 2001, we reinforced security at our airports, and our general liability insurance premiums increased substantially. For more information on the insurance policies we carry, see “Item 4, Information on the Company – Property, Plant and Equipment.” 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 the Mexican and Jamaican civil aviation authorities.

The users of airports, principally airlines, also have been subject to increased costs, as they have been required to adopt additional security measures and their insurance premiums have also increased substantially. While governments in other countries have agreed to indemnify airlines for liabilities they might incur resulting from terrorist attacks, the Mexican and Jamaican governments have not done so and have given no indication of any intention to do the same. In the future, airlines may be required to comply with more rigorous security rules or guidelines and premiums for aviation insurance could rise further. In addition, fuel prices, supplies and interest rates for airlines aircraft lease agreements, which constitute a significant cost for airlines using our airports, may be subject to 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. Increases in airlines’ costs may result in higher airline ticket prices and decreased demand for air travel generally, thereby having an adverse effect on our revenues and results of operations.

If authorities require enhancements to security equipment or adoption of additional security measures, we may be required to undertake significant additional expenses and capital expenditures. We cannot guarantee that these expenses and/or capital expenditures will be taken into account for our Mexican airports in our Maximum Tariff and Master Development Programs negotiations. Therefore, these additional expenses could negatively affect our cash flows and affect our results of operations.

In the case of any change in security enhancement requirements in Jamaica, the Jamaican civil aviation authorities have permitted any such unavoidable and unforeseen expenditure to be treated as a cost pass-through for the purposes of regulation, allowing for an increase in regulated charges at any time within the tariff review period to cover the cost of additional security requirements. However, we can provide no assurance that we would be successful in negotiating new tariffs to recover the expenses and/or capital expenditures needed to comply with any new security requirements.

The operation and maintenance of new baggage screening equipment could increase our expenses and may expose us to greater liability.

In 2005, the Mexican government issued a policy letter (carta de política) calling for all checked baggage on all commercial flights to undergo a new comprehensive screening process. The new screening process required the installation of dedicated screening equipment and the manual inspection of baggage if such equipment alerted to the potential presence of prohibited items. Although the Mexican Airport Law expressly provides that airlines bear the responsibility for baggage screening, we incur ongoing expenses to maintain and operate this equipment, which we currently recover from our airline customers. However, if it is determined that we are responsible for all or a portion of the cost or that we are liable for certain issues arising from our operation of the screening systems, our exposure to liability could increase significantly. These operational costs were reviewed during the negotiation of the Master Development Programs for our Mexican airports for the years 2020-2024, completed in December 2019, and there were no changes contemplated to the operational costs or to the cost recovery procedures. However, there can be no assurance that these operational costs or the cost recovery procedures will not be revised in the next negotiation of the Master Development Program in 2024.

We also expect to incur ongoing expenses to maintain any equipment purchased, and we could be required to undertake significant additional capital expenditures for items such as a new screening technology or additional equipment if screening guidelines are expanded further and require that additional steps be taken to comply with the requirements. For instance, replacement of current baggage screening equipment with new Computer Tomography X-ray (“CTX”) baggage screening equipment is scheduled for 2021, although regulatory changes could force our Mexican airports to undertake this replacement sooner, as has already occurred in our Tijuana and Los Cabos airports. In addition, in July 2016, the Federal Civil Aviation Agency (“AFAC”) issued a document titled Airport Security Recommendations, which established that airports must have alternative methods for baggage screening to be used in case the inspection technology that is used is not available. We believe that we comply with the requirement but the AFAC may require additional investments. These additional expenses could restrict our liquidity and adversely affect our results of operations if such costs are higher than those accepted in the negotiations of our Master Development Programs for the 2020-2024 period. For more information on screening equipment, see “Item 4, Information on the Company – Regulatory Framework – Mexican Airport Concessions – Scope of Concessions.”

Our revenues and profitability may be adversely affected if we fail in our business strategy.

Our ability to increase our revenues and profitability depends in part on our business strategy, which consists of setting prices as close as possible to our regulatory maximum rates for any given year for our Mexican and Jamaican airports, as well as, reducing operating costs, controlling our capital expenditure commitments under our Master Development Programs with the Mexican government and under the Capital Development Program with the Jamaican government, increasing passenger and cargo traffic at our airports and increasing revenues from commercial activities.

Our ability to increase our commercial revenues is significantly dependent, among other factors, on increasing passenger traffic at our airports and on our ability to renegotiate rental agreements with our tenants to provide for contractual terms more favorable to us and for the ability for us to directly operate business lines. In addition, our ability to increase revenues from commercial activities depends on our ability to continue the remodeling, expansion and modernization of the commercial areas we operate within our airports and on the introduction of new business lines. Further, we are in the process of expanding the amount and types of business lines that we operate directly within our airports. Revenues from business lines operated directly by us represented 26.5% of non-aeronautical revenues in 2019 (7.0% of the sum of aeronautical and non-aeronautical revenues generated in our airports in 2019).

We cannot provide assurance that we will be successful in implementing our strategy of increasing our passenger traffic or our revenues from commercial activities, including those that we operate directly. 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. Additionally, our new commercial strategy of increasing revenues by operating lines of businesses in our airports directly could result in the loss of a significant amount of revenues, or not generate the level of profitability sufficient to increase our results of operations. Accordingly, there can be no assurance that the passenger traffic volume in our airports will increase or that our profitability will increase. See “Item 5, Recent Developments – Developments relating to the outbreak of COVID-19 may have a material adverse impact on our financial conditions or results of operations.”

Our acquisitions may not achieve anticipated benefits, and may increase our liabilities, disrupt our existing business and harm our results of operations.

The benefits we expect to receive from our acquisitions depend on our ability to integrate the operations, services, personnel and administrative infrastructure of the acquired businesses in a timely and efficient manner. Acquisitions also entail increased operating costs, as well as greater allocation of management resources away from daily operations. Additionally, the business growth opportunities, revenue benefits, cost savings and other benefits we anticipate to result from our acquisitions may not be achieved as expected, or may be delayed. To the extent that we incur higher integration costs or achieve lower revenue benefits or fewer cost savings than expected, or if we are required to recognize impairments of acquired assets, investments or goodwill, our results of operations and financial condition may be adversely affected.

In October 2018, we signed the NMIA Concession Agreement with the Government of Jamaica for the operation, modernization and expansion of the NMIA located in Kingston, Jamaica. On October 10, 2019, we took control of the operation, management and administration of the NMIA. See “Item 5, Operating and Financial Review and Prospects – Overview – Recent Developments.” While the NMIA is the second airport we operate in Jamaica, we may not be able to fully implement our business strategy or integrate its operations with the Montego Bay Airport, which could adversely affect our results of operations and financial condition.

Our leverage could adversely affect our ability to raise additional capital to fund our operations and limit our ability to react to changes in the economy or our industry.

As of December 31, 2019, our outstanding consolidated indebtedness was Ps.16.4 billion (approximately U.S.$871.5 million). This indebtedness may constrain our ability to raise incremental financing or increase the cost at which we could raise and maintain any such financing or impair our ability to take advantage of significant business opportunities that may arise. As a result of this indebtedness, we may also be more vulnerable to general adverse economic, industry or competitive conditions. We cannot assure you that our business will generate cash in an amount sufficient to enable us to service our debt or to fund our other liquidity needs, which may adversely affect our overall performance. We may need to refinance all or a portion of our debt on or before maturity, and we cannot assure you that we will be able to refinance any of our debt on commercially reasonable terms. These risks may be intensified in 2020 due to the impact of the COVID-19 pandemic. See “Item 5, Recent Developments – Developments relating to the outbreak of COVID-19 may have a material adverse impact on our financial conditions or results of operations.” and “Item 5, Operating and Financial Review and Prospects – Liquidity and Capital Resources.”

Covenants in our indebtedness may limit our discretion with respect to certain business matters.

The instruments governing our indebtedness or the indebtedness of our operating entities may contain restrictive covenants limiting our discretion with respect to certain business matters. These covenants could place significant restrictions on, among other things, our ability to incur additional liabilities, acquire new equity investments, engage in mergers or acquisitions, pay dividends, create liens or other encumbrances or make certain other payments, investments, loans and guarantees. These covenants could also require us to meet certain financial ratios and financial condition tests. A failure to comply with any such covenants could result in a default which, if not cured or waived, could permit acceleration of the relevant indebtedness.

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 maintain positive 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 39.4% of our total employees in Mexico and 62.0% in Jamaica as of December 31, 2019), 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.

The loss of, or suspension of operations by, one or more of our key customers could result in a loss of a significant amount of our revenues.

A majority of our revenues are driven by the operations of a few key airline customers. In 2019, Concesionaria Vuela Compañía de Aviación, S.A. de C.V. (“Volaris”), Grupo Aeroméxico, S.A.B. de C.V. (“Aeroméxico Group”), a holding company that owns Aeroméxico and Aeroméxico Connect, Aeroenlaces Nacionales, S.A. de C.V. (“VivaAerobus”) and American Airlines, Inc. (“American Airlines”) transported a significant percentage of our passenger traffic. During 2019, the passenger charges collected by these four airlines accounted for 18.3%, 6.0% 4.1% and 4.7%, respectively, of total revenues in our airports (20.7%, 6.8%, 4.7% and 4.9%, respectively, of the sum of aeronautical and non-aeronautical revenues generated in our airports in 2019). Excluding revenues from passenger charges, these airlines accounted for 2.1%, 0.8%, 0.5% and 1.0%, respectively, of our total revenues in 2019 (1.9%, 0.7%, 0.4% and 0.9%, respectively, of the sum of aeronautical and non-aeronautical revenues generated in our airports in 2019).

.During 2020, news reports indicated that ABC Aerolíneas, S.A. de C.V. (“Interjet”), was experiencing financial difficulties and there was speculation regarding its potential insolvency. During 2019, the passenger charges collected by Interjet accounted for 3.9%, of total revenues in our airports (4.3% of the sum of aeronautical and non-aeronautical revenues generated in our airports in 2019). Excluding revenues from passenger charges, Interjet accounted for 0.4% of our total revenues in 2019 (0.5% of the sum of aeronautical and non-aeronautical revenues generated in our airports in 2019). Therefore, in case of Interjet continue with financial difficulties and they could not continue with its operations, we expect that it would not have a significant impact on our results of operations

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 reduce 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. In addition, Mexican law prohibits an international airline from transporting passengers from one Mexican location to another, except if the passenger originated travel outside Mexico, thus limiting the number of airlines providing domestic service in Mexico. Accordingly, we expect to continue to generate a significant portion of our revenues from domestic travel from a limited number of airlines.

Furthermore, passenger charges, which accounted for 52.9% of our revenues in 2019 (60.0% when taking into account only the sum of aeronautical and non-aeronautical revenues), are collected, pursuant to passenger charges collection agreements, by airlines from passengers on our behalf and are later paid to us, depending on the airline, within no more than 60 days following the date of each flight. During 2019, the average collection term of passenger charges was 54 days. See “Item 4, Information on the Company – Business Overview – Our Sources of Revenues – Aeronautical Services – Passenger Charges – Passenger Charges in Mexico.” Consequently, if any of our key airline customers were to become insolvent or seek bankruptcy protection, we would be an unsecured creditor with respect to any unpaid passenger charges, and we would not be assured of collecting the amounts invoiced to that airline for passenger charges despite cash deposits held in guarantee. Additionally, we could not be assured that we would recover the traffic they would stop transporting. Both scenarios could negatively affect our cash flows from operations or our results of operations. See “Item 5, Recent Developments – Developments relating to the outbreak of COVID-19 may have a material adverse impact on our financial conditions or results of operations.”

Additionally, if some of our commercial clients were to face difficulties making their payments to our airports, we would try to renegotiate the commercial and payment terms to keep them at our airports. Despite our efforts, however, some clients may decide to leave our commercial spaces and cancel their contracts. This could potentially have a negative effect on our revenues.

The main domestic airlines operating at our Mexican and Jamaican airports have in the past refused to pay certain increases in our specific prices for aeronautical services and could refuse to pay additional increases in the future.

In the past, certain of the domestic airlines operating at our Mexican and Jamaican airports refused to pay certain increases in the specific prices we charge for aeronautical services. Although these prior disputes were resolved, because only a few airlines contribute a substantial portion of our revenues, our results of operations could be adversely impacted if any of these (or any of our other) airlines should refuse to make payments in the future. Moreover, during periods of economic downturn, the airlines that operate at our airports may be more likely to oppose increases in our charges for aeronautical services in future years, which could adversely impact our results of operations. See “Item 4, Information on the Company – Business Overview – Principal Customers – Principal Aeronautical Services Customers – Airline Customers.”

The airlines at our airports may refuse to continue collecting passenger charges on our behalf or we may decide to collect passenger charges ourselves, which would result in increased costs for us.

The airlines operating at our airports collect a passenger charge on our behalf from each departing passenger on an aircraft (except certain exclusions in each of Mexico and Jamaica, described below under “Item 4, Information on the Company – Business Overview – Our Sources of Revenues – Aeronautical Services – Passenger Charges”).

Currently, we have entered into collection agreements with the airlines that operate at our Mexican airports to collect those passenger charges on our behalf. As a result, passenger charges are included in the cost of passengers’ tickets, and we issue invoices for those charges to each airline. We and the airlines with which we have these collection agreements have the right to cancel them with prior notice to the other party. If we or one of our airline customers were to cancel a collection agreement, we would have to implement a collection system of our own to collect passenger charges from passengers directly. The installation and operation of such a collection system would result in additional costs for us, which would negatively impact our results of operations.

MBJA does not have agreements with some of the airlines that operate at the Montego Bay airport for the collection of passenger charges on its behalf. However, the collection of passenger charges by the airlines is implied under the current operating agreements signed by each airline operating at the Montego Bay airport, whereby these airlines must pay MBJA for regulated passenger charges. Newly issued Air Carrier Operating Agreements, however, have been amended to expressly require airlines to collect passenger service charges.

As part of the transition process, all agreements held by the previous operator of the Kingston airport were assigned or novated to PACKAL. All agreements with airlines and the International Air Transport Association (“IATA”) that were assigned or novated to PACKAL by the previous operator as part of this process are space license agreements, each of which includes a schedule of conditions of use outlining the policies for aeronautical operation and requiring that each airline collect all passenger and security charges from departing passengers on behalf of the airport and remit such charges to the airport operator. Airlines operating in NMIA could refuse to collect passenger charges on behalf of the airport.

The operations of our airports may be disrupted due to 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 government or entities of the government for provision of services, such as electricity, supply of fuel for aircraft, air traffic control and immigration and customs services for our international passengers. Additionally, 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 are dependent on third-party providers of certain complementary services such as catering, baggage handling, and operation of airport buses and passenger walkways. If these service providers were to halt operations at any of our airports, we would be required to seek a new service provider or provide services ourselves, either of which would likely result in increased capital expenditures or costs and have an adverse impact on our cash generation and results of operations.

Legal claims and other actions by the former holders of land comprising certain of our Mexican airports may disrupt the operations and security of these airports.

Some of our airports are partly sited on lands that were expropriated by the Mexican government pursuant to its power of eminent domain. Prior to their expropriation, some of these lands had been held by groups of individuals through a system of communal ownership of rural land known as an ejido. Certain of these former ejidos’ participants have asserted indemnity claims against the Mexican government challenging the expropriation decrees. See “Item 8, Financial Information – Legal Proceedings – Ejido participants at Tijuana, Guadalajara and Puerto Vallarta airports.”

The Mexican government owns the land on which Guadalajara International Airport operates and has granted us the right to use that land for the purpose of operating the airport pursuant to our concession. Currently, there are squatters residing on or claiming rights to a portion of the property, at least one of whom has attempted to subdivide and sell off certain portions of the property. As owner of the property, the Mexican government must initiate any actions directed at removing these persons from the property.

In addition, during various periods of 2017, 2018 and 2019, members of an ejido called el Zapote blocked access to commercial areas of the Guadalajara International Airport, specifically the parking facilities, which resulted in commercial revenues losses of Ps.9.0 million in 2017 (7.9% of our total car parking charges at the airport for 2017), Ps.8.1 million in 2018 (5.8% of our total car parking charges at the airport for 2018), and Ps.20.5 million in 2019 (14.1% of our total car parking charges at the airport for 2019). We are reviewing the actions these persons have taken and are cooperating with the Mexican government to ensure that the actions of these squatters and ejidos do not adversely affect the operations of Guadalajara International Airport. However, if the Mexican government is unable to successfully remove these persons from the property, their presence could have an adverse impact on our operations, revenues and security, and could restrict our ability to expand our operations, at the Guadalajara airport.

In addition to challenging the expropriation, certain of the former ejido Tampico participants are also currently occupying portions of Tijuana International Airport property. While these persons are not currently interfering with the airport’s operations, their presence could limit our ability to expand the airport into the areas they occupy. There can also be no assurance that the former ejido participants will not seek to disrupt the airport’s operations if their legal claims against the Mexican government are not resolved to their satisfaction, which may negatively impact our results of operations.

Our Mexican concessions guarantee our access to the land and any interruption caused to our operations by any of the ejidos is the responsibility of the Mexican government. Although the Mexican government must provide restitution for any economic loss resulting from a disruption in access to our airports, there can be no assurance that the former ejido participants will not seek to disrupt the airport’s operations if their legal claims against the Mexican government are not resolved to their satisfaction. There also can be no assurance that the legal proceedings will be resolved in our favor, which may negatively impact our results of operations.

We may be liable for property tax claims asserted against us by certain Mexican municipalities.

We remain subject to ongoing property tax claims that have been asserted against us by certain municipal authorities for the payment of property taxes with respect to certain of the properties on which we operate our airports. We believe that under the law, the Mexican government, as the owner of the property upon which we operate our airports, would currently be responsible for paying these taxes directly if a court were to determine that these taxes must be paid. See “Item 8, Financial Information – Legal Proceedings – Property tax claims by certain municipalities” for a full discussion of these property tax proceedings.

Additionally, if the Mexican government changes the current laws or if we do not prevail in the aforementioned proceedings, these tax liabilities could have an adverse effect on our financial condition and results of operations.

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.

We recognize deferred tax assets relating to tax losses carried forward and deductible temporary differences only to the extent that it is probable that future taxable profit will be available against which the tax losses carried forward and the temporary differences can be utilized. Net deferred tax assets amounted to approximately Ps.5.6 billion at December 31, 2019. The deferred tax assets are quantified on the basis of currently enacted tax rates and accounting standards and are subject to change as a result of future changes to tax laws or the rules for computing taxable profits and allowable losses. Failure to generate sufficient future taxable profits or changes in tax laws or accounting standards may reduce our estimated recoverable amount of net deferred tax assets. Such a reduction could have an adverse effect on our Consolidated Statement of Profit or Loss. For further information on deferred tax assets, refer to Note 12 to our audited consolidated financial statements. See “Item 5, Operating and Financial Review and Prospects – Critical Accounting Policies – Deferred Tax Assets.”

The Pacific and Central regions of Mexico and the island of Jamaica experience seasonal torrential rains and hurricanes (particularly during the months of July through September), as well as earthquakes. Extreme weather and 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 traffic volume.

The occurrence of extreme weather and 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 for our Mexican airports. 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.

Airline regulations promulgated by international bodies or regulatory agencies in other countries could affect our operations and potentially affect our revenues or results of operations.

For instance, on July 30, 2010, the U.S. Federal Aviation Administration (“FAA”) announced that, following an assessment of the Federal Civil Aviation Agency, it had determined that Mexico was not in compliance with international safety standards set by the International Civil Aviation Organization (“ICAO”), and, as a result, downgraded Mexico’s aviation safety rating from “Category 1” to “Category 2”.

Under FAA regulations, because of this downgrade, Mexican airlines were not permitted to expand or change their current operations between the United States and Mexico except under certain limited circumstances; code-sharing arrangements between Mexican and U.S. airlines were suspended; and operations by Mexican airlines flying to the United States were subject to greater FAA oversight. These additional regulatory requirements resulted in reduced service between our Mexican airports and the United States by Mexican airlines, which resulted in a decrease in demand for travel at our Mexican airports.

The FAA restored Mexico’s Category 1 rating on December 1, 2010. In 2019, 10.2% of the passengers who traveled through our Mexican airports traveled on flights to or from the United States operated by Mexican airlines. Jamaica has held an FAA Category 1 rating since a similar downgrade to Category 2 from July 1995 to September 1997.

The FAA, however, may downgrade Mexico’s or Jamaica’s air safety rating in the future. We cannot predict what impact such a downgrade would have on our passenger traffic or results of operations, or on the public perception of the safety of our airports.

We provide a public service regulated by the governments of Mexico and Jamaica, and our flexibility in managing our aeronautical activities is limited by the regulatory environments in which we operate.

Our aeronautical fees charged to airlines and passengers are regulated, like those of most airports in other countries. In 2017, 2018 and 2019, 67.0%, 67.3% and 65.0%, respectively, of our total revenues were earned from aeronautical services (in 2017, 2018 and 2019, 74.9%, 74.9% and 73.7%, respectively, of the sum of aeronautical and non-aeronautical revenues were earned from aeronautical services), which are subject to price regulation under our maximum rates in Mexico and under the maximum regulated charges in Jamaica. 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 or established by the Mexican government (as in the case of our Master Development Programs or our maximum rates, respectively) or the Jamaican government (as in the case of maximum regulated charges for MBJ and NMIA) 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 and Capital Development Programs or the obligation under our Mexican concessions and Jamaican concessions to provide a public service) or increase our maximum rates and regulated charges 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 laws and regulations governing our business will be applied.

Many of the laws, regulations and instruments that regulate our business in Mexico were adopted or became effective in 1999, and there is limited precedent 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 Mexican concessions, the Mexican Airport Law 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 provide any assurance that we will not encounter difficulties in complying with these laws, regulations and instruments. For instance, on November 8, 2017, changes to the Mexican Airport Law took effect which modified various regulations, primarily impacting airlines. One of the changes contemplated is the payment of indemnification to passengers delayed for longer than two hours. The new law further clarifies that the payment will be made if the airport concessionaire or airline is at fault for the delay. As of the date hereof, there is no process in place to determine whether the airport concessionaire or airline is responsible for the delay.

We cannot provide any assurance that once the regulations are finalized, concessionaires, such as ourselves, will not be held responsible for certain passenger delays or will not be required to pay indemnifications to passengers affected by such delays. Further, we cannot provide any assurance that such indemnifications will not have a material impact on our results of operations.

Although our maximum rates through 2024 have been set, we cannot predict what our Master Development Programs for the next five-year period from 2025 to 2029 will establish. We also cannot provide assurance that other regulatory agencies or the Mexican legislature will not impose regulations adverse to our operations in the future or that the laws and regulations governing our business, including the Master Development Programs, the maximum 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. For instance, on January 26, 2015, certain amendments to the Mexican Airport Law were enacted that institute an enforcement mechanism for existing requirements. For a discussion of the regulatory provisions applicable to our business in Mexico, see “Item 4, Information on the Company – Regulatory Framework – Sources of Mexican Regulation.”

Similarly, there is limited precedent that would allow us to predict the impact of the laws, regulations and instruments that regulate our business in Jamaica and we cannot provide any assurance that our Jamaican airports will not encounter difficulties in complying with these laws, regulations and instruments. In addition, although the concession agreements for our Jamaican airports and Jamaican law establishes ranges of sanctions that might be imposed should our Jamaican airports fail to comply with the terms of the concession, other Jamaican applicable law and its regulations, we cannot predict the sanctions that are likely to be assessed for a given violation within these ranges. Although the maximum regulated charges have been set for our Jamaican airports through December 2024, we cannot predict what maximum regulated charges the Jamaican government will establish for the next five-year period from January 2025 to December 2029. We also cannot provide assurance that other regulatory agencies or the Jamaican legislature will not impose regulations adverse to our Jamaican airports’ operations in the future or that the laws and regulations governing our business in Jamaica, including the Jamaican Civil Aviation and Airports Authority acts and the process for setting maximum regulated charges, 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. For a discussion of the regulatory provisions applicable to our business in Jamaica, see “Item 4, Information on the Company – Regulatory Framework – Sources of Jamaican Regulation.”

The regulations pursuant to which the maximum rates applicable to our aeronautical revenues in Mexico and to the maximum regulated charges that we may collect at our Jamaican airports are established do not guarantee that we or any of our airports will be profitable.

The regulations applicable to our aeronautical activities establish an annual maximum rate for each Mexican airport, which is the maximum annual amount of revenues per workload unit that we may earn at that airport from services subject to price regulation. The maximum rates for our Mexican airports have been determined for each year through 2024. Our Mexican concessions provide that an airport’s maximum rates will be adjusted periodically for inflation determined by reference to the Mexican Producer Price Index (Índice Nacional de Precios al Productor), or “Mexican PPI,” excluding petroleum. Although we are entitled to request additional adjustments to an airport’s maximum rates under certain circumstances, including the amendment of certain provisions of the Mexican laws and regulations that structure and influence our business, our Mexican concessions provide that such a request will be approved only if the SCT determines that certain events specified in our Mexican concessions have occurred. The circumstances under which we are entitled to an adjustment are described under “Item 4, Information on the Company – Regulatory Framework – Mexican Aeronautical Services Regulation – Special Adjustments to Maximum Rates.” Therefore, there can be no assurance that any such request would be made or granted. For a discussion of the framework for establishing our maximum rates in Mexico and the application of these rates, see “Item 4, Information on the Company – Regulatory Framework – Mexican Aeronautical Services Regulation.”

The Jamaican Airports (Economic Regulation) Act 2002, requires that the Jamaica Civil Aviation Authority, or “JCAA,” adjust the maximum amounts that may be levied by an airport operator at the end of each succeeding period of five years. Specifically, every five years, MBJA and NMIA must submit to the JCAA a proposal for increases to the maximum revenues per passenger (revenue yield cap per passenger) as justified by a schedule of five-year estimates for traffic growth, operating costs and investment commitments, including capital expenditures for capital projects and required improvements at our Jamaican airports under the MBJA and NMIA concession agreements (in the case of MBJA, a “Capital Development Program,” in the case of NMIA, the “Capital Works,” and together, the “Capital Development Programs”), as well as the opening Regulated Asset Base (RAB). After the JCAA’s review of the maximum amounts to be levied based on these estimates, the JCAA makes its determination as to the maximum revenues per passenger for each year of the succeeding five-year period. Under the terms of the MBJA and NMIA concession agreements with the Airports Authority of Jamaica, or “AAJ,” if the JCAA approves the new maximum amount to be levied, MBJA and NMIA must fulfill the estimated capital expenditures included in the Capital Development Programs. The last review by the JCAA of these maximum regulated charges for the Montego Bay and Kingston airports was completed in December 2019. Changes resulting from that review period took effect in January and April 2020 for MBJA and NMIA, respectively. These changes will remain in effect through December 2024 for both MBJA and NMIA. For a discussion of the framework for establishing MBJA’s and NMIA’s maximum regulated charges in Jamaica, see “Item 4, Information on the Company – Regulatory Framework – Jamaican Aeronautical Services Regulation.”

Our Jamaican airports have an obligation under their respective concession agreement to satisfy certain requirements applicable to a Capital Development Program. We cannot provide assurance that AAJ will determine that any such Capital Development Program complies with the applicable requirements under their respective concession agreement, or that AAJ will not request our Jamaican airports to undertake additional capital expenditures.

Under the terms of our concessions, there is no guarantee that our consolidated results of operations or the results of operations of any airport will be profitable.

Our results of operations may be adversely affected by required efficiency adjustments to our maximum rates in Mexico.

Our maximum rates in Mexico are subject to annual efficiency adjustments, which have the effect of reducing the maximum rates for each year to reflect projected efficiency improvements. For the five-year terms ending 2019 and 2024, an annual efficiency adjustment factor of 0.7% was established by the SCT. Future annual efficiency adjustments will be determined by the SCT in connection with the setting of each Mexican airport’s maximum rates every five years. For a description of these efficiency adjustments, see “Item 4, Information on the Company – Regulatory Framework – Mexican Aeronautical Services Regulation – Methodology for Determining Future Maximum Rates.” We cannot provide assurance that we will achieve efficiency improvements sufficient to allow us to maintain or increase our income from operations as a result of the progressive decrease in each Mexican airport’s maximum rate.

If we exceed the maximum rate at any Mexican 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 Mexican airport to come as close as possible to the authorized maximum rate for that airport in any given year. We expect to continue to pursue this pricing strategy in the future. For example, in 2017, 2018, and 2019, our revenues subject to maximum rate regulation represented 99.9%, 100.0%, and 100.0% respectively, of the amount we were entitled to earn under the maximum rates for all of our Mexican airports. However, there can be no assurance that we will be able to establish prices in the future that allow us to collect virtually all of the revenues 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 PPI, excluding petroleum, 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 our airports during that year.

If we exceed the maximum rate at any Mexican airport at the end of any year, the SCT 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 for the same cause. In the event that any one of our Mexican airport concessions is terminated, our other Mexican airport concessions may also be terminated.

In prior years, in order to ensure our compliance with the maximum rate at a particular airport when the possibility of exceeding that maximum rate has arisen, we have taken actions in the latter part of the year, such as reducing our specific prices and offering discounts. We can offer no assurance that, should external factors cause us to risk exceeding our maximum rates close to or at the end of any given year, we will have sufficient time to take the actions described above in order to avoid exceeding our maximum rates prior to year-end.

If we fail to fulfill the requirements of our Master Development Programs during a given five-year period, we could be subject to sanctions from the Mexican government.

Historically, our capital expenditure commitments under our Master Development Programs are determined by reference to the Mexican PPI’s construction price index. Using the index we aim to be as close as possible to the five-year period capital expenditure commitments at any time. We expect to continue this capital expenditure control strategy in the future. Using this strategy, our capital expenditure during 2017, 2018, and 2019 was 101.1%, 101.0% and 102.0% respectively, of our capital expenditure commitments under our Master Development Programs. However, there can be no assurance that our capital expenditure control strategy will be sufficiently accurate and that we will not fall below our capital expenditure commitments. If, as a consequence of the annual maximum tariff fulfillment review, the SCT determines that we are not in compliance with the committed investments, the government may assess a fine and may reduce the maximum rate of that airport in the subsequent year. Non-compliance with committed investments could also result in the termination of the concession if the relevant term has been violated and sanctions have been imposed at least three times for the same cause. In the event that any one of our Mexican concessions is terminated, our other concessions may also be terminated.

Although in prior years, in order to ensure compliance with our Master Development Programs, we have taken actions in the latter part of the year, such as increasing the amount or pace of certain construction projects, we can give no assurance that, should external factors cause us to risk failing to meet our investment levels, we will have sufficient time to take actions to comply with our Master Development Programs.

Our operating results could be adversely affected if the airlines fail to collect sufficient Airport Improvement Fees for MBJA or if MBJA does not receive approval for the use of these funds to offset costs associated with capital investments at the Montego Bay airport.

The Airports (Economic Regulation) Act and related agreements require the airlines operating at our Jamaican airports to charge an Airport Improvement Fee (“AIF”) from embarking international passengers on behalf of our Jamaican airports and to deposit the fees on a monthly basis in a trust account controlled by the Jamaican Ministry of Transport and Mining (“MTM”). Subject to the MTM’s approval, our Jamaican airports may use these funds for additional capital investments not included in their respective Capital Development Programs, as well as for interest expenses relating to the financing thereof. Our Jamaican airports are required to commit to such additional capital investments in exchange for the right to use the AIF funds.

The MTM approval of collection of AIF funds at the Montego Bay airport was renewed on February 25, 2015 for the period ending April 11, 2030, unless otherwise revoked. However, because the MTM’s prior approval of MBJA’s use of AIF funds is for specified capital investments in projects that have already been carried out, MBJA is not currently authorized to use any AIF funds collected after April 11, 2015. As of the date hereof, MBJA has entered into a Memorandum of Understanding (“MOU”) with the AAJ to fund “Phase 3” investments including the extension of the existing runway and installation of Runway End Safety Areas through the AIF. In the MOU, the AAJ has committed to guarantee the financing of specific capital projects to limit MBJA’s exposure to financial risks resulting from AIF shortfalls arising from lower than expected passenger traffic.

If MBJA’s passenger traffic projections are above the levels of passenger traffic realized at the Montego Bay airport, the amount of AIF to be collected may not be sufficient to finance all capital projects approved by the MTM and their financial cost. We can provide no assurance that the Montego Bay airport will achieve the passenger traffic required to recover MBJA’s capital investments committed in exchange for the use of the AIF funds. However, there is an Implementation Letter in place between AAJ and MBJA which will indemnify MBJA for any funds advanced towards the approved capital projects to be funded by the AIF which eliminates any exposure to the company.

This does not apply to NMIA as the AIF funds will solely be used by the government through the AAJ. NMIA will have no benefit from the collection of these funds.

See “Item 4, Information on the Company – Regulatory Framework – Jamaican Aeronautical Services Regulation.”

If our Jamaican airports fail to fulfill the requirements of their respective Capital Development Programs, the airports could suffer specific negative consequences, including a termination of their respective concessions.

Under their concession agreements, our Jamaican airports are required to make capital expenditures in order to meet Capital Development Program requirements by certain strict deadlines. Additionally, our Jamaican airports are also responsible for maintaining the tangible concession assets under the concession agreements, which involves capital investment projects and improvements to concession assets. If either MBJA or NMIA fails to comply with the terms and conditions of its concession agreement, it could be in default and face liquidated damages, and, if it fails to remedy the breach within the applicable grace period, it could suffer other negative consequences, including the termination of its concession.

The Mexican government may terminate or reacquire our Mexican 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 Mexican 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 Mexican 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 Mexican concessions may also be terminated upon our bankruptcy or insolvency.

We would face similar sanctions for violations of the Mexican Airport Law or the regulations thereunder. Under applicable Mexican law and the terms of our Mexican concessions, our Mexican concessions may also be made subject to additional conditions, including under our renewed Master Development Programs, which we may be unable to meet. Failure to meet these conditions may also result in fines, other sanctions and the termination of the concessions.

The Mexican government may also revoke one or more of our Mexican 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. See “Item 4, Information on the Company – Regulatory Framework – Other Regulation of Mexican Concessions and Concession Assets – Revocation of Concessions” 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 Mexican 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. In the case of a mandated change in our operations, the Mexican government is required to compensate us for 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 Mexican concessions and related assets in the event of such action.

In the event that any one of our Mexican airports’ 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 Jamaican government may terminate or reacquire the concessions held by our Jamaican airports under various circumstances, some of which are beyond our control.

Our Jamaican airport concessions are our principal assets in Jamaica, and we would be unable to continue operations at our Jamaican airports without them. As owner of the concession assets, the AAJ is entitled under certain circumstances, however, to expel us from all or part of our Jamaican airport sites or to take over or carry on the operation and management of the airports or provision of airport services. The AAJ may step into the public domain assets that are the subject of the Jamaican airport concessions for as long as may be required if it determines that we are in breach of the concession agreements, to prevent material disruptions in service at the airports or in cases of national emergencies. Upon such a step-in by the AAJ, the AAJ must account to us for any revenues collected at the airports during the step-in period. Where the AAJ steps into the public domain assets that are the subject of the airport concession pursuant to any uncured event of default or to prevent material disruptions in service, we are required to bear all costs (except consequential losses) and expenses associated with the AAJ exercise of its step-in rights. 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.

Following notice and good-faith consultations to avoid such a result, the AAJ may terminate the concession agreements upon an event of default on our part. Regardless of cause for termination, a termination fee is due to us upon a termination or revocation of the concession. However, the concession agreements expressly limit the AAJ’s liability to such termination fee. In the event that the AAJ terminates the concession with or without cause, there can be no assurance that the loss of the airport concession would not have a material adverse effect on our business and results of operations.

See “Item 4, Information on the Company – Regulatory Framework – The Montego Bay Airport Concession – AAJ’s Rights to Step In, Terminate or Grant a New Concession.” See “Item 4, Information on the Company – Regulatory Framework – The Kingston Airport Concession – AAJ’s Rights to Step In, Terminate or Grant a New Concession.”

The Mexican and Jamaican governments could grant new concessions that compete with our airports.

The Mexican and Jamaican governments could grant additional concessions to operate existing government-managed airports, authorize the construction of new airports or allow existing privately held domestic airports to change into international airports and permit them to receive regular domestic and international flights, all of which could lead to increased competition for our airports.

One factor that may significantly increase competition from other airports is the expansion of the permits of existing private airports that are currently not permitted to operate regular commercial routes. Under Mexican law, any privately held airport that has operated with a permit to provide public service for at least five years automatically acquires the right to also operate regularly scheduled commercial flights and to receive a concession to operate as a public service airport. In addition, through an amendment proposed by the SCT and confirmed by the Presidency, an airport operating with a permit to provide public service could become an international airport.

Any competition from other such additional 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 provide assurance that we would participate in such process, or that we would be successful if we were to participate. See “Item 4, Information on the Company – Regulatory Framework – Other Regulation of Mexican Concessions and Concession Assets – Grants of New Mexican Concessions” and “Item 4, Information on the Company – Regulatory Framework – The Montego Bay Airport Concession – AAJ’s Rights to Step In, Terminate or Grant a New Concession.”

The SCT could require us to monitor certain aircraft movements at our Mexican airports that we do not currently control, which could result in increased costs.

The Mexican Air Traffic Control Authority (Servicios a la Navegación en el Espacio Aéreo Mexicano) or “SENEAM”, could require us to monitor certain aircraft movements at our Mexican airports that we do not currently control, which could result in increased costs. SENEAM currently requires us to manage and control aircraft movements in and out of our arrival and departure gates and remote boarding locations at our Guadalajara, Tijuana and Puerto Vallarta airports. At our other Mexican airports, these aircraft movements are monitored by SENEAM. Should SENEAM require us to control, or if we, for efficiency purposes, request to control, these aircraft movements directly at any or all of our other Mexican airports in the future, our results of operations could be negatively impacted by increased operating insurance and liability costs resulting from taking on these obligations.

The Mexican civil aviation authority could require us to extend the official operating schedule at our Mexican airports, which could result in increased operating costs.

The AFAC is responsible for establishing the official operating schedules of our Mexican airports. Outside of our Mexican airports’ official hours of operation, we are permitted to double our airport charges for services that we provide. Currently, our airports at Guadalajara, Puerto Vallarta and Morelia have official operating schedules of 24 hours per day. The AFAC can issue a decree extending the official operating schedule of one or more of our other airports from its current schedule, which would deprive us of the ability to double our airport charges for off-hour services at airports for which such a decree has been issued. For instance, as of January 17, 2014, the AFAC expanded the operating schedule of our Aguascalientes airport from 6:00 a.m. to 8:00 p.m. to 6:00 a.m. to 12:00 a.m. and as of April 2, 2015, the operating schedule of our Los Cabos airport was expanded from 7:00 a.m. to 6:00 p.m. to 7:00 a.m. to 9:00 p.m. Such extensions of our official operating schedules result in increases in operating costs, and we can provide no assurances that we would be able to recover those costs.

Federal tax legislation in Mexico may have an adverse effect on our financial condition and our results of operations.

The terms of our Mexican concessions do not exempt us from generally applicable Mexican tax laws. Changes to tax laws and regulations in Mexico could significantly increase our tax expense, which could have a material adverse impact on our results of operations.

For instance, on January 1, 2014, new tax laws came into force following tax reforms in Mexico that, among other changes: maintained the income tax rate on corporations of 30%; imposed withholding tax in respect of dividends paid to Mexican and foreign shareholders; eliminated deductions previously allowed in respect of payments between related parties or certain foreign corporations; limited the tax deductions for certain benefits paid to employees; and increased the value-added tax in certain areas of Mexico.

We cannot predict the impact that changes in law will have, if fully implemented and applied to us, on our business, financial condition and results of operations. In addition, we cannot predict the indirect impact that such legislation could have on our customers and shareholders.

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 various changes to the laws applicable to Mexican companies, including us. The terms of our Mexican concessions do not exempt us from any changes to Mexican laws. Changes to the Mexican constitution or to any other Mexican laws could have a material adverse impact on our results of operations.

For instance, as a result of certain 2013 amendments to Mexico’s Constitution, on July 6, 2014, a new Federal Economic Competition Law (Ley Federal de Competencia Económica) went into effect, which, among other things, grants broader powers to the federal competition authority, including the ability to regulate essential facilities. If the new competition authority determines that a specific service or product is an essential facility, it has the ability to regulate access conditions, prices, tariffs or technical conditions for or in connection with the specific service or product. Some of the services we render are public services that are regulated by the Mexican government, and we are unsure if the competition authority will apply the new competition law in the same manner and under the same considerations as it would apply to non-regulated service providers. Should the new competition authority determine that all or part of the services we provide are considered an essential facility, we may be required to implement significant changes to the way we currently do our business, which could have a material adverse impact on our results of operations. For a discussion of the new competition law, see “Item 4, Information on the Company – Regulatory Framework – Sources of Mexican Regulation – Federal Economic Competition Commission.” Also see “Item 3, Key Information – Risk Factors – Risks Related to the Regulation of Our Business – We cannot predict how the regulations governing our business will be applied” in this section.

For more detailed information on current sources of regulation governing the operation of airports in Mexico, see “Item 4, Information on the Company – Regulatory Framework – Sources of Mexican Regulation.”

AMP, our strategic shareholder, has significant influence over our operations, and AMP’s interests may differ from those of other shareholders.

AMP holds Series BB shares currently representing 15% of our total capital stock. The Series BB shares have certain special rights that allow AMP to exercise significant influence over our operations. Through its right to appoint and remove members of our senior management, AMP participates in the decision-making process of our management in areas such as business strategy, operations, financing, acquisitions and dispositions of assets or business.

our shareholders (including the approval of our financial statements, increases or decreases of our capital stock, the payment of dividends, the amendment of our bylaws and any decision that has the objective to modify or annul its right to appoint our top-level executive officers). These rights are not conditioned on whether or not the technical assistance agreement and the participation agreement remain in force. Pursuant to our bylaws, if at any time AMP (as the holder of our Series BB shares) were to hold less than 7.65% of our capital stock in the form of Series BB shares, such shares would be mandatorily converted into Series B shares, which would cause AMP to lose all of its special rights. Shareholders of AMP have allocated among themselves certain veto rights relating to the exercise by AMP of its veto and other rights, which increases the risk of impasse at AMP shareholders’ meetings and ultimately at our shareholders’ meetings. Differences in points of view among AMP’s shareholders with respect to our management could affect our results of operations. The interests of AMP may differ from those of our other shareholders, and we can offer no assurance that AMP and the officers appointed by AMP will exercise their rights in ways that favor the interests of our other shareholders.

Disputes among AMP’s shareholders may affect our shareholders’ meetings or management.

In 2010 and 2011, disputes among AMP’s shareholders affected our shareholders’ meetings and trading of our shares on the Bolsa Mexicana de Valores, S.A.B. de C.V. (“Mexican Stock Exchange”) and the New York Stock Exchange (“NYSE”), as well as involving us in litigation. Notwithstanding those disputes, on December 1, 2011, we were advised by AMP’s shareholders that they had entered into an agreement to end their dispute and to terminate their legal proceedings. Additionally, we were informed that AMP’s shareholders agreed to a comprehensive mechanism for decision-making (primarily by consensus, but with specific mechanisms aimed at avoiding deadlocks that could affect our operations), and that AMP’s shareholders would continue developing our business.

On November 19, 2014, Controladora Mexicana de Aeropuertos, S.A. de C.V. (“CMA”) became 66.66% owner of the capital stock of AMP . As a result of this transaction, CMA agreed that the minority shareholders’ consent is required with respect to certain significant actions or decisions. See “Item 7, Major Shareholders and Related Party Transactions – Major Shareholders – AMP Trust, Bylaws and Shareholders’ Agreement.”

If disputes among AMP’s shareholders were to occur in the future, it is not possible to predict if they would result in deadlock at our shareholders’ meetings or distract our management, or what effects such events might have on the price of our stock, its liquidity or our market value and the effects that these conflicts could have on our business or results of operations. In addition, AMP’s veto, appointment and other rights could adversely impact our operations and constitute an obstacle for us to bring in a new strategic shareholder and/or operator.

If AMP should decide to sell all or a portion of its interest in us, our operations could be adversely affected.

AMP currently exercises significant influence over our management, as described above. AMP is able to sell nearly all of the shares that it owns. Our bylaws provide that, subject to certain exceptions, Series BB shares must be converted into Series B shares prior to transfer. Should AMP divest its interest in us or cease to hold Series BB shares, our management could change and our operations could be adversely and significantly affected as a result.

Our operations could be adversely affected if the technical assistance agreement is not renewed with AMP.

AMP exercises a significant influence over our management through the technical assistance agreement, through which AMP provides our airports with expertise in operating in the aeronautical sector and strategic planning guidance to increase aeronautical and non - aeronautical revenues, in addition to knowledge of the Mexican government and business sectors and assistance with the negotiation of our Master Development Programs. Therefore, if either we or AMP decides not to renew the technical assistance agreement, it would require time and potentially higher costs for us to replace AMP’s strategic expertise through contracts with new external advisors; apart from the possible higher costs, the need to replace AMP could have an impact on our business strategy and ongoing projects, such as the successful negotiation of tariffs, investments and other elements of our Master Development Programs. As a result, our results of operations could be negatively affected. For more detailed information on the technical assistance agreement with AMP, see “Item 4, Information on the Company – History and Development of the Company – Investment by AMP.”

Failure to comply with certain requirements of the privatization guidelines and the participation agreement relating to our privatization could have a material and adverse effect on our operations or the value of our securities.

Pursuant to the guidelines published by the Mexican government during the first phase of our privatization and the participation agreement setting forth the rights and obligations of each of the parties involved in our privatization, AMP assumed certain rights and obligations.

Although we believe AMP satisfies all their requirements under the privatization guidelines and the participation agreement, there can be no assurance that allegations or official inquiries relating to AMP’s compliance with its obligations under those requirements will not take place. In the event of future inquiries or an official finding that AMP is or was not in compliance with the requirements of the privatization guidelines or the participation agreement, AMP could be subject to fines and the technical assistance agreement between us and AMP could be terminated, which could have a material effect on our operations. In addition, there can be no assurance that any such developments would not result in a material decrease in the market value of our shares or ADSs or their liquidity.

Certain actions by Grupo México, S.A.B. de C.V. may affect our management, financial condition or results of operations.

Articles X and XII of our bylaws, among others, limit the ability of Series B shareholders, directly or with related parties, other than AMP, to hold more than 10% of our outstanding capital stock, and any shares held in excess of that amount must be sold in a public offering. In accordance with our bylaws, until the public offering of such shares takes place, such excess shares have no voting power and cannot be represented in any shareholders’ meeting.

On June 13, 2011, Grupo México, S.A.B. de C.V. (“Grupo México”) announced that its board of directors had approved the acquisition, directly or indirectly, of at least 30%, and up to 100%, of our shares outstanding at that time, excluding treasury shares, through a public tender offer. Grupo México and its subsidiary, Infraestructura y Transportes México, S.A. de C.V. (“ITM”), then commenced legal proceedings seeking (i) to modify our bylaws to eliminate the foregoing limitations and (ii) to terminate AMP’s special rights that stem from AMP’s ownership of our Series BB shares.

On June 17, 2015, the Mexican Supreme Court issued an amparo ruling upholding the validity of Articles X and XII of our bylaws regarding the limitations on ownership of our capital stock. On February 17, 2016, the Superior Court of Mexico City declared that Grupo México and ITM were in violation of the Company’s bylaws due to the fact that together they held more than 10% of our outstanding capital stock, and ordered Grupo México and ITM to sell any Series B shares held in excess of that limit. Consequently, the challenge initiated by Grupo México and ITM against these articles has been definitively concluded, with the ruling confirming the validity and effectiveness of these articles in support of the position we maintained and defended. Grupo México filed an appeal looking for clarification regarding the ruling. On November 9, 2016, the Grupo México complaint was declared unfounded. We filed a complaint seeking fees and expenses. On May 8, 2019, a civil court in Mexico City granted Grupo Mexico´s request for an amparo on a challenge to the constitutionality of Article 48, Section III of the Mexican Securities Law. We then filed a direct amparo appeal. The amparo review is pending. See “Item 8, Financial Information – Legal Proceedings – Litigation related to Grupo México, S.A.B. de C.V. seeking to void certain of our bylaws.”

In its most recent filing on Schedule 13D with the SEC on December 24, 2019, Grupo México disclosed that it beneficially owned 10.6% of our total outstanding shares. It is not possible to predict the extent to which these disputes with Grupo México will distract our management, the effects that future developments in this dispute might have on the price of our stock, its liquidity or our market value or the effects that these conflicts could have on our business or results of operations.

Adverse economic conditions in Mexico may adversely affect our financial condition or results of operations.

All of our operations conducted in Mexico are dependent upon the performance of the Mexican economy. As a result, our business, financial condition or results of operations may be affected by the general condition of the Mexican economy, over which we have no control. 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. We can provide no assurance that such conditions will not return or that such conditions will not have a material adverse effect on our business, financial condition or results of operations. See “Item 5, Recent Developments – Developments relating to the outbreak of COVID-19 may have a material adverse impact on our financial conditions or results of operations.”

According to the Mexican National Institute for Statistics and Geography (Instituto Nacional de Estadística y Geografía), or “INEGI,” GDP increased 2.1% in 2017, 2.0% and 2018, and decreased 0.1% in 2019, in each case compared with the previous year. The annualized interest rates for 28-day Mexican Treasury Bills (CETES) averaged approximately 6.7%, 7.6% and 7.8% in 2017, 2018 and 2019, respectively. As of May 22, 2020, the 28-day Interbank Equilibrium Interest Rate (Tasa de Interés Interbancaria de Equilibrio), or “TIIE-28,” was 5.7644%. To the extent that we incur peso-denominated debt in the future, it could be at high interest rates.

If inflation or interest rates increase significantly or if the Mexican economy is otherwise adversely impacted, our business, financial condition or results of operations could be materially and adversely affected.

Additionally, economic conditions in Mexico may also be affected by political developments in the United States, such as the change in administrations in January 2017, and economic developments in the United States, such as interest rates, exchange rates and GDP growth, among others. We cannot assure you that any developments in the U.S. or elsewhere will not materially and adversely affect us in the future.

Depreciation or fluctuation of the peso relative to the U.S. dollar could adversely affect our results of operations and financial condition.

Any future significant appreciation or depreciation of the peso could impact our aggregate passenger traffic volume, which could have a material adverse effect on our results of operations. 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 that more than offset an increase in international passenger traffic volume. Another substantial decrease in value could occur, and it could (notwithstanding other factors) lead to a decrease in domestic passenger traffic that may not be offset by any increase in international passenger traffic. In 2017, the peso appreciated 4.5% against the U.S. dollar. In 2018, the peso appreciated 0.3% against the U.S. dollar. In 2019, the peso appreciated 4.0% against the U.S. dollar. Any future significant depreciation of the peso could impact our aggregate passenger traffic volume by increasing the cost of travel for domestic passengers, while any future significant appreciation of the peso could impact our aggregate passenger volume by increasing the cost of travel for international passengers. See “Item 5, Recent Developments – Developments relating to the outbreak of COVID-19 may have a material adverse impact on our financial conditions or results of operations.”

International passengers and international flights pay tariffs denominated in U.S. dollars. However, in Mexico, these tariffs are generally invoiced and collected in Mexican pesos. Because such tariffs are invoiced taking into account the average of the exchange rate for the 30 days prior to the date of a flight, a significant depreciation of the peso during the final two months of any year could result in our exceeding our maximum rates, which would be a violation of our concession. If a significant depreciation of the peso occurred, we could be required to issue rebates to our customers to avoid exceeding our maximum rates. On the other hand, a significant appreciation of the peso could result in us invoicing substantially less than our maximum rate per workload unit. We do not have any means of recovering lost revenue if we charge less than the maximum rate as a result of a significant appreciation in the peso. We attempt to set our U.S. dollar-denominated tariffs so as to avoid exceeding our maximum rates while attempting to charge as close to the maximum rate as possible.

Due to the acquisition of 100% of the shares of DCA in 2015, we incurred indebtedness in U.S. dollars. A devaluation of the peso would increase the debt service cost of such U.S. dollar-denominated indebtedness and result in foreign exchange losses. In 2019, approximately 99.0% of MBJA’s operating revenues, 58.0% of its operating expenses and 98.0% of its capital expenditures were denominated in U.S. dollars, with the remaining 42.0% of operating expenses and 2.0% of its capital expenditures denominated in Jamaican dollars, which are pegged to the U.S. dollar. All of MBJA’s indebtedness was also denominated in U.S. dollars in 2019. Accordingly, fluctuations in the exchange rate between the Mexican peso and the U.S. dollar may also affect our performance through the consolidation of MBJA and NMIA’s financial and operating results.

In addition, fluctuations in the exchange rate between the peso and the U.S. dollar, particularly depreciations, may adversely affect the U.S. dollar equivalent of the peso price of the Series B shares on the Mexican Stock Exchange. As a result, such peso depreciations will likely affect the market price of the ADSs. Exchange rate fluctuations would also affect the ADS depositary’s ability to convert into U.S. dollars, and make timely payment of, any peso cash dividends and other distributions paid in respect of the Series B shares.

We can provide no assurance that depreciation or fluctuation of the peso relative to the U.S. dollar will not require us to issue rebates to avoid exceeding our maximum rates or cause us to invoice substantially less than our maximum rate per workload unit, negatively impact our financial results or our performance through the consolidation of MBJA and NMIA’s financial and operating results, or adversely affect the market price of our ADSs. In addition, although most of our operating costs are denominated in pesos, we cannot predict whether our cost of services will increase as a result of the depreciation of the peso or as a result of other factors.

The value and prices of securities issued by Mexican companies may be adversely affected by developments in other countries.

The Mexican economy may be, to varying degrees, affected by economic and market conditions in other countries. Although economic conditions in other countries may differ significantly from economic conditions in Mexico, investors’ reactions to adverse developments in other countries may have an adverse effect on the market value of securities of Mexican issuers. For instance, the credit freeze and global recession that began in 2007 and continued into 2009 had a significant impact in Mexico. Mexico’s stock market fell 48% during that period. Similarly, the European debt crisis that began in Greece and then spread to other countries such as Italy and Spain as well as European financial institutions, affected financial markets around the world and in Mexico.

We cannot provide assurance that events in other emerging market countries, in the United States or elsewhere, will not materially and adversely affect our business, financial condition or results of operations.

Political conditions in Mexico could materially and adversely affect Mexican economic policy or business conditions and, in turn, our operations.

The Mexican government has exercised, and continues to exercise, significant influence over the Mexican economy. Mexican governmental actions concerning the economy could have a significant impact on Mexican private sector entities in general, as well as on market conditions and prices and returns on Mexican securities, including our securities.

Andrés Manuel López Obrador, a member of the National Regeneration Movement (“MORENA”), began a six-year term as president of Mexico on December 1, 2018. The newly elected members of the Mexican Congress took office on September 1, 2018, with MORENA holding an absolute majority in the Chamber of Deputies and no political party holding a majority in the Senate. The transition in leadership and party control could result in economic or political conditions in Mexico that could materially impact our operations. As with any governmental change, this change to the country’s administration may lead to significant changes in laws, public policies or regulations, may affect the political and economic environment in Mexico, and consequently, they may contribute to economic uncertainty and to heightened volatility of the Mexican capital markets and in securities issued by Mexican companies.

We can provide no assurance that changes in the policies of Mexico’s federal government will not have an adverse effect on our business, financial conditions and results of operations. Consequently, we can provide no assurance that Mexican political or social developments, over which we have no control, will not adversely affect our financial conditions, results of operations, our ability to make dividend payments to our shareholders or the market price of our securities.

Our business could be adversely affected by other claims by certain Mexican municipalities.

Certain of our Mexican airports are subject to claims by the municipalities in which they operate regarding our failure to obtain certain municipal licenses. Although we do not believe that we are subject to the license requirements at issue, if the municipalities require additional licenses or make changes to the current laws and we are unable to obtain the necessary licenses or if we do not prevail in proceedings challenging these requirements, our failure to obtain these licenses could have a material adverse effect on the operations of certain of our airports and consequently on our financial condition and results of operations.

High incidences of crime in Mexico and violence related to drug trafficking could adversely affect our business.

Travel alerts issued by the U.S. Bureau of Consular Affairs, the most recent as of December 17, 2019, informed of the risks of traveling in Mexico due to (i) threats to safety and security posed by transnational criminal organizations in the country and (ii) increased violence in many towns and cities across Mexico. These travel alerts emphasize the extent of criminal activity in different Mexican states, including recommending against travel in states such as Michoacan, Colima and Sinaloa in which our Morelia, Manzanillo and Los Mochis airports are located.

In addition, perceptions about crime in Mexico and violence related to drug trafficking may also have an adverse effect on our business as they may decrease the international passenger traffic directed to Mexico or the domestic passenger travel using our airports in affected states.

Higher incidences of crime throughout Mexico and drug trafficking-related violence could have an adverse effect on our business as it may decrease the international passenger traffic directed to Mexico or the domestic passenger travel using our airports in affected states.

The level of environmental regulation in Mexico is increasing and the enforcement of environmental laws has become more common. For instance, a new carbon dioxide (“CO2”) market commenced operating in Mexico during 2018. The market will require that industries that generate above a certain amount of CO2 emissions pay for rights to excess emissions. As of 2019, companies subject to the legislation are required to report their global emissions for verification by the Mexican Emissions Registry (Registro Nacional de Emisiones). We are subject to this legislation, and began reporting our emissions in 2018. In 2019, we began submitting our emissions reports for verification by the Mexican Emissions Registry. In addition, new water quality standards are being discussed, which would require greater water quality for all of our wastewater disposal. There can be no assurance that environmental regulations or their enforcement will not change in a manner that could have a material adverse effect on our business, results of operations, prospects or financial condition. For more information on environmental regulation, see “Item 4, Information on the Company – Regulatory Framework – Mexican Environmental Regulation.”

Minority shareholders may be less able to enforce their rights against us, our directors, or our strategic 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 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. In addition, the procedures for class action lawsuits were incorporated into Mexican law and became effective in March 2012; however, certain rules and procedures could be different than the ones in the United States. Therefore, in some cases it may be more difficult for minority shareholders to enforce their rights against us, our directors, or our strategic 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, Mexico and other countries is to promote full and fair disclosure of all material corporate information, including accounting information. However, there may be different or less publicly available information about issuers of securities in Mexico than is regularly made available by public companies in countries with highly developed capital markets, including the United States.

In addition, accounting standards and disclosure requirements in Mexico differ from those of the United States. Our financial statements are prepared in accordance with IFRS, which differs from U.S. GAAP in a number of respects. Items on the financial statements of a company prepared in accordance with IFRS may not reflect its financial position or results of operations in the way they would be reflected, if such financial statements had been prepared in accordance with U.S. GAAP.

Adverse economic conditions in Jamaica may adversely affect our financial condition or results of operations.

Despite 99% of the passenger traffic through our Jamaican airports consisting of international passengers, the general condition and performance of the Jamaican economy, over which we have no control, may affect our business, financial condition or results of operations. Jamaica is a small, emerging market country, which has struggled with low growth and high public debt. Due to its size, indebtedness, reliance on exports to a small number of principal markets, such as the United States and Canada, and the concentration of its economic activity in its two principal industries of bauxite mining and tourism, the Jamaican economy is highly susceptible to external shocks. Jamaica is also affected by social and security problems, including, among others, trafficking in drugs and high rates of violent crime, underemployment and youth unemployment.

If growth remains lower than what is needed for reducing the poverty, and the country continues to be confronted by serious social issues that predominantly affect youth, such as a high levels of crime and violence and high unemployment. The Statistical Institute of Jamaica estimated the unemployment rate in Jamaica at 7.8% in July 2019, down from 8.4% in July 2018.

If Jamaican inflation or interest rates increase significantly or if the Jamaican economy is otherwise adversely impacted, our business, financial condition or results of operations could be adversely affected. See “Item 5, Recent Developments – Developments relating to the outbreak of COVID-19 may have a material adverse impact on our financial conditions or results of operations.”

Political conditions in Jamaica could materially and adversely affect Jamaican economic policy or business conditions and, in turn, our operations in Jamaica.

National elections to determine which party forms the Jamaican government for the next five years were held in February 2016, which resulted in the Jamaica Labour Party (“JLP”) holding a majority of the seats in both houses of Parliament. The previous ruling party, the People’s National Party (“PNP”) advocated for the continued implementation of public policies and private partnerships to encourage infrastructure development in the tourism sector. Thus far, the change in ruling political parties in Jamaica has not led to significant modifications of the economic and regulatory policies pursued by the previous administration. Any adverse changes in legislation in the future could have a negative impact on our business, financial condition, performance of operations and cash flows.

Our Jamaican airport concessions are regulated principally by the AAJ, an agency of the Jamaican government, under the Airports Authority Act of 1974. In April 2003, the AAJ divested operational responsibility for the Montego Bay airport to MBJA under a concession agreement pursuant to which MBJA is responsible for the management of the day-to-day operations of the Montego Bay airport in keeping with specific performance criteria and prescribed international standards. In addition, on October 10, 2018, the AAJ signed a concession agreement with PACKAL, for the management of the day-to-day operations of the Kingston airport. The AAJ retains ownership of the non-movable assets of these airports. Our Jamaican airports pay a concession fee to the Jamaican government and at the end of the concession agreements will transfer the infrastructure of our Jamaican airports, and any moveable assets acquired during the period of the concessions, to the AAJ. Regular performance reviews and other contract administration oversight functions are conducted by the AAJ, as specified under the concession agreements. There can be no assurance that governmental regulations or their enforcement will not change in a manner that could have a material adverse effect on our business, results of operations, prospects or financial condition. However, there are certain provisions within the concession agreements that offer some protection to MBJA and PACKAL in the event of adverse changes in Jamaican law. In certain instances, if there is an adverse change in Jamaican law resulting in an unavoidable net increase in costs or net reduction in revenues to MBJA and PACKAL, MBJA and PACKAL will be entitled (subject to remaining provisions of the MBJA and PACKAL Concession Agreements) to monetary compensation from AAJ. See “Item 4, Information on the Company – Regulatory Framework.”

High incidences of crime in Jamaica and violence related to drug trafficking could adversely affect our business.

Travel alerts issued by the U.S. Bureau of Consular Affairs, the most recent as of April 15, 2019, informed of the risks of traveling in Jamaica due to threats to safety and security posed by increased crime, including violent crime, in many areas across Jamaica. The travel alerts emphasize the increase of criminal activity in different areas across Jamaica, including in certain areas in Montego Bay and Kingston, near where our Jamaican airports are located.

In addition, perceptions about crime in Jamaica and violence related to drug trafficking may also have an adverse effect on our business as they may decrease the international passenger traffic directed to Jamaica.

Higher incidences of crime throughout Jamaica could have an adverse effect on our business as it may decrease the international passenger traffic directed to Jamaica.

Government tax legislation in Jamaica may have an adverse effect on our financial condition and results of operations.

The Jamaican government has in recent years implemented various changes to the tax laws applicable to Jamaican companies. Except certain relief from withholding tax in relation to interest on commercial and shareholder’s loans to non-resident lenders and to dividends to non-resident shareholders, and in the case of our Jamaican airports certain relief from customs duty and general consumption tax on major capital investment, the terms of our concession agreements do not exempt us from generally applicable Jamaican tax laws. Changes to tax laws and regulations in Jamaica could significantly increase our tax expense, which could have a material adverse impact on our results of operations.

We cannot predict the impact that changes in law, if fully implemented and applied to us, will have on our business, financial condition and results of operations. In addition, we cannot predict the indirect impact that such legislation could have on our customers and shareholders.

We hold concessions to operate, maintain and develop twelve international airports in the Pacific and Central regions of Mexico and two international airports in Jamaica. As operator of the airports under our concessions, we charge airlines, passengers and other users’ fees 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.

Grupo Aeroportuario del Pacífico, S.A.B. de C.V., a corporation (sociedad anónima bursátil de capital variable) organized under the laws of Mexico, was incorporated in 1998 as part of the Mexican government’s initiative to open Mexico’s airports to private investment. The corporation’s period of duration is set at 100 years.

Each of our Mexican concessions has a term of 50 years beginning on November 1, 1998. The term of each of our Mexican concessions may be extended by the SCT under certain circumstances for up to 50 additional years. Our wholly owned Spanish subsidiary, DCA, holds a 74.5% stake in MBJA, the entity that holds the concession to operate, maintain and utilize the Montego Bay International Airport in Jamaica for a period of 30 years beginning on April 12, 2003 but includes no extension provision.

On October 10, 2018, we signed a concession agreement with the Government of Jamaica to operate, modernize and expand the NMIA in Kingston, Jamaica for a period of 25 years with a possible five-year extension. We took control of the operation and management of NMIA on October 10, 2019.

The address of our registered office is as set forth on the cover of this annual report on Form 20-F. Our telephone number is +52 (33) 3880-1100. Our U.S. agent is Puglisi & Associates, 850 Library Avenue, Suite 204, Newark, Delaware 19711.

In February 1998, the Mexican government issued the Investment Guidelines for the Opening of Investment in the Mexican Airport System. Under these guidelines, the SCT identified 35 of Mexico’s 58 principal airports as being suitable for investment. These 35 airports were divided into four airport groups: Grupo Aeroportuario del Pacífico, or the Pacific Airport Group (twelve Mexican airports); Grupo Aeroportuario del Sureste, or the Southeast Airport Group (nine airports), Grupo Aeroportuario de la Ciudad de México, D.F., or the Mexico City Airport Group (one airport) and Grupo Aeroportuario del Centro-Norte, or the Central-North Airport Group (thirteen airports).

The guidelines generally provided for the airport groups to become open to private investment through a two-stage program. In the first stage, a series of public auctions were conducted to award a minority interest in each airport group to a strategic shareholder. In the second stage, all or a portion of the remaining interest in each airport group was sold through public offerings in the Mexican and international capital markets. Except for the Mexico City Airport Group, all of the other airport groups have completed both stages of the program.

As a result of the opening of Mexico’s airports to private investment, we and our subsidiaries are no longer subject to the Mexican regulations applicable to government wholly owned companies. We believe that this provides us greater flexibility to develop and implement our business strategy and to respond to potential business opportunities.

In 1999, through a public auction held as part of the first stage of the private investment program, the Mexican government sold a 15% equity interest in us to AMP.

AMP paid the Mexican government a total of Ps.2.45 billion (nominal pesos, excluding interest) (U.S.$261 million based on the exchange rates in effect on the date of AMP’s bid) in exchange for:

Under the technical assistance agreement, AMP provides management and consulting services and transfers industry expertise and technology to us in exchange for a fee. The agreement provides us an exclusive license in Mexico to use all technical assistance and expertise transferred to us by AMP or its shareholders during the term of the agreement. AMP 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 SCT and the improvement of our airport operations. Our management believes that if we were not to receive the technical assistance provided via our agreement with AMP, this could adversely and significantly affect our results of operations.

Upon expiration, the agreement automatically renews for successive five-year terms unless one party provides notice of termination at least 60 days prior to a scheduled expiration date. Under our bylaws, a decision by us to renew or cancel the technical assistance agreement is subject to the approval of 51% of Series B shareholders other than AMP or any related party of AMP (to the extent that AMP or any such related party holds Series B shares). A party may also terminate the technical assistance agreement prior to its expiration date upon non-compliance with its terms by the other party. The technical assistance agreement with AMP was automatically renewed on August 25, 2019 for five additional years.

The technical assistance fee is equal to the greater of U.S.$4.0 million, adjusted annually for U.S. inflation since August 25, 2000 (measured by the U.S. CPI), or 5% of our annual consolidated income from operations from our Mexican airports (calculated prior to deducting the technical assistance fee, income taxes and depreciation and amortization, in each case determined in accordance with MFRS). We believe that this structure creates an incentive for AMP to increase our annual consolidated earnings. AMP is also entitled to reimbursement for the out-of-pocket expenses it incurs in its provision of services under the agreement. In 2017, 2018 and 2019, the technical assistance fee, based on our Mexican airports’ income from operations, amounted to Ps.357.4 million, Ps.411.5 million and Ps.461.6 million, respectively. These amounts represented 4.4%, 4.5% and 4.5% of our annual consolidated income from operations (calculated prior to deducting the technical assistance fee, income taxes and depreciation and amortization), respectively.

The technical assistance agreement allows AMP, its shareholders and their affiliates to render additional services to us only if our Acquisitions Committee determines that these related parties have submitted the most favorable bid in a public bidding process involving at least three unrelated parties. For a description of this committee, see Item 6 herein. Our bylaws, the participation agreement and the technical assistance agreement also contain certain other provisions designed to avoid conflicts of interest between AMP and us.

Pursuant to our bylaws, AMP (as holder of our Series BB shares) has the right to appoint and remove our top-level executive officers (upon consultation with our Nominations and Compensation Committee), to elect four members of our board of directors and their alternates and to designate three of the members of our Operating Committee and 20% of the members of each other board committee (or one member of any committee consisting of fewer than five members). According to Mexican and U.S. independence standards, the members of our Audit Committee must be independent. Pursuant to our bylaws, AMP (as holder of our Series BB shares) also has the right to veto certain actions requiring approval by our shareholders (including the payment of dividends, the amendment of our bylaws and any decision that has the objective of modifying or annulling its right to appoint our top-level executive officers). In addition, shareholders of AMP have allocated among themselves certain veto rights relating to the exercise by AMP of its veto and other rights, which increases the risk of impasse at the AMP shareholders’ meetings and ultimately at our shareholders’ meetings. See “Item 3, Key Information – Risk Factors – Risks Related to Our Strategic Shareholder.”

Our bylaws provide that, subject to certain exceptions, Series BB shares must be converted into Series B shares prior to transfer. Our bylaws and certain of the agreements executed in connection with the privatization process prohibited AMP from transferring any of its Series BB shares before August 25, 2004. Since that date, AMP has been permitted to transfer up to 49% of its Series BB shares without restriction. Since August 25, 2009, AMP has been permitted to sell in any year up to 20% of its remaining 51% interest in our Series BB shares. Also pursuant to our bylaws, if at any time AMP (as the holder of our Series BB shares) were to hold less than 7.65% of our capital stock in the form of Series BB shares, its Series BB shares would be mandatorily converted into Series B shares, which would cause AMP to lose all of its special rights.

As required under the participation agreement entered into in connection with the Mexican government’s sale of our Series BB shares to AMP, AMP has transferred its Series BB shares to a trust, the trustee of which is Banco Nacional de Comercio Exterior, S.N.C. (“Bancomext”). For a description of this trust, see “Item 7, Major Shareholders and Related Party Transactions – Major Shareholders – AMP Trust, Bylaws and Shareholders’ Agreement.”

Pursuant to the terms of the trust, AMP may direct the trustee to vote only shares representing up to 10% of our capital stock. Any shares in excess of 10% are voted by the trustee in accordance with the vote of the majority of Series B shares. The trust does not affect the veto and other special rights granted to the holders of Series BB shares described above.

In 1999, 85% of our capital stock was transferred from the Mexican government to a trust established in Nacional Financiera, S.N.C., Institución de Banca de Desarrollo (“NAFIN”), a Mexican government-owned development banking institution. In February 2006, we conducted an initial public offering to allow NAFIN to dispose of its 85% interest in us. Through this offering, all of our outstanding Series B shares were sold to the public in Mexico, the U.S. and elsewhere, and NAFIN ceased to be a shareholder. The net proceeds from the sale of shares were remitted entirely to the Mexican government. We received no proceeds from this offering. At the same time, we established an American Depositary Receipt facility with The Bank of New York Mellon (formerly The Bank of New York) and obtained approval to list our ADSs on the NYSE. In addition, we registered our Series B shares with the National Securities Registry (Registro Nacional de Valores) and listed our Series B shares on the Mexican Stock Exchange.

Under the terms of our Mexican concessions, each of our Mexican subsidiary concession holders is required to present a Master Development Program for approval by the SCT every five years. Each Master Development Program includes investment commitments for the regulated part of our Mexican airports business (including capital expenditures and improvements) for the succeeding five-year period. Once approved by the SCT, these commitments become binding obligations under the terms of our Mexican concessions.

On December 12, 2019, the SCT approved our Master Development Programs for each of our Mexican airports for the 2020 to 2024 period. This five-year program took effect on January 1, 2020 and will be in effect through December 31, 2024.

The table below sets forth our historical capital expenditures for our Mexican airports. Capital expenditures are calculated on a cash flow basis, meaning that capital expenditures are equal to those investments actually paid for by each airport during a given year and not including investments allocated for by the airport during that year but not paid for during the given year. The investments shown in the table below therefore reflect our expenditures actually paid for by our Mexican airports for the years indicated. In order to be compared with our committed investments for a given year, the investments made in the previous year but paid for in the given year need to be subtracted while the investments allocated but not paid for in the given year need to be added. For 2017, 2018 and 2019, our investments allocated but unpaid totaled Ps.409.2 million, Ps.318.5 million and Ps.286.4 million, respectively. The substantial majority of these investments were made under the terms of our Master Development Programs.

The following table sets forth our historical capital expenditures by type of investment across all of our Mexican airports for the years indicated:

During 2017, 2018, and 2019, 3.1%, 1.9% and 2.4% respectively, of our capital expenditures were funded by cash flows from operations, while the remaining balance was funded by bank loans and long-term debt securities issued on the Mexican capital markets (Certificados Bursátiles de Largo Plazo). We expect to continue funding the most significant portion of our capital expenditures for our Mexican airports in the future with new debt issuances on the Mexican capital markets; however, our ability to incur debt may be restricted by our existing bank loans. See “Item 5, Operating and Financial Review and Prospects – Liquidity and Capital Resources.”

Our capital expenditures in 2019 were allocated to the following types of investments at the majority of our Mexican airports:

The following table sets forth our estimated committed investments for each airport for 2020 through 2024 under the new Master Development Programs expressed in thousands of constant pesos as of December 31, 2017, that were approved by the SCT on December 12, 2019. We are required to comply with the investment obligations under these programs on a year-to-year basis.

The following table sets forth our estimated committed investments for 2020 through 2024 by type of investment:

Differences between estimated committed investments and historical capital expenditures sometimes exist due primarily to: (i) the difference between capital expenditures made but unpaid during the prior year and investments made but unpaid during the current year; (ii) adjustments for inflation; and (iii) investments deferred into the first two months following the corresponding fiscal year, among other factors.

We allocated 86.8% of the total amounts committed under our Master Development Program for the 2020–2024 period to four of our airports: Guadalajara, Puerto Vallarta, Tijuana and Los Cabos. On February 14, 2020, we issued long-term bond certificates on the Mexican market (Certificados Bursátiles) under the ticker symbol “GAP20” for a total of Ps.3.0 billion. The proceeds from the issuance were allocated to make the maturity payment of our “GAP15” debt securities for a total of Ps.2.2 billion and the remaining will be allocated to finance capital investments set forth in the Master Development Program for 2020. We expect the remaining of our Master Development Program for the 2020-2024 period will also be financed primarily through cash from our operations and through the debt market in Mexico, subject to market conditions. See “Item 5, Operating and Financial Review and Prospects – Liquidity and Capital Resources – Indebtedness.”

Due to the COVID-19 pandemic, we have delayed non-obligatory capital investments and shall request the postponement of investments committed for this year from the proper authorities. See “Item 3, Risk Factors – Developments relating to the outbreak of COVID-19 may have a material adverse impact on our financial conditions or results of operations control”, and “Item 5, Recent Developments – Developments related to the outbreak of COVID-19.”

On April 20, 2015, we completed a transaction with Abertis for the acquisition of 100% of the shares of DCA for a total of U.S.$192.0 million. We financed 100% of the acquisition of DCA via bridge loans with external sources provided by Scotiabank and BBVA Bancomer. On September 24, 2015, we signed two new long term loans agreements, also with Scotiabank and BBVA Bancomer, for the refinancing of the bridge loans for an amount of U.S.$191.0 million. See “Item 5, Operating and Financial Review and Prospects – Liquidity and Capital Resources – Indebtedness.”

DCA has a 74.5% stake in MBJA, the entity that holds the concession to operate, maintain and utilize the Montego Bay International Airport in Jamaica. Vantage Airport Group Limited (“Vantage”), a Canadian joint venture that operates Vancouver International Airport, owns the remaining 25.5% stake in MBJA. The Montego Bay airport is Jamaica’s main airport, located in the city of Montego Bay, in the center of the tourist corridor between Negril and Ocho Rios, where 88% of the island’s hotel capacity is located. See “Item 3, Key Information – Risk Factors – Risks Related to Jamaica.” Based on our and Vantage’s experience in the airport sector, we believe that this cooperation will strengthen MBJA, benefitting it in terms of both operations and profitability.

DCA also held a 14.77% stake in SCL, the operator of the international terminal in Santiago de Chile until September 30, 2015. Upon expiration of the concession to operate the Santiago de Chile airport, those assets were immediately returned to the Chilean government and the new operator. Pursuant to the concession agreement, there is a one-year period after delivery of the concession assets during which the concessionaire remains responsible for any latent defects in those assets. After this period and a subsequent one-year period, SCL shall be liquidated in accordance with Chilean corporate and tax regulations. During 2016, we received dividends and capital reimbursements of Ps.58.9 million. In 2018, we received a capital reimbursement of Ps.10.0 million. Though SCL will no longer have operations, SCL must remain in effect for an additional year after the transfer. After that first year, SCL will remain in effect until its dissolution in accordance with tax regulations in Chile, in spite of this and due to some legal proceedings still pending, we expect to liquidated this subsidiary in December 2023.

On April 3, 2003, MBJA entered into a concession agreement with the AAJ pursuant to which the AAJ granted MBJA the right and obligation to rehabilitate, develop, operate and maintain the Montego Bay International Airport for 30 years from April 12, 2003 (the “MBJA Concession Agreement”). MBJA, as the approved airport operator, is thereby permitted to undertake the functions of the AAJ with respect to the Montego Bay airport and required to provide the airport services set out therein at the Montego Bay airport. The MBJA Concession Agreement is governed by Jamaican law and MBJA cannot assign its rights or obligations under the agreement except with the prior written consent of the AAJ. Under the terms of the MBJA Concession Agreement, MBJA also has certain other obligations to make capital investments. See “Item 4, Information on the Company – Regulatory Framework – The Montego Bay Airport Concession.”

MBJA made capital investments of US.$6.5 million, U.S.$34.2 million and U.S.$11.7 million in 2017, 2018 and 2019, respectively, for the rehabilitation of the taxiways and aprons and modernization of equipment at the Montego Bay airport. Estimated committed investments in the Capital Development Program from April 2015 through December 2019 are U.S.$37.9 million. These investment commitments were funded by bank loans mainly and by cash flows from operations, therefore, MBJA has also arranged a U.S.$40.0 million credit facility with the Bank of Nova Scotia and Bank of Nova Scotia Jamaica Limited to finance the majority of these projects. See “Item 5, Operating and Financial Review and Prospects – Liquidity and Capital Resources – Capital Expenditures – Capital Expenditures in Jamaica.”.

The following table sets forth our estimated committed investments for 2020 through 2024 under the new Capital Development Program:

At their annual general meeting on March 23, 2017, MBJA’s shareholders approved a dividend payment of U.S.$26.0 million to be distributed pro rata amongst the shareholders. Accordingly on January 22, 2018, MBJA paid dividends of approximately U.S.$19.4 million to DCA. At their annual general meeting on June 12, 2018, MBJA’s shareholders approved a dividend payment of U.S.$30.0 million to be distributed pro rata amongst the shareholders. Accordingly on September 26, 2018, MBJA paid dividends of approximately U.S.$22.4 million to DCA. At their annual general meeting on December 4, 2019, MBJA’s shareholders approved a dividend payment of U.S. $30.0 million. Accordingly on December 16, 2019 MBJA paid dividends of approximately U.S. $22.4 million to DCA.

On October 10, 2018, PACKAL entered into a concession agreement with AAJ, with which the authority guaranteed to PACKAL the right to rehabilitate, develop, operate and maintain NMIA for a period of 25 years, with a possible extension of 5 years, as of October 10, 2019. In accordance with the terms of the concession agreement, We paid U.S. $7.1 million (U.S. $2.1 million to the International Finance Corporation (“IFC”) and U.S. $5.0 million to the AAJ). PACKAL is obliged to pay the AAJ a concession right of 62.01% of the total aeronautical and commercial revenues. All long-lived assets located in the NMIA are owned by AAJ. Upon the expiration of the term of the concessions agreement granted to us, the assets, including all the improvements made to the airport facilities during the term of the concessions, will automatically revert in favor of AAJ. The following table sets forth our estimated committed investments for 2020 through 2024 under the new Capital Development Program:

We hold concessions to operate twelve international airports in Mexico and two international airports in Jamaica.

Our twelve Mexican airports serve two major metropolitan areas (Guadalajara and Tijuana), several tourist destinations (Puerto Vallarta, Los Cabos, La Paz and Manzanillo), and a number of mid-sized cities (Hermosillo, Guanajuato, Morelia, Aguascalientes, Mexicali and Los Mochis). Our Mexican airports are located in nine of the 32 Mexican states, covering a territory of approximately 566,000 square kilometers, with a population of approximately 31.1 million according to the 2015 national census data from INEGI. All of our Mexican airports are designated as international airports under Mexican law, meaning that they are all equipped to receive international flights and maintain customs, refueling and immigration services managed by the Mexican government.

Our Mexican airports handled 36.5 million, 40.5 million and 43.6 million terminal passengers in 2017, 2018, and 2019 respectively, which we believe places us among the largest private airport operator in the Americas. As of December 31, 2019, five of our airports ranked among the top ten busiest airports in Mexico based on commercial aviation passenger traffic, according to data published by the SCT. According to the SCT’s figures, our commercial aviation passenger traffic accounted for approximately 26.3%, 26.9% and 27.2% of all arriving and departing commercial aviation passengers in Mexico in 2017, 2018 and 2019, respectively. In 2019, our Mexican airports recorded total revenues of Ps.13.8 billion, of which Ps.12.0 billion corresponds to the sum of aeronautical and non-aeronautical revenues and Ps.1.8 billion corresponds to the improvements to concession assets.

Our Mexican airports serve several major international routes, including Guadalajara-Los Angeles, which, in 2019, ranked as the fifth busiest international route in Mexico by total number of passengers according to the Federal Civil Aviation Agency. In addition, our airports serve major resort destinations such as Puerto Vallarta and Los Cabos, which are among the most popular destinations in Mexico visited by tourists from the United States. Our airports also serve major domestic routes, including Guadalajara-Mexico City, which was the country’s fifth busiest route in 2019, according to the Federal Civil Aviation Agency. Other top domestic routes in terms of total passenger traffic include Mexico City-Tijuana and Guadalajara-Tijuana, which ranked seventh and eleventh, respectively, among the busiest domestic routes in Mexico in 2019, according to the Federal Civil Aviation Agency.

Mexico and the United States are party to a bilateral aviation agreement, which went into force on August 21, 2016. The bilateral agreement provides for an increase in airlines servicing existing routes between Mexico and the United States, as well as the addition of new routes and an increase in the frequency of flights on existing routes. The agreement also grants Mexican airlines the ability to further penetrate international markets. We believe that our business has benefited from and will continue to benefit from this amendment as a result of increased service to Mexican airports by U.S. airlines.

Guadalajara and Tijuana are among Mexico’s most important manufacturing, industrial and commercial centers. Both cities have significant maquiladora industries. A maquiladora plant is a manufacturing facility to which mostly raw materials are imported and from which finished products are exported, with the manufacturer paying tariffs only on the value added in Mexico. Maquiladora plants were originally concentrated along the Mexico-U.S. border, but more recently have moved further south in order to access lower labor costs and a larger and more diverse labor pool, and to take greater advantage of certain inputs available from Mexican suppliers. In 2019, our Guadalajara and Tijuana airports were Mexico’s third and fifth busiest airports, respectively, in terms of passenger traffic, according to the SCT. In 2017, 2018 and 2019, our Guadalajara and Tijuana airports together represented approximately 54.6%, 54.8% and 54.5% of our Mexican airports’ terminal passenger traffic and 48.2%, 47.4% and 51.4% of our Mexican airports’ total revenues (in 2017, 2018, and 2019 they represented 48.9%, 49.4% and 49.3% of the sum of our Mexican airports’ aeronautical and non-aeronautical revenues).

Mexico is one of the main tourist destinations in the world. Mexico has historically ranked in the top fifteen countries worldwide in terms of foreign visitors, ranking seventh with approximately 45 million international tourists in 2019, according to the Mexican Ministry of Tourism. The tourism industry is one of the largest generators of foreign exchange in the Mexican economy. Within Mexico, the region bordering the Pacific Ocean (where several of our airports are located) is a principal tourist destination due to its beaches and cultural sites, which are served by numerous hotels and resorts. Four of our airports, the Los Cabos, Puerto Vallarta, La Paz and Manzanillo airports, serve popular Mexican tourist destinations. Of these tourist destinations, Los Cabos and Puerto Vallarta are the most popular, with Los Cabos constituting Mexico’s third most popular international tourist destination and Puerto Vallarta the fourth, in terms of visitors in 2019, according to the Mexican National Institute of Migration (Instituto Nacional de Migración). The Los Cabos and Puerto Vallarta airports attracted approximately 5.6 million and 5.1 million terminal passengers, respectively, in 2019. In 2017, 2018, and 2019 our Los Cabos and Puerto Vallarta airports together represented 25.9%, 24.8%, and 24.5% of our Mexican airports’ terminal passengers and 32.5%, 32.9% and 30.0% of our Mexican airports’ total revenues (33.4%, 32.0% and 31.5% of the sum of our Mexican airports’ aeronautical and non-aeronautical revenues). In addition, these two airports have general aviation and Fixed Base Operations (“FBO”) terminals, where specialized, full service operations are offered to general aviation aircraft, including refueling, cleaning and catering.

The remaining six Mexican airports in our group serve mid-sized cities—Hermosillo, Leon, Morelia, Aguascalientes, Mexicali and Los Mochis—with diverse economic activities. These cities are industrial centers (Hermosillo, Leon, Aguascalientes and Mexicali) and/or serve as the hubs for important agricultural regions (Leon, Morelia and Los Mochis). In 2017, 2018 and 2019, these six airports serving mid-sized cities accounted for approximately 16.7%, 17.7% and 18.3% of our Mexican airports’ terminal passenger traffic and 16.8%,16.7% and 15.7% of our Mexican airports’ total revenues (15.1%, 16.1%, and 16.7% of the sum of our Mexican airports’ aeronautical and non-aeronautical revenues). Of these six airports, Guanajuato has the greatest passenger traffic volume. In 2017, 2018, and 2019 Guanajuato accounted for approximately 5.4%, 5.8% and 6.3% of our Mexican airports’ terminal passenger traffic and 6.0%, 5.6%, 5.8% of our Mexican airports’ total revenues (5.4%, 5.9%, and 6.4% of the sum of our Mexican airports’ aeronautical and non-aeronautical revenues).

Montego Bay International Airport is a full-service international passenger airport, with additional FBO and cargo operations driven by agricultural exports from the island, serving as the primary gateway for international air travel to Jamaica, a major international tourist destination and growing tourism market. In 2019, it was the third busiest airport in the Caribbean region, excluding Cuba, in terms of commercial aviation passenger traffic, according to Airports Council International. Located in the town of Montego Bay, which is in the geographical center of the tourist corridor between the coastal resort areas of Negril and Ocho Rios where, according to the Jamaican Tourist Board, 88.0% of the island’s hotel capacity is located, the Montego Bay airport facilitates the transit of more than 70% of the tourists arriving on the island. In 2019, 4.7 million terminal passengers travelled through the Montego Bay airport, an 5.0% increase over the previous year, of which 99.0% were international passengers. Of the total passengers in 2019, 70.0% came from the United States, 16.0% came from Canada, 12.0% came from Europe and 2.0% from other countries.

In 2017, 2018, and 2019 respectively, the Montego Bay International Airport served 4.2 million, 4.5 million and 4.7 million terminal passengers. During 2017, MBJA’s total revenues amounted to Ps.1.9 billion, of which Ps.1.3 billion were from aeronautical revenues, Ps.496.5 million were from non-aeronautical revenues and Ps.66.1 million correspond to improvements to concession assets. During 2018, MBJA’s total revenues amounted to Ps.2.5 billion, of which Ps.1.4 billion were from aeronautical revenues, Ps.543.9 million were from non-aeronautical revenues and Ps.546.0 million correspond to improvements to concession assets. During 2019, MBJA’s total revenues amounted to Ps.2.2 billion, of which Ps.1.5 billion were from aeronautical revenues, Ps.585.3 million were from non-aeronautical revenues and Ps.136.3 million correspond to improvements to concession assets.

On February 20, 2017, the Government of Jamaica issued a Request for Qualifications inviting interested parties to prepare and submit a prequalification application to participate in a bidding process for a public private partnership to operate the Norman Manley International Airport in Kingston, Jamaica. We timely submitted our prequalification application and, after participating in a competitive bidding process with seven other international airport operators, we were selected for the concession.

On October 10, 2018, we signed a concession agreement with the government of Jamaica for the operation, modernization and expansion of the Kingston International Airport for a period of 25 years. We began operating and managing the Kingston International Airport in the last quarter of 2019.

All revenue amounts in this “Business Overview” section include revenues from improvements to concession assets; however, in some cases we include discussion surrounding only aeronautical and non-aeronautical revenues or the sum of both. See the introduction to “Item 3, Key Information – Selected Financial and Other Data,” for a discussion of the reasons for using aeronautical and non-aeronautical revenues for certain comparisons. We specifically state when either aeronautical or non-aeronautical revenues are being used. Because aeronautical and non-aeronautical revenues are derived from our business operations, we believe these figures may in some cases be more useful for readers because those revenues stem from the key drivers of our business: passenger traffic and our maximum rates.

Aeronautical services represent the most significant source of our revenues. In 2017, 2018 and 2019, aeronautical services revenues represented approximately 67.0%, 67.3% and 65.0% respectively, of our total revenues (in 2017, 2018, and 2019 aeronautical services represented 74.9%, 74.9% and 73.7% respectively, of the sum of aeronautical and non-aeronautical revenues). Our 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 and the time of day the aircraft operates at the airport.

In Mexico, all of our revenues from aeronautical services are regulated under the maximum-rate price regulation system applicable to our airports. See “Item 4, Information on the Company – Regulatory Framework – Mexican Aeronautical Services Regulation.”

In Jamaica, MBJA’s revenues from passenger charges, aircraft landing and parking charges, airport security charges and passenger walkway charges are regulated by the JCAA, revenues from car parking charges are set by the MTM and revenues from leasing of space to airlines, complementary services, cargo handling and ground transportation are unregulated. See “Item 4, Information on the Company – Regulatory Framework – Jamaican Aeronautical Services Regulation.”

In Mexico, we collect a passenger charge for each departing passenger on an aircraft (other than diplomats, infants and transit and transfer passengers, if the transfer of the passenger occurs within 24 hours of the passenger’s arrival at the airport). We do not collect passenger charges from arriving passengers. Passenger charges are included in the cost of a passenger’s ticket, and we issue invoices for those charges to each airline on a weekly basis and record an account receivable for the invoice corresponding to a flight during the actual month of the flight.

Before the opening of Mexico’s airports to private investment, all airports in Mexico had entered into agreements with national and foreign airlines under which the airlines were obligated to collect all passenger charges on behalf of the airports in exchange for being given a period of time in which to reimburse those passenger charges to the airports. The length of the reimbursement period was tied to the interest rate on short-term Mexican treasury bills (CETES), in order to allow airlines to accumulate interest that would compensate them for the costs they incurred in collecting those passenger charges.

Under passenger charges collection agreements negotiated with our airline customers, which took effect as of November 1, 2009, airlines requesting payment period extensions are obligated to: (i) reimburse passenger charges collected on behalf of our airports during a period no greater than 60 days after the “operational average date” (no later than the invoice date) for such charges; and (ii) provide cash, bonds, standby letters of credit or other similar instruments as a guarantee for passenger charges in an amount equal to the highest passenger charges received by the airline on an airport-by-airport basis for the previous year during a period of time equal to the requested payment period plus 30 additional days. Each airline with a payment grace period is obligated to maintain the guarantee at an agreed-upon level, and if it does not do so, it must reimburse the passenger charges on the day the applicable flight departs from our airports without any grace period. If the airline pays our airports on time, the airport is obligated to give the airline an allowance of 3% of the value of each invoice billed no later than seven days after the payment date. The airline can then apply this allowance to cover airport services, leases for ticket counters and back-office and passenger charges. During 2017, 2018 and 2019, under the passenger charges collection agreements, we received payments within an average period of 52, 57, and 54 days, respectively.

Passenger charges vary at each of our Mexican airports and depending on whether the destination is national or international. International passenger charges are currently U.S. dollar-denominated, but are invoiced and collected in pesos based on the average exchange rate during the month prior to the flight. Domestic passenger charges are peso-denominated. Because passenger charges for international flights are denominated in U.S. dollars, 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.

At our Mexican airports in 2017, 2018 and 2019, passenger charges represented approximately 85.5% (domestic passenger charges represented 43.7% and international passenger charges represented 41.8%), 85.4% (domestic passenger charges represented 47.1% and international passenger charges represented 38.3%) and 85.5% (domestic passenger charges represented 46.7% and international passenger charges represented 38.9%) respectively, of our aeronautical services revenues and approximately 56.8% (domestic passenger charges represented 29.1% and international passenger charges represented 27.8%), 59.4% (domestic passenger charges represented 32.8% and international passenger charges represented 26.7%), and 55.1% (domestic passenger charges represented 30.1% and international passenger charges represented 25.0%), respectively, of our total revenues. In 2017, 2018, and 2019 passenger charges represented approximately 64.5% (domestic passenger charges represented 33.0% and international passenger charges represented 31.5%), 64.4% (domestic passenger charges represented 35.5% and international passenger charges represented 28.9%), and 63.2% (domestic passenger charges represented 34.5% and international passenger charges represented 28.7%), respectively, of the sum of aeronautical and non-aeronautical revenues.

In March 2017, we published new rates for passenger charges and other specific tariffs for ten airports (Aguascalientes, Hermosillo, Guanajuato, La Paz, Manzanillo, Mexicali, Los Mochis, Morelia, Puerto Vallarta and Los Cabos) and passenger walkway charges for Hermosillo. In May 2017, we published new rates for passenger charges and other specific tariffs for our Guadalajara and Tijuana airports. In June 2018, we published new rates for passenger charges and other specific tariffs for our twelve Mexican airports. In March 2019, we published updated fees for jet bridges and apron buses. In September 2019, we published rates for passenger charges set in USD for five airports (Hermosillo, La Paz, Los Mochis, Mexicali, Tijuana) where rates were previously only set in Mexican pesos. These new rates for passenger charges and other specific tariffs did not change materially compared to those of each prior year, because charges are capped by the Maximum Tariff corresponding to each airport in its Master Development Program for the period.

In Jamaica, MBJA and NMIA collect a passenger charge for each departing passenger on an aircraft (other than infants and transit and transfer passengers). We do not do not collect passenger charges from arriving passengers. Passenger charges are included in the cost of a passenger’s ticket, and we issue invoices for those charges to each airline on a weekly basis and record an account receivable for the invoice corresponding to a flight during the actual month of the flight. Passenger charges are invoiced in U.S. dollars for all airlines.

In 2017, 2018 and 2019, passenger charges represented 60.2%, 60.2%, and 60.9% respectively, of MBJA’s aeronautical revenues and 41.9%, 44.0% and 43.9%, respectively, of MBJA’s total revenues.

From October 10, 2019 through December 31, 2019, passenger charges of NMIA represented 42.3% of NMIA’s aeronautical revenues and 33.3% of NMIA’s total revenues.

In Mexico, we collect landing charges from carriers for their use of our runways, illumination systems on the runways 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 2017, 2018 and 2019, aircraft landing charges represented approximately 7.9%, 8.0% and 7.9% respectively, of our Mexican airports’ aeronautical revenues and 5.3%, 5.5% and 5.1% respectively, of our Mexican airports’ total revenues (in 2017, 2018 and 2019, aircraft landing charges represented 6.0%, 6.0%, and 5.9% respectively, of the sum of our Mexican airports’ aeronautical and non-aeronautical revenues).

In Jamaica, MBJA and NMIA collect landing charges from aircraft operators for landing at the airport. These landing charges are included in the list of charges regulated by the JCAA. Landing charges are paid by each aircraft operator based on each landing aircraft’s maximum takeoff weight and the origin, destination and purpose of the flight.

In 2017, 2018 and 2019, aircraft landing charges represented 9.8%, 9.9% and 9.8% respectively, of MBJA’s aeronautical revenues and 6.8%, 7.1% and 6.6% respectively, of MBJA’s total revenues.

From October 10, 2019 through December 31, 2019, aircraft landing charges of NMIA represented 11.1% of NMIA’s aeronautical revenues and 8.8%, of NMIA’s total revenues.

In Mexico, we collect various charges from carriers for the use of our facilities by their aircraft and passengers after landing. We collect aircraft parking charges for aircraft that are loading and unloading passengers or cargo as well as for long-term aircraft parking that does not involve the loading or unloading of passengers or cargo. Aircraft parking charges that involve loading and unloading passengers or cargo vary 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, while charges for long-term parking vary 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. We collect aircraft parking charges the entire time an aircraft is on our aprons.

During 2017, 2018 and 2019 these charges represented 1.9%, 1.9% and 1.8%, respectively, of our Mexican airports’ aeronautical revenues and 1.3%, 1.3%, and 1.2% respectively, of our Mexican airports’ total revenues (in 2017, 2018 and 2019 aircraft parking charges represented 1.4%, 1.4%, 1.4% respectively, of the sum of our Mexican airports’ aeronautical and non-aeronautical revenues).

In Jamaica, MBJA and NMIA collect parking charges from aircraft operators in respect of any aircraft remaining on the ground at the airport for a period of five hours or more. Parking charges are calculated on the basis of 24-hour intervals so that any ground stops amounting to five hours or more for the first 24-hour interval may be rounded up to one day. Parking charges are based on aircraft maximum takeoff weights and whether the aircraft is used for commercial, visiting non-commercial or domestic activity.

In 2017, 2018 and 2019 aircraft parking charges represented 0.1%, 0.1% and 0.1%, respectively, of MBJA’s aeronautical revenues and 0.1%, 0.1% and 0.1%, respectively, of MBJA’s total revenues.

From October 10, 2019 through December 31, 2019, aircraft parking charges of NMIA represented 6.6% of NMIA’s aeronautical revenues and 5.2%, of NMIA’s total revenues.

In Mexico, we also assess an airport security charge, which is collected from each airline, based on the number of its departing terminal passengers (other than diplomats, infants 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. We provide airport security services at our airports directly.

The AFAC and the Ministry of Public Security (Secretaría de Seguridad Pública) issue guidelines for airport security in Mexico. In response to the September 11, 2001 terrorist attacks in the United States, we took additional steps to increase security at our airports. At the request of the U.S. Federal Aviation Authority, the Mexican civil aviation authority issued directives in October 2001 establishing new rules and procedures to be adopted at our airports. Under these directives, these rules and procedures were implemented immediately and for an indefinite period of time.

Additional regulations were issued by the AFAC in 2011 established rules and procedures for the inspection of carry-on baggage. See “Item 4, Information on the Company – Business Overview – Our Sources of Revenues – Non-Aeronautical Services – Recovery of Costs from Checked Baggage Screening at our Mexican Airports” in this section. To fulfill these requirements, we improved our security by providing new training and operating procedures, adding new equipment and security personnel, most of them from third-party providers, in addition to increasing our coordination with other airports and airlines. However, as security is a primary concern in our industry, the possibility of new threats may require frequent updates to the security measures at our airports.

In 2017, 2018 and 2019, these charges represented approximately 1.1%, 1.2% and 1.2% respectively, of our Mexican airports’ aeronautical services revenues and approximately 0.8%, 0.8% and 0.8% respectively, of our Mexican airports’ total revenues. In 2017, 2018 and 2019, security charges represented 0.9%, 0.9% and 0.9% of the sum of our Mexican airports’ aeronautical and non-aeronautical revenues.

In Jamaica, MBJA and NMIA collect a security charge from each airline based on the number of its departing terminal passengers (other than infants and transit and transfer passengers) for use of the x-ray equipment, metal detectors, security personnel services and other related security equipment. These security charges are included in the list of charges regulated by the JCAA. Security charges are billed at a flat rate for all categories of passengers.

In 2017, 2018 and 2019, airport security charges represented 7.8%, 7.9% and 7.9%, respectively, of MBJA’s aeronautical revenues and 5.5%, 5.7% and 5.4% respectively, of MBJA’s total revenues.

From October 10, 2019 through December 31, 2019, airport security charges of NMIA represented 23.7% of NMIA’s aeronautical revenues and 18.7%, of NMIA’s total revenues.

In Mexico, airlines are also assessed charges for the connection of their aircraft to terminals through a passenger walkway and for the transportation of passengers between terminals and aircraft via airport buses and other vehicles. Charges for use of passenger walkways are based on each unit or service rendered, which are limited to a period of 30 minutes each, but charges for the transportation of customers between terminals and aircraft via airport buses and other vehicles are determined based on the number of trips taken between the terminal and the aircraft.

Passenger walkways are only available at our Guadalajara, Tijuana, Los Cabos, Puerto Vallarta, Guanajuato and Hermosillo airports. Beginning in November 2012, we transferred the operation of our passenger walkways and our airport buses, which had previously been provided by us, to an independent third party, which also maintains relationships with the airlines for their use of this equipment. Therefore, as of November 2012, we receive only recovery of cost revenues associated with the energy usage of the walkways and a per-unit fee for the use of the walkways and airport buses.

During 2017, passenger walkway and airport bus revenues equaled Ps.4.1 million, or 0.04% of our Mexican airports’ total revenues (0.04% of the sum of our Mexican airports’ aeronautical and non-aeronautical revenues). During 2018, passenger walkway and airport bus revenues equaled Ps.4.7 million, or 0.04% of our Mexican airports’ total revenues (0.04% of the sum of our Mexican airports’ aeronautical and non-aeronautical revenues). During 2019, passenger walkway and airport bus revenues equaled Ps.5.7 million, or 0.04% of our Mexican airports’ total revenues (0.04% of the sum of our Mexican airports’ aeronautical and non-aeronautical revenues).

At MBJA, airlines are also assessed charges for the connection of their aircraft to terminals through a passenger walkway or loading bridge, which are included in the list of charges regulated by the JCAA. Each airline is billed at a flat rate per aircraft connection for the first two hours and at an hourly rate thereafter.

In 2017, 2018 and 2019 passenger walkway charges represented 2.6%, 2.5% and 2.6% respectively, of MBJA’s aeronautical revenues and 1.5%, 1.9% and 1.7% respectively, of MBJA’s total revenues.

In addition, we receive regulated revenues from leasing space in our Mexican airports to airlines as needed for their operations, such as the leasing of ticket counters, monitors and back offices.

In 2017, 2018 and 2019, leasing of space to airlines represented approximately 1.9%, 1.8% and 1.7% respectively, of our Mexican airports’ aeronautical revenues services, and approximately 1.3%, 1.3% and 1.1%, respectively, of our Mexican airports’ total revenues (in 2017, 2018 and 2019 revenues from leasing of space to airlines represented 1.4%, 1.4% and 1.3% respectively, of the sum of our Mexican airports’ aeronautical and non-aeronautical revenues).

MBJA and NMIA receive revenues from leasing land and space, such as back offices and ticket offices, storage, vehicle and aircraft maintenance areas and ground handling equipment space. Land and space leasing is not considered a regulated activity by the JCAA.

At each of our Mexican airports, we earn revenues from charging access and other fees to third-party providers of baggage handling services, catering services, aircraft maintenance and repair services and fuel services. These 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 its total revenues.

Under the Mexican Airport Law, we are required to provide complementary services at each of our airports if there are no third parties providing such services. For example, Menzies Aviation, S.A. de C.V., Aveespress, S.A. de C.V. and Administradora Especializada en Negocios, S.A. de C.V. (a subsidiary of Aeroméxico Group), currently provide the majority of the baggage handling services at our Mexican airports. If the third parties currently providing these services ceased to do so, we would be required to provide these services or find other third parties to provide such services.

The Mexican Airport and Auxiliary Services Agency (Aeropuertos y Servicios Auxiliares), or “ASA,” a corporation owned by the federal government, maintains an exclusive contract to sell fuel at all of our Mexican airports, and we charge the agency a nominal access fee. ASA, in turn, is required to purchase all of its fuel from Petróleos Mexicanos (“Pemex”), a decentralized public entity of the Mexican federal government. In the event that the Mexican government privatizes fuel supply activities in the future, the terms of our Mexican concessions provide that it will do so through a competitive bidding process.

We currently maintain contracts with 54 companies that provide the majority of these complementary services at our twelve Mexican airports. In 2017, 2018 and 2019 revenues from complementary service fees represented approximately 1.6%, 1.3% and 1.8%, respectively, of our Mexican airports’ aeronautical revenues services, and approximately 1.1%, 0.9% and 1.1%, respectively of our Mexican airports’ total revenues (in 2017, 2018 and 2019, revenues from complementary service fees represented 1.2%, 1.0%, and 1.3%, respectively, of the sum of our Mexican airports’ aeronautical and non-aeronautical revenues).

In Jamaica, MBJA and NMIA earn revenues from charging access and other fees to third-party providers of refueling, inflight catering, ground handling and FBO services. Refueling services are provided by a consortium of three companies: Gulf Stream Petroleum SRL (formerly Total), GB Energy and Jamaica Aircraft Refueling Services (JARS). This consortium leases land from MBJA and NMIA on which they constructed an aviation fuel storage facility and each operator pays MBJA and NMIA a fuel concession fee based on the number of gallons of fuel sold through the airport’s fueling system. Inflight catering is provided by Goddard Catering through an exclusive contract inherited from the AAJ. The three ground handling services companies operating at our Jamaican airports, AJAS, GCG Ground Services (Jamaica) Limited (formerly Jamaica Dispatch) and Eulen America, pay a fee per aircraft and cargo handled as well as a vehicle permit for vehicles accessing the ramp. IAM Jet Centre is the licensed operator for provision of FBO services at MBJA and NMIA. MBJA and NMIA are not required by law to provide complementary services, even if a third party is not providing such services at the airports.

In 2017, 2018 and 2019 revenues from complementary service fees represented 19.4%, 19.4% and 18.7%, respectively, of MBJA’s aeronautical revenues and 13.5%, 14.0% and 12.7%, respectively, of MBJA’s total revenues.

From October 10, 2019 through December 31, 2019, complementary services from NMIA represented 9.2% of NMIA’s aeronautical revenues and 7.3% of NMIA’s total revenues.

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 for each workload unit of cargo. Cargo-related revenues are largely regulated and therefore subject to maximum rates applicable to regulated revenues sources. Increases in our cargo volume are beneficial to us for purposes of maximum rate calculations, as cargo increases the number of our workload units.

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. A substantial portion of cargo originating in the United States and destined for Latin America is currently handled in the Miami and Los Angeles international airports, and we believe that a portion of this cargo could instead be routed more efficiently through our Guadalajara airport or our Tijuana airport.

In 2017, 2018 and 2019, our Mexican airports handled approximately 202.9 thousand, 213.8 thousand and 214.6 thousand metric tons of cargo, respectively. Guadalajara International Airport represents the most significant portion of our cargo volume, accounting for approximately 78.5%, 76.8% and 75.1% of the cargo handled by our Mexican airports in 2017, 2018 and 2019, respectively.

The majority of cargo in our Jamaican airports is belly cargo, or cargo carried on passenger aircraft; there are only two dedicated cargo carriers at the airports, both of which use small aircraft. There are no significant revenues from cargo handling at the Montego Bay airport nor Kingston airport.

In 2017, 2018 and 2019 the Montego Bay airport handled approximately 6.9 thousand, 7.5 thousand and 7.2 thousand metric tons of cargo, respectively.

From October 10, 2019 through December 31, 2019, NMIA handled 2.4 thousand metric tons of cargo.

In Mexico, we receive revenues from ground transportation vehicles and taxi companies who pay an access fee to operate on our airports’ premises. Our revenues from providers of ground transportation services deemed “permanent” under applicable Mexican law, such as access fees charged to taxis and buses, are subject to price regulation. Taxi rates to passengers are also subject to regulation.

Non-aeronautical services historically have generated a significantly smaller portion of our revenues as compared to aeronautical services. The contribution to the sum of our aeronautical and non-aeronautical revenues from non-aeronautical services was 25.1% in 2017, 25.1% in 2018 and 26.3% in 2019 . We estimate that this contribution will increase as we continue to focus on growing these revenues. Our revenues from non-aeronautical services are principally derived from commercial activities.

Our strategy to increase our commercial revenue is driven by an in-depth analysis and understanding of our market. This strategy includes leveraging brand and consumer behavior studies, careful selection of the best business operators in every segment based on innovative concepts and brand recognition, layout redesigns and modernizations of terminal spaces and research into potential new projects, all of which lead to increased sales per passenger.

In addition, we continue to expand the number of businesses operated directly by us, including conversion from static to digital signage for advertising, opening more VIP lounges and in the medium term, the development of a project for a hotel at our Guadalajara airport, which will be owned by us but operated by an international brand, among others. None of our revenues from non-aeronautical services are regulated under the Mexican price regulation system. In Jamaica, all of our Jamaican airport revenues from non-aeronautical services are unregulated except for revenues from car parking facilities.

Leading privatized airports generally generate an important portion of their revenues from commercial activities. An airport’s revenues from commercial activities are largely dependent on passenger traffic, its passengers’ level of spending, terminal design, the mix of commercial tenants and the basis of fees charged to businesses operating in the airport. Revenues from commercial activities also 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.

We currently have the following types of commercial activities in each of our airports:

Domestic passengers represented approximately 56.4%, 57.8% and 63.9% of our Mexican terminal passenger traffic in 2017, 2018 and 2019, respectively (CBX users at Tijuana airport were considered international passengers in 2017, 2018 and 2019). In addition, we estimate that a significant minority of our international passengers in Mexico are lower-income Mexicans traveling to or from the United States. Based on surveys and studies conducted at our airports to better understand the consumption habits of our passengers, we believe that the spending habits of these Mexican international passengers are more similar to the spending habits of our domestic passengers, who generally purchase fewer products than other international passengers do. However, in order to increase the consumer spending of this demographic, we have been increasing the brand recognition of commercial spaces and the products they offer, which, based on the surveys and studies we have conducted, we believe is likely to contribute to increased consumption among our domestic passengers and our Mexican international passengers. Partly as a result of the implementation of these strategies, consumer spending per passenger in our Mexican airports increased by 10.7% during 2019 as compared to 2018, and 5.9% during 2018 as compared to 2017.

In 2005, the Mexican government issued a policy letter (carta de política) calling for all checked baggage on all commercial flights to undergo a new comprehensive screening process. The new screening process required the installation of dedicated screening equipment and the manual inspection of baggage if such equipment alerted to the potential presence of prohibited items. Uncertainty regarding the new screening process initially caused a delay in the implementation. Although the Mexican Airport Law expressly provides that airlines bear the responsibility for baggage screening, the fact that the policy letter was silent as to responsibility caused some of our airline customers to contend that the policy letter’s intent was for airport concessionaires, such as us, to bear responsibility for the new screening process. Since the issuance of the policy letter, the Federal Civil Aviation Agency (Agencia Federal de Aviación Civil), or “AFAC”, has been expected to issue implementing regulations. On November 23, 2012, the Mexican civil aviation authority published a recommendation (circular obligatoria) on the SCT website that, instead of modifying the legal responsibilities set forth in the Mexican Airport Law, attempted to facilitate contracts between parties through certain non-binding recommendations regarding issues of responsibility that have been raised by the policy letter. These non-binding recommendations have no legal effect unless incorporated into a valid contract.

Today eleven of our twelve Mexican airports employ baggage screening equipment and an explosives trace detector system is used in our Los Mochis airport. As of December 31, 2019, we have signed agreements to operate the baggage screening equipment with every airline customer, and 99.3% of the passengers travelling through our Mexican airports were using the baggage screening system.

We incur ongoing expenses to maintain and operate this equipment, which we currently recover from our airline customers. For more information on screening equipment, see “Item 4, Information on the Company – Regulatory Framework – Mexican Airport Concessions – Scope of Concessions.”

We believe that leading privatized airports typically generate a greater portion of their revenues from commercial activities than we currently do. We typically generate approximately 20% to 30% of total revenues from commercial activities. In 2019, revenues from non-aeronautical services in our airports accounted for 26.3% of our total revenues. As this is a primary component of our business strategy, we have focused on increasing our revenues from commercial activities in our airports by:

In order to increase our revenues from commercial activities, we have focused on expanding and redesigning the layout of certain terminals in our Mexican airports to allow for the inclusion of more commercial businesses, as well as to redirect the flow of passengers through our airports, increasing their exposure to the commercial areas of our airports. In 2017, we added 7,542 square meters of commercial area at the Guadalajara airport and 1,973 square meters at the Tijuana airport, where we redesigned the commercial layout. In 2018, we added about 6,500 square meters of commercial area, of which 85% was in our Tijuana and Guadalajara airports. At our Tijuana airport new food and beverage and retail stores began operation, including Panda Express, Johnny Rockets and Starbucks, among others. Meanwhile, in Guadalajara our new food and beverage offerings include 900 Bistro Argentino, Café Punta del Cielo and Carl’s Jr., among others. In the first half of 2019, the rest of the new commercial offerings at our Tijuana and Guadalajara airports were completed and began operations. During 2019, we also improved the commercial layout of our Los Cabos airport.

We have also continued improving our lease arrangements with existing tenants through the usage of royalty-based lease contracts, whereby lease amounts are based on tenants’ revenues, subject to minimum fixed amounts related to the square footage. We estimate that approximately 88.4% of current commercial revenues could be arranged as royalty-based contracts based on the nature of our tenants’ operations. Approximately 99.1% of the contracts that could be arranged as royalty-based have already been executed under those conditions.

In 2016, we hired HVS Consulting & Valuation, a leading consultant in the hospitality industry, to develop proposals for commercial development at our Guadalajara airport. In order to maximize profitability and based on HVS Consulting & Valuation’s study, we plan to develop a 180-room select-service hotel operated by a third party under a fee agreement. In October 2017, our Board of Directors approved the creation of a new subsidiary responsible for the construction and operation of the hotel at the Guadalajara airport. This hotel is expected to represent an investment of approximately Ps.350 million. With the operation of the hotel at the Guadalajara airport, we will be able to dedicate an additional 549 square meters for retail and other complementary services and 1,564 square meters for food and beverage. It is estimated that the hotel will begin operations in 2022.

We recognize revenues and the associated costs of improvements to concession assets that we are obligated to perform as established by the Master Development Programs at our Mexican airports and the Capital Development Program at the Montego Bay airport. Revenues represent the value of the exchange between ourselves and the respective governments with respect to the improvements, given that we construct or provide improvements to the airports as obligated under the Master Development Programs and the Capital Development Program, and in exchange, the governments grant us the right to obtain benefits for services provided using those assets, which are recognized as intangible assets. We have determined that our obligations per the Master Development Programs and the Capital Development Program should be considered to be a revenue-earning activity as all expenditures incurred to fulfill the Master Development Programs and the Capital Development Program are included in the maximum tariffs and regulated charges that we charge our customers. Therefore, we recognize the revenue and expense in profit or loss when the expenditures are performed. The cost for such additions and improvements to concession assets is based on actual costs incurred by us in the execution of the additions or improvements, considering the investment requirements in the Master Development Programs and the Capital Development Program. Through bidding processes, we contract third parties to carry out such construction. The amount of revenues for these services is equal to the amount of costs incurred, as we do not obtain any profit margin for these construction services. The amounts paid are set at market value. As a result, revenues from improvements to concession assets do not have a cash impact on our results. Furthermore, they are not directly related to our passenger traffic, which is the main driver of our revenues. See “Item 5, Operating and Financial Review and Prospects – Critical Accounting Policies.”

We focus our marketing activities, with respect to aeronautical services, on participation in business conferences organized by public organizations, such as the International Air Transport Association, and private organizations, such as the annual “Routes Americas” and “World Routes” conferences organized by United Business Media. These conferences provide a forum for the exchange of information relating to airlines’ decisions about changes in routes and flights. Additionally, we go through several one-on-one meetings with domestic and international airlines to further discuss specific route opportunities as well as route performance. During 2019, a total of 45 new routes were opened to and from our airports, many of which originated from air service development work during the past decade. The work performed by our commercial department is complemented by several different airline marketing consultants, who provide us with market intelligence and databases in order to better execute our network expansion strategy.

In 2019, our Mexican airports served a total of approximately 43.6 million terminal passengers. In 2019, our two principal airports that serve important metropolitan areas, Guadalajara International Airport and Tijuana International Airport, together represented approximately 54.5% of our Mexican airports’ total terminal passenger traffic. Puerto Vallarta International Airport and Los Cabos International Airport, our main Mexican airports serving popular tourist destinations, together accounted for approximately 24.5% of our Mexican airports’ total terminal passenger traffic in 2019. Guanajuato International Airport, which is our largest airport serving a mid-sized city, accounted for approximately 6.3% of our Mexican airports’ total terminal passenger traffic in 2019.

All of our Mexican airports are designated as international airports under applicable Mexican law, meaning that they are equipped to receive international flights and maintain customs and immigration facilities operated by the Mexican government.

The following table shows the sum of aeronautical and non-aeronautical revenues for each of the Mexican airports for the years indicated:

The following tables set forth the passenger traffic volume for each of our Mexican airports for the years indicated:

	Year Ended December 31,
	2017						2018						2019
	Terminal (1)		Transit (2)		Total		Terminal (1)		Transit (2)		Total		Terminal (1)		Transit (2)		Total
Total Passengers:
Guadalajara		12,808,007		36,644		12,844,651		14,351,563		19,288		14,370,851		14,846,329		15,480		14,861,809
Tijuana		7,103,249		34,369		7,137,618		7,835,064		48,794		7,883,858		8,925,873		47,325		8,973,198
Los Cabos		4,909,746		1,984		4,911,730		5,249,039		3,223		5,252,262		5,609,122		3,901		5,613,023
Puerto Vallarta		4,522,571		9,156		4,531,727		4,767,060		5,940		4,773,000		5,051,855		6,335		5,058,190
Guanajuato		1,955,608		13,389		1,968,997		2,338,752		13,853		2,352,605		2,755,807		12,156		2,767,963
Hermosillo		1,627,848		18,063		1,645,911		1,743,754		30,942		1,774,696		1,874,059		19,836		1,893,895
La Paz		848,493		2,037		850,530		926,334		1,423		927,757		1,008,136		2,307		1,010,443
Mexicali		804,031		4,814		808,845		1,138,467		6,968		1,145,435		1,198,808		4,357		1,203,165
Aguascalientes		754,141		525		754,666		868,505		2,674		871,179		858,433		1,127		859,560
Morelia		618,829		5,447		624,276		729,606		4,174		733,780		897,754		3,728		901,482
Los Mochis		348,527		11,315		359,842		344,830		8,384		353,214		391,300		9,416		400,716
Manzanillo		181,987		392		182,379		172,493		1,187		173,680		174,718		392		175,110
Total		36,483,037		138,135		36,621,172		40,465,467		146,850		40,612,317		43,592,194		126,360		43,718,554

	Year Ended December 31,
	2017						2018						2019
	Domestic		International		Total		Domestic		International		Total		Domestic		International		Total
Departing Terminal Passengers:
Guadalajara		4,489,034		1,954,286		6,443,320		5,113,419		2,099,518		7,212,937		5,199,715		2,271,994		7,471,709
Tijuana		2,598,969		893,307		3,492,276		2,777,045		1,061,145		3,838,190		3,025,408		1,357,161		4,382,569
Los Cabos		718,621		1,740,176		2,458,797		818,495		1,809,390		2,627,885		937,323		1,869,708		2,807,031
Puerto Vallarta		697,819		1,569,840		2,267,659		781,798		1,609,047		2,390,845		891,549		1,643,729		2,535,278
Guanajuato		630,568		346,079		976,647		802,265		370,389		1,172,654		1,015,691		372,192		1,387,883
Hermosillo		767,462		43,065		810,527		816,921		47,146		864,067		879,749		48,247		927,996
La Paz		421,030		9,090		430,120		549,569		4,918		554,487		497,589		11,462		509,051
Mexicali		387,279		4,592		391,871		457,359		10,042		467,401		579,307		6,067		585,374
Aguascalientes		277,618		101,363		378,981		323,741		111,871		435,612		303,023		126,612		429,635
Morelia		155,905		150,859		306,764		179,143		188,206		367,349		233,450		218,408		451,858
Los Mochis		169,945		5,827		175,772		167,691		5,925		173,616		191,012		6,584		197,596
Manzanillo		46,498		44,869		91,367		42,874		42,778		85,652		40,931		45,562		86,493
Total		11,360,748		6,863,353		18,224,101		12,830,320		7,360,375		20,190,695		13,794,747		7,977,726		21,772,473

	Year Ended December 31,
	2017						2018						2019
	Domestic		International		Total		Domestic		International		Total		Domestic		International		Total
Arriving Terminal Passengers:
Guadalajara		4,556,570		1,808,117		6,364,687		5,200,101		1,938,525		7,138,626		5,296,110		2,078,510		7,374,620
Tijuana		2,536,919		1,074,054		3,610,973		2,724,709		1,272,165		3,996,874		2,954,316		1,588,988		4,543,304
Los Cabos		752,950		1,697,999		2,450,949		853,715		1,767,439		2,621,154		978,406		1,823,685		2,802,091
Puerto Vallarta		731,577		1,523,335		2,254,912		823,538		1,552,677		2,376,215		947,766		1,568,811		2,516,577
Guanajuato		677,188		301,773		978,961		851,986		314,112		1,166,098		1,041,187		326,737		1,367,924
Hermosillo		795,465		21,856		817,321		858,024		21,663		879,687		924,069		21,994		946,063
La Paz		416,604		1,769		418,373		457,573		1,360		458,933		497,795		1,290		499,085
Mexicali		411,239		921		412,160		582,997		983		583,980		612,589		845		613,434
Aguascalientes		299,942		75,218		375,160		353,067		79,826		432,893		332,207		96,591		428,798
Morelia		166,801		145,264		312,065		190,081		172,176		362,257		245,372		200,524		445,896
Los Mochis		172,222		533		172,755		170,853		361		171,214		193,362		342		193,704
Manzanillo		54,599		36,021		90,620		54,335		32,506		86,841		54,413		33,812		88,225
Total		11,572,076		6,686,860		18,258,936		13,120,979		7,153,793		20,274,772		14,077,592		7,742,129		21,819,721

The following table shows the passengers who used the CBX facilities to travel from the United States to Mexico and vice versa, who are reported as international passengers in the Tijuana airport.

The following table sets forth the air traffic movement capacity of each of our Mexican airports as of December 31, 2019:

The following table sets forth the air traffic movements for each of our Mexican airports for the years indicated:

The following table sets forth the average number of passengers per air traffic movement for each of our Mexican airports for the years indicated:

The following table sets forth the air traffic movements in our Mexican airports for the years indicated in terms of commercial, charter and general aviation:

Guadalajara International Airport is our most important Mexican airport in terms of passenger traffic, air traffic movements and contribution to the sum of aeronautical and non-aeronautical revenues.

In 2019, Guadalajara International Airport was the third busiest airport in Mexico in terms of commercial aviation passenger traffic, according to the SCT. In 2019, it served 14.8 million terminal passengers, accounting for approximately 34.1% of our Mexican airports’ terminal passenger traffic. During 2019, approximately 70.7% of the terminal passengers served were domestic passengers and 29.3% were international passengers. Of the airport’s international passengers, we estimate that a significant portion is Mexicans living in the United States visiting Guadalajara. This airport also serves many business travelers traveling to and from Guadalajara. Because the airport’s passengers are predominantly domestic, the airport’s passenger traffic and results of operations are affected to a greater extent by Mexican economic conditions.

Guadalajara International Airport is located approximately 20 kilometers from the city of Guadalajara, which has a population (including its suburbs) of approximately 8 million inhabitants. Guadalajara is Mexico’s second largest city in terms of population and is the capital of the state of Jalisco, the country’s fourth largest state in terms of population. As a major hub for the Mexican national highway system, the city of Guadalajara is an important center for both ground and air transportation. Other major cities in the state of Jalisco include Puerto Vallarta and Lagos de Moreno. Jalisco is an important agricultural producer, making Guadalajara an important center for agricultural commerce. The state is an important contributor to Mexico’s maquiladora industry, most notably in the electronic, computer equipment and clothing industries. The maquiladora industry in Jalisco grew significantly in the 1990’s as maquiladoras moved away from the U.S.-Mexico border seeking lower labor costs and a more diverse labor pool.

A total of fourteen airlines operate at the airport, of which the principal airlines are Volaris, Aeromexico Group and VivaAerobus. The main non-Mexican airlines operating at the airport are United, Alaska, American and Delta. Airlines operating at the airport reach 60 destinations. Of these destinations, Mexico City, Tijuana and Los Angeles are the most popular.

Guadalajara International Airport operates 24 hours daily. The airport has two operating runways, one with a length of 4,000 meters and a full parallel taxiway and the other with a length of 1,800 meters, with a threshold displacement of 300 meters at the runway, which permits a landing distance of 1,500 meters. The runway capacity at this airport is 39 air traffic movements per hour. The airport also has an Instrument Landing System (“ILS”) that assists pilots in poor weather. The airport’s facilities include a main commercial terminal with a large parking facility and a general aviation building. The airport’s main commercial terminal has a total area of approximately 73,000 square meters, as well as parking facilities consisting of an additional 68,000 square meters. The general aviation building has an additional 975 square meters. The commercial terminal has 37 gates and 36 remote boarding positions. Of the international gates, four have air bridges, and of the domestic gates, eight have air bridges.

In 2019, approximately 161.1 thousands metric tons of cargo were transported through the airport.

We have continued to take significant steps to modernize and expand Guadalajara International Airport in order to improve its operations and image. These steps have included the improvement of the airport’s main commercial terminal, including the modernization of restrooms, hallways and gate areas. During 2019, we completed the expansion of the main terminal by adding an additional 3,200 square meters and renovated an additional 3,000 square meters.

During the last quarter of 2017, we requested bids for four food and beverage service areas and 20 retail spaces at the airport. These bids sought to attract experienced concessionaries and well-known brands in order to improve the image of the airport and to accommodate the expansion of the domestic terminal. In 2018, approximately 3,000 square meters of new commercial space was added, including 1,200 square meters to be used by Areas, S.A. for its concepts and the rest of the space including brands such as Gandhi, Tous, Swarovski, Charros, Marissa, among others.

We directly operate two VIP lounges in the Guadalajara airport: one in the international departures area and another in the domestic departures area. In 2019, we added 783 square meters of space to the domestic VIP lounge.

In 2019, approximately 23.9% of the sum of our aeronautical and non-aeronautical revenues generated at Guadalajara International Airport was derived from non-aeronautical revenues.

In 2019 we started the executive design of a new mixed-use development; this new area will include an expansion of the existing terminal building, new commercial areas, an office tower with 9,500 square meters of gross leasable area and a business class hotel with 180 keys. We also began the conceptual design of a new terminal with almost 100,000 square meters.

A portion of the land on which Guadalajara International Airport is located was expropriated by the Mexican federal government in 1975 pursuant to its power of eminent domain and is subject to certain legal proceedings by its former landholders. For a description of these legal proceedings and their potential impact on our operations, see “Item 8, Financial Information – Legal Proceedings – Ejido participants at Tijuana, Guadalajara and Puerto Vallarta airports.”

Tijuana International Airport is our second most important Mexican airport in terms of passenger traffic and air traffic movements, and third in terms of contribution to the sum of aeronautical and non-aeronautical revenues. In 2019, Tijuana International Airport was the fifth busiest airport in Mexico in terms of commercial aviation traffic, according to the SCT. In 2019, it served a total of 8.9 million terminal passengers, accounting for approximately 20.5% of our Mexican airports’ terminal passenger traffic. Approximately 99.5% of the terminal passengers served were domestic passengers. Since Tijuana is located near the Mexico-U.S. border and is therefore a popular entry point to the United States for Mexican and American travelers, the airport’s passenger traffic and results of operations are affected by Mexican and U.S. economic conditions.

Tijuana International Airport serves the city of Tijuana and surrounding areas in the State of Baja California, including the municipalities of Ensenada, Tecate and Rosarito. With a population of approximately 1.3 million, Tijuana is the largest city in the state. Currently, the state of Baja California is the second largest maquiladora center in Mexico, according to INEGI data on workforce by industry. A highway connecting the city of Tijuana to the airport also extends directly to the U.S.-Mexico border crossing, providing convenient access to San Diego, California (which is located approximately 30 kilometers from Tijuana International Airport) and other areas of southern California, particularly Los Angeles.

A total of seven airlines operate at the airport, of which the principal airlines are Volaris, Aeromexico Group and Interjet. Airlines operating at this airport provide service to 37 destinations. Of these destinations, Mexico City, Guadalajara and Culiacan are the most popular. In addition, in 2019, Aeromexico Group flew from Tijuana to Shanghai and Hainan Airlines flew from Tijuana to Beijing.

Tijuana International Airport currently operates seventeen hours daily between the hours of 7:00 a.m. and 12:00 a.m. However, it is equipped to operate 24 hours daily if necessary, and we double our passenger charges and fees for aeronautical services provided outside normal business hours. The airport has one runway with a length of 2,959 meters and a full parallel taxiway. The runway capacity at this airport is 36 air traffic movements per hour. The airport also has an ILS that assists pilots in poor weather. It has twenty-two gates serving both domestic and international travelers and ten remote boarding positions. Of the 22 gates, ten have air bridges.

During 2019, we completed an expansion of 2,000 square meters and a renovation of 5,500 square meters. We started the construction (foundation, structure and civil works) of the new terminal building which will facilitate and increase the airport´s capacity to process international passengers, and we began the expansion of the commercial aviation apron and renovations of the main taxiway A.

In December 2015, we inaugurated the international bridge between our Tijuana airport and the U.S. border, or CBX. This bridge allows passengers to cross directly to the United States using a pathway between the airport and the international border, facilitating transfers between the United States and Mexico for travelers holding a boarding pass to all flights departing from or arriving in Tijuana, and reducing connection and waiting times at both the San Isidro and Otay Mesa border crossings. The Mexican border authority’s services are located in the Tijuana airport, and the corresponding U.S. services are located on the premises of the CBX terminal on the north side of the border. The use of this facility is limited to passengers traveling through the airport upon presentation of a boarding pass, but is not subject to additional charges as it is part of the services offered by the Tijuana airport, which are included in the passenger charges. Passengers using the bridge from or to Tijuana may also be subject to toll charges levied by Otay-Tijuana Venture, L.L.C. (“OTV”), the bridge operator on the U.S. side. We estimate that up to 45% of Tijuana passengers have a final destination or origin in the U.S., and consequently a significant portion of the passengers at the airport are expected to be users of the CBX. Due to its convenience for U.S. residents in the area, the CBX is also expected to increase the overall number of passengers using the airport. During 2019, the CBX served 2.9 million passengers, approximately 32.5% of the Tijuana airport’s total passengers. The CBX was the primary driver behind the 13.9% increase in total passengers during the 2019 at the Tijuana airport. For more information see “Item 7, Major Shareholders and Related Party Transactions – Related Party Transactions.” Our investment in adapting the Tijuana airport installations and building the Mexican infrastructure amounted to Ps.185.0 million.

In 2019, approximately 30.7 thousands metric tons of cargo were transported through the airport.

In 2019, approximately 22.5% of the sum of our aeronautical and non-aeronautical revenues generated at Tijuana International Airport was derived from non-aeronautical revenues.

During 2018, we also solicited bids for the rent-a-car modules and obtained a significant revenue increase compared to the previous contracts. A new model office was built in order to standardize the image of the car rental facilities within the terminal.

During 2018, we awarded bids for 25 new retail spaces and thirteen food and beverage spaces, totalling 729 and 2,700 square meters, respectively. At the end of 2018, 70% of the new commercial space began operating with brands such as Panda Express, Domino’s Pizza and Johnny Rockets. The rest of this space was in operation by the second quarter of 2019.

During 2019 we performed a complete refurbishment of the land side food court and all the commercial units for which bids were received during 2018 began operating.

A portion of the land on which Tijuana International Airport is sited was expropriated by the Mexican federal government in 1970 pursuant to its power of eminent domain and is subject to certain legal proceedings by its former landholders. For a description of these legal proceedings and their potential impact on our operations, see “Item 8, Financial Information – Legal Proceedings – Ejido participants at Tijuana, Guadalajara and Puerto Vallarta airports.”

Los Cabos International Airport is our third most important Mexican airport in terms of passenger traffic, fourth in terms of air traffic movements and second in terms of contribution to the sum of aeronautical and non-aeronautical revenues. In 2019, Los Cabos International Airport was the sixth busiest airport in Mexico in terms of commercial aviation passenger traffic, according to the SCT. In 2019, it served 5.6 million terminal passengers, accounting for approximately 12.9% of our Mexican airports’ terminal passenger traffic of whom approximately 65.8% were international passengers.

The airport serves primarily tourists visiting San Jose del Cabo, Cabo San Lucas and other coastal destinations along the Trans-Peninsular highway of the state of Baja California Sur. Los Cabos International Airport is located approximately thirteen kilometers from the city of San Jose del Cabo, in the state of Baja California Sur. According to the Mexican Ministry of Tourism, 1.9 million international tourists visited Los Cabos (San Jose del Cabo and the nearby city of Cabo San Lucas) by air in 2019. Visitors to this area are generally affluent and include golfers who enjoy world-class courses, as well as sport fishing and diving enthusiasts who are drawn by the rich marine life in the region’s coastal waters.

A total of eighteen airlines operate at the airport, of which the principal airlines are American, Alaska, United, Southwest and Volaris. Airlines operating at this airport provide service to 48 destinations. Of these destinations, Mexico City, Los Angeles, Guadalajara and Dallas are the most popular.

Los Cabos International Airport currently operates eleven hours daily between 7:00 a.m. and 9:00 p.m. However, it is equipped to operate 24 hours daily if necessary, and we double our passenger charges and fees for aeronautical services provided outside normal business hours. The airport has one runway measuring 3,004 meters, and a full parallel taxiway to the runway. The runway capacity at this airport is 42 air traffic movements per hour. The existing runway allows us to serve planes flying to any destination in the United States and Canada. The airport has two commercial aviation terminals. Terminal 1 occupies approximately 14,600 square meters and Terminal 2 occupies approximately 38,000 square meters. In addition, the airport has a general aviation and an FBO terminal. The airport has sixteen gates (eight in Terminal 1 and eight in Terminal 2), including four gates with air bridges, and eighteen remote boarding positions.

During 2019, we continued renovating and expanding the international terminal building, increasing the terminal area by 5,000 square meters and renovating 10,600 square meters, adding 10 remote boarding gates. These construction projects will be concluded in 2020.

We operate a commercial space of approximately 2,000 square meters at Los Cabos International Airport; this space includes two VIP lounges and five convenience stores, which have been operated by a third party since October 2016.

To create a better experience for our domestic passengers, we finished the construction of a 280 square meter beer garden at the domestic terminal. The new bar brings more options to the food and beverage services for this terminal. In 2019, approximately 36.6% of the sum of our aeronautical and non-aeronautical revenues generated at Los Cabos International Airport was derived from non-aeronautical revenues (of which 93.9% came from commercial activities, the highest such percentage among our airports). During 2019, we redesigned the commercial layout of the international terminal to maximize sales per passenger through a new commercial mix. This process will take until 2021 to complete.

We solicited bids for food and beverage service for ten commercial units with a total surface of 1,941 square meters. As a result of the process brands such as Panda Express, Subway, Sbarro, Carl's Junior, Pacific Grill, Tequila Patron, STK, The Coffee Bean and Starbucks were incorporated; increasing the food and beverage area by 40%. We expect to request retail bids during the second quarter of 2020.

Puerto Vallarta International Airport is our fourth most important Mexican airport in terms of passenger traffic, third in air traffic movements and fourth in terms of contribution to the sum of aeronautical and non-aeronautical revenues. In 2019, Puerto Vallarta International Airport was the seventh busiest airport in Mexico in terms of commercial aviation passenger traffic, according to the SCT. In 2019, it served 5.0 million terminal passengers, accounting for 11.6% of our Mexican airports’ terminal passenger traffic. During 2019, 63.6% of these terminal passengers were international passengers and 36.4% were domestic passengers.

Puerto Vallarta International Airport is located on the Pacific coast in the state of Jalisco. The airport primarily serves foreign tourists and is also a popular tourist destination within Mexico. Puerto Vallarta’s tourist attractions include the natural beauty of the Bay of Banderas, the area’s many beaches and abundant marine wildlife. Puerto Vallarta is a mature tourist destination, and the completion of new resort areas including hotels and golf courses in the areas known as Nuevo Vallarta and Punta Mita is expected to bring more tourists to the area in subsequent years.

A total of twenty three airlines operate at the airport, of which the principal airlines are American, United, Alaska, Interjet, Volaris, Aeromexico Group and Southwest. Airlines operating at this airport provide service to 52 destinations. Of these destinations, the most popular are Mexico City, Los Angeles, Monterrey and Dallas. In addition, Thomson Airways flies once weekly from Puerto Vallarta to London Gatwick and Manchester and Finnair flies once weekly to Helsinki.

Puerto Vallarta International Airport operates 24 hours daily. The airport has one runway with a length of 3,105 meters as well as a parallel taxiway. The runway capacity at this airport is 37 air traffic movements per hour. This airport has one main commercial terminal, an FBO terminal and a general aviation building. The airport has nineteen gates, of which five serve domestic flights and fourteen serve international flights, nine remote boarding positions and eleven air bridges.

In 2019, approximately 27.8% of the sum of our aeronautical and non-aeronautical revenues generated at our Puerto Vallarta airport was derived from non-aeronautical revenues (of which 93.9% came from commercial activities).

Guanajuato International Airport is our fifth most important Mexican airport in terms of passenger traffic, sixth in air traffic movements and fifth in terms of contribution to the sum of aeronautical and non-aeronautical revenues. In 2019, Guanajuato International Airport was the ninth busiest airport in Mexico in terms of commercial aviation passenger traffic, according to the SCT. In 2019, it served 2.8 million terminal passengers, accounting for approximately 6.3% of our Mexican airports’ terminal passenger traffic. During 2019, approximately 74.6% of the terminal passengers served were domestic passengers.

Guanajuato International Airport is located in the central state of Guanajuato near the cities of Leon, Irapuato, Silao and Guanajuato, approximately 315 kilometers northwest of Mexico City. The state of Guanajuato has a population of approximately 5.9 million people according to the Mexican National Population Council and is located in Mexico’s Bajio region, best known for its rich colonial history, agricultural sector and manufacturing industry. General Motors, Honda, Kia, Mazda and Toyota have assembly plants in Guanajuato. In addition, several automobile parts manufacturers are located in Guanajuato. The local government is developing a “dry dock”, or truck loading service terminal, near the airport that we believe will increase cargo demand.

A total of nine airlines operate at the airport, of which the principal airlines are Volaris, Aeromexico Group, Interjet, VivaAerobus and United Airlines operating at this airport provide service to fifteen destinations. Of these destinations Tijuana, Mexico City and Cancun are the most popular.

Guanajuato International Airport operates 20 hours daily between 4:00 a.m. and 12:00 midnight. However, it is equipped to operate 24 hours daily if necessary, and we double our passenger charges and fees for aeronautical services provided outside normal business hours. The airport has one runway with a length of 3,501 meters. The runway capacity at this airport is 16 air traffic movements per hour. It has two terminals (one commercial and one general aviation), with seven gates, seven remote boarding positions and three air bridges.

During 2017, we began a 3,000 square meter terminal expansion and the renovation of another 7,990 square meters. We concluded the expansion during 2019, and the new commercial areas and expanded VIP Lounge began operations in 2019 as well. During 2019, we also began the renovation of the security checkpoint, restrooms and commercial areas.

Hermosillo International Airport is our sixth most important Mexican airport in terms of passenger traffic, fifth in terms of air traffic movements and sixth in terms of contribution to the sum of aeronautical and non-aeronautical revenues. In 2019, Hermosillo International Airport was the eleventh busiest airport in Mexico in terms of commercial aviation passenger traffic, according to the SCT. In 2019, it served approximately 1.9 million terminal passengers, accounting for approximately 4.3% of our Mexican airports’ terminal passenger traffic. During 2019, approximately 96.3% of the terminal passengers served were domestic passengers. Many of the airport’s passengers use the airport as a hub for connecting flights between other Mexican cities, particularly Mexico City, Tijuana, Guadalajara and Monterrey. Because the airport’s passengers are predominantly domestic, the airport’s passenger traffic and results of operations are affected to a greater extent by Mexican economic conditions.

Hermosillo International Airport serves the city of Hermosillo and four other nearby municipalities, which together have a population of approximately 1.0 million, according to the Mexican National Population Council. The city of Hermosillo, which is the capital of the state of Sonora, is located approximately 260 kilometers south of the border town of Nogales and 130 kilometers east of the Gulf of California. The airport is located approximately thirteen kilometers west of the city of Hermosillo. The airport is an important hub in a primarily agricultural and industrial region. Approximately 10.6 thousand metric tons of cargo passed through the airport in 2019. Currently, cargo transport services at this airport primarily serve the nearby Ford factory, which receives components via the airport.

A total of seven airlines operate at the airport, of which the principal airlines are Volaris, Aeromexico Group, VivaAerobus and Interjet. Airlines operating at this airport provide service to thirteen destinations. Of these destinations, Mexico City, Guadalajara, Monterrey and Tijuana are the most popular.

Hermosillo International Airport operates eighteen hours daily between 6:00 a.m. and 12:00 midnight. However, it is equipped to operate 24 hours daily if necessary, and we double our passenger charges and fees for aeronautical services provided outside normal business hours. The airport has two runways, one with a length of 2,300 meters and the other, a private aircraft runway that is not currently operating due to commercial considerations, with a length of 1,100 meters. Runway capacity at this airport is 30 air traffic movements per hour. The airport has nine gates and ten remote boarding positions and includes both a commercial aviation building and a general aviation building for small private aircraft.

As part of our business strategy, in recent years we changed the profile and category of services of almost all of the stores at Hermosillo International Airport to stores with greater brand recognition. During 2018, we opened a new VIP lounge in our Hermosillo airport. In 2019, we solicited bids for a new restaurant with approximately 200 square meters of surface area located in the waiting lounge.

Mexicali International Airport is our seventh most important Mexican airport in terms of passenger traffic, tenth in terms of air traffic movements and seventh in terms of contribution to the sum of aeronautical and non-aeronautical revenues. In 2019, Mexicali International Airport was the eighteenth busiest airport in Mexico in terms of commercial aviation passenger traffic according to the SCT. In 2019, it served 1.2 million terminal passengers, accounting for approximately 2.8% of our Mexican airports’ terminal passenger traffic.

During 2019, approximately 99.4 % of the terminal passengers served by this airport were domestic passengers. Because the airport’s passengers are predominantly domestic, the airport’s passenger traffic and results of operations are affected to a greater extent by Mexican economic conditions.

Mexicali International Airport serves the city of Mexicali, in the Mexican state of Baja California, as well as the U.S. cities of Yuma, Arizona and Calexico, California. The city of Mexicali is located along the U.S.-Mexico border approximately 150 kilometers east of Tijuana and 80 kilometers west of Yuma, Arizona. Manufacturing forms the basis of the area’s economy, most notably in the form of maquiladora factories, which have proliferated along the California-Baja California border.

A total of five airlines operate at the airport, of which the principal airlines are Volaris and Aeromexico Group. Airlines operating at this airport provide service to seven destinations. Of these destinations, Guadalajara, Mexico City, and Culiacan are the most popular.

Mexicali International Airport operates nineteen hours daily between 6:00 a.m. and 1:00 a.m. the following day. However, it is equipped to operate 24 hours daily if necessary, and we double our passenger charges and fees for aeronautical services provided outside normal business hours. The airport has one runway measuring 2,720 meters in length, as well as a main commercial terminal and a smaller general aviation terminal. The runway capacity at this airport is fourteen air traffic movements per hour. The main commercial terminal has four gates and five remote boarding positions.

During 2018, we completed a 1,200 square meters expansion of the terminal building, adding two new boarding gates (increasing from two to four) and, expanding the baggage claim area, including the installation of a new baggage carousel (increasing from two to three). We also completed a 1,600-square-meter renovation in the check-in area and the ambulatory area. A “gastro pub” restaurant (called Gastro Hub) of approximately 185 square meters, began operations. Car rental services began operating at the Mexicali airport during the first quarter of 2019, as a result of the bid released in 2018.

La Paz International Airport is our eighth most important Mexican airport in terms of passenger traffic, air traffic movements and contribution to the sum of aeronautical and non-aeronautical revenues. In 2019, La Paz International Airport was the twenty first busiest airport in Mexico in terms of commercial aviation passenger traffic, according to the SCT. In 2019, it served 1.0 million terminal passengers, accounting for approximately 2.3% of our Mexican airports’ terminal passenger traffic. During 2019, approximately 98.7% of the terminal passengers served were domestic passengers. Because the airport’s passengers are predominantly domestic, the airport’s passenger traffic and results of operations are affected to a greater extent by Mexican economic conditions.

La Paz International Airport serves the city of La Paz, located along the coast of the Gulf of California in the state of Baja California Sur, of which La Paz is the capital. Eco-tourism is a growing industry in La Paz due to the abundance of marine life found in the Gulf of California.

A total of five airlines operate at the airport, of which the principal airlines are Volaris, Calafia Airlines and Aeromexico Group. Airlines operating at this airport provide service to thirteen destinations. Of these destinations, Mexico City, Guadalajara and Tijuana are the most popular.

La Paz International Airport operates sixteen hours daily between 7:00 a.m. and 11:00 p.m. However, it is equipped to operate 24 hours daily if necessary, and we double our passenger charges and fees for aeronautical services provided outside normal business hours. The airport has one runway measuring 2,500 meters in length and a single main commercial terminal. The runway capacity at this airport is fifteen air traffic movements per hour. It also has four gates and nine remote boarding positions.

Aguascalientes International Airport is our ninth most important Mexican airport in terms of passenger traffic, seventh in air traffic movements and ninth in terms of contribution to the sum of aeronautical and non-aeronautical revenues. In 2019, Aguascalientes International Airport was the twenty fifth busiest airport in Mexico in terms of commercial aviation passenger traffic, according to the SCT. In 2019, it served 858.4 thousand terminal passengers, accounting for approximately 2.0% of our Mexican airports’ terminal passenger traffic. During 2019, approximately 74.0% of the terminal passengers served were domestic passengers. Because the airport passengers are predominantly domestic, the airport’s passenger traffic and results of operations are affected to a greater extent by Mexican economic conditions.

Aguascalientes International Airport serves the city of Aguascalientes and eight surrounding municipalities in the central state of Aguascalientes, which is located roughly 513 kilometers northwest of Mexico City. Manufacturing forms the basis of the region’s economy. One of Nissan’s main manufacturing plants in Mexico is located in the city of Aguascalientes.

A total of six airlines operate at the airport, of which the principal airlines are Aeromexico Group, Volaris and Interjet. Airlines operating at this airport provide service to eight destinations. Of these destinations Mexico City, Tijuana, Cancun and Dallas are the most popular.

Aguascalientes International Airport operates eighteen hours daily between 6:00 a.m. and 12:00 a.m. However, it is equipped to operate 24 hours daily if necessary, and we double our passenger charges and fees for aeronautical services provided outside normal business hours. It has two runways, one measuring 3,000 meters in length and the other, a private aircraft runway that is not currently operating as a result of commercial considerations, measuring 1,000 meters, and a single main commercial terminal. The runway capacity at this airport is twelve air traffic movements per hour. The airport has four gates and five remote boarding locations.

In 2019, we concluded the terminal expansion and renovation. The project increased the boarding lounge capacity and surface area, with two additional boarding gates, and included a renovated security checkpoint. In 2019, the commercial area increased by 27% compared with 2018, and we opened a new VIP Lounge with 1,300 square meters of space. A bid for a retail commercial space of 20 square meters at the Aguascalientes airport was carried out during the third quarter with a recognized clothing brand known for featuring popular designs of Mexican culture, winning the bid.

Morelia International Airport is our tenth most important Mexican airport in terms of passenger traffic, ninth in terms of air traffic movements and tenth in terms of contribution to the sum of aeronautical and non-aeronautical revenues. In 2019, Morelia International Airport was the twenty three busiest airport in Mexico in terms of commercial aviation passenger traffic, according to the SCT. In 2019, it served 897.8 thousand terminal passengers, accounting for approximately 2.1% of our Mexican airports’ terminal passenger traffic. During 2019, approximately 53.3% of the terminal passengers served by this airport were domestic passengers.

Morelia International Airport serves the city of Morelia and ten other municipalities in the immediate vicinity. The city of Morelia is the capital of the state of Michoacan, which has a population of approximately 4.6 million according to the Mexican National Population Council. Michoacan’s principal industry is agriculture, and it has a developing eco-tourism industry (primarily due to the seasonal presence of monarch butterflies).

A total of six airlines operate at the airport, of which the principal airlines are Volaris, Aeromexico Group, American and United. Airlines operating at this airport provide service to ten destinations. Of these destinations, Tijuana, Chicago Midway and Mexico City are the most popular.

Morelia International Airport operates 24 hours a day. The airport has one runway with a length of 3,408 meters and a single main terminal building. The runway capacity at this airport is fourteen air traffic movements per hour. The airport has four gates and eight remote boarding positions.

In 2019, we concluded a terminal expansion and renovation which increased the boarding lounge by 200 square meters, added two boarding gates, and included a renovated and expanded security checkpoint with additional security lines, X-ray equipment and waiting areas. The commercial area grew by 16% in 2019 as compared with 2018.

Los Mochis International Airport is our eleventh most important Mexican airport in terms of passenger traffic and air traffic movements and eleventh in terms of contribution to the sum of aeronautical and non-aeronautical revenues. In 2019, Los Mochis International Airport was the forty first busiest airport in Mexico in terms of commercial aviation passenger traffic, according to the SCT. In 2019, it served 391.3 thousand terminal passengers, accounting for approximately 0.9% of our Mexican airports’ terminal passenger traffic. During 2019, approximately 98.2% of the terminal passengers served were domestic passengers. Because the airport’s passengers are predominantly domestic, the airport’s passenger traffic and results of operations are affected to a greater extent by Mexican economic conditions.

Los Mochis International Airport serves the city of Los Mochis, in the Pacific coastal state of Sinaloa, an important agricultural state. The area’s sport fishing and hunting attract both Mexican and foreign visitors.

A total of three airlines operate at the airport: Volaris, Aeromexico Group and Calafia Airlines. Airlines operating at this airport provide service to six destinations, of which Mexico City, Tijuana and Guadalajara are the most popular.

Los Mochis International Airport operates fourteen hours daily between 7:00 a.m. and 9:00 p.m. However, it is equipped to operate 24 hours daily if necessary, and we are authorized to charge double our regular passenger charges and fees for aeronautical services provided outside normal business hours. The airport has one runway measuring 2,007 meters in length as well as a single main commercial terminal. The runway capacity at this airport is sixteen air traffic movements per hour. The airport has three gates and eight remote boarding positions.

Manzanillo International Airport is our twelfth most important Mexican airport in terms of passenger traffic and air traffic movements and twelfth in terms of contribution to the sum of aeronautical and non-aeronautical revenues. In 2019, Manzanillo International Airport was the forty fourth busiest airport in Mexico in terms of commercial aviation passenger traffic according to the SCT. During 2019, the airport served 174.7 thousand terminal passengers, accounting for approximately 0.4% of our Mexican airports’ terminal passenger traffic. During 2019, approximately 54.6% of the terminal passengers served were domestic passengers and 45.4% were international passengers.

Manzanillo International Airport serves the city of Manzanillo and six surrounding municipalities in the small Pacific coastal state of Colima. The city is located on the coast approximately 230 kilometers southeast of Puerto Vallarta and 520 kilometers northwest of Acapulco. The airport serves primarily tourists visiting coastal resorts in Colima and neighboring Jalisco. In recent years, passenger traffic at Manzanillo International Airport has remained stable despite the increased popularity of Puerto Vallarta and other tourist destinations due to a decline in investments in the tourism sector in Manzanillo.

A total of six airlines operate at this airport, of which the principal airlines are Aeromexico Group and Alaska Airlines. Some of the other airlines operate only during the high tourist season (November to April). The principal destinations served by airlines at this airport are Mexico City, Los Angeles and Calgary.

Manzanillo International Airport operates twelve hours daily between 8:00 a.m. and 8:00 p.m. However, it is equipped to operate 24 hours daily if necessary, and we double our passenger charges and fees for aeronautical services provided outside normal business hours. The airport has one runway measuring 2,260 meters. The runway capacity at this airport is sixteen air traffic movements per hour. The airport has four gates and four remote boarding positions.

During 2019, we opened a new restaurant located in the waiting lounge, with 150 square meters of surface area in order to improve the passenger experience.

The Montego Bay International Airport is Jamaica’s main tourist airport. In 2019, the Montego Bay airport served 4.7 million terminal passengers, making it the third busiest airport in the Caribbean region, excluding Cuba, in terms of commercial aviation passenger traffic, according to Airports Council International. In 2019, 99.8% of the terminal passengers served were international passengers. Of the total passengers in 2019, 70.0% came from the United States, 16.0% came from Canada, 12.0% came from Europe and 2.0% from other countries.

Montego Bay International Airport serves as the primary gateway for international air travel to Jamaica, a major international tourist destination, by facilitating the transit of more than 71% of the tourists arriving on the island. In recent years, passenger traffic at Montego Bay International Airport has grown in conjunction with the increased traffic overall at the Kingston airport, which services mostly business and other traffic. The Jamaican government has discussed plans to build a third international commercial airport, most likely on the southern coast at Vernamfield, to meet the long-term requirements for the growth of air transport, which may impact passenger traffic in the medium and long term at the Montego Bay and Kingston airports. Because the Montego and Kingston airports serve different demands and we do not expect the Jamaican government’s Vernamfield airport plan to be executed in the immediate future, we expect passenger traffic at our Montego Bay airport to grow.

A total of thirty-four international airlines operate at the airport, providing year-round and seasonal services. Our principal airlines are American Airlines, Southwest Airlines, Delta Airlines, and JetBlue. Airlines serving the Montego Bay airport provide service from over 60 airport destinations. Of these, Toronto, New York, Atlanta and Ft. Lauderdale are the most popular.

Montego Bay International Airport operates eighteen hours daily between 6:00 a.m. and 12:00 midnight. However, it is equipped to operate 24 hours daily if necessary. The airport has one runway measuring 2,662 meters. The runway capacity at this airport is 33 air traffic movements per hour. The airport also has an ILS that assists pilots in poor weather. The airport’s facilities include a main commercial terminal with a large parking facility and a general aviation building. The airport’s main commercial terminal has a total area of approximately 6,000 square meters, as well as an additional 5,657 square meters of parking facilities. The general aviation building has an additional area of 300 square meters. The commercial terminal has 17 gates and 5 remote parking positions.

In July 2017, the main food and beverage operator, Express Catering, finalized a deal with the Starbucks brand pursuant to which it opened a café off-airport. The deal also contemplated construction of three Starbucks locations in the airport to serve all passengers. The main Starbucks is located in the terminal building and opened in March 2018. Additionally, two kiosks were opened in 2019.

The following table sets forth revenues, passenger traffic and air traffic movement data for the Montego Bay airport in 2017, 2018 and 2019:

In 2017, 2018, and 2019 approximately 6.9 thousand, 7.5 thousand and 7.2 metric tons of cargo were transported through the airport.

Third parties operate a total of seven lounges in the Montego Bay airport: five hotel lounges and one general lounge in the arrivals area and one general lounge in the departures area. In 2015, the general pay per use passenger lounge operated by Club Mobay was expanded by 283.3 square meters; the lounge was further expanded in January 2018 by 245 square meters and now covers 1,580 square meters with a capacity of 399 seats.

In October 10, 2019, we took control and began to operate NMIA in the city of Kingston, Jamaica. As a result of our taking over control of NMIA through our subsidiary, PACKAL, our summary consolidated financial and operating information for the fiscal year ended December 31, 2019 includes the consolidation of PACKAL financial and operating information for the period from October 10 to December 31, 2019. Therefore, financial and operating information related to the Kingston airport for the fiscal year ended December 31, 2019 may not be directly comparable with financial and operating information for our Mexican airports for 2019 or for the Kingston airport for prior fiscal years.

The passenger profile of the Kingston International Airport is business and Visiting Friends and Relatives (“VFR”). In 2019, the Kingston airport served 1.8 million terminal passengers, making it the seventh busiest airport in the Caribbean region, excluding Cuba, in terms of commercial aviation passenger traffic, according to Airports Council International. From October 10, 2019 (when we began to consolidate PACKAL´s operating information) to December 31, 2019, the airport served 408.7 thousands terminal passengers

In recent years, passenger traffic at Kingston International Airport has grown in conjunction with the increased traffic overall at the Kingston airport, which services mostly business and other traffic.

A total of eight international airlines operate at the airport, providing year-round and seasonal services. Kingston International Airport operates 18 hours daily between 6:00 a.m. and 12:00 midnight. However, it is equipped to operate 24 hours daily if necessary. The airport has one runway measuring 2,662 meters. The runway capacity at this airport is 33 air traffic movements per hour. The airport also has an ILS that assists pilots in poor weather. The airport’s facilities include a main commercial terminal with a large parking facility and a general aviation building.

As a holding company, we operate each of our thirteen airports through an operating subsidiary. In addition to these airport subsidiaries, we also have three employee service companies as operating subsidiaries. Our employee service companies, which provide part of the labor force for our airports but do not directly employ any personnel, are (i) Servicios a la Infraestructura Aeroportuaria del Pacífico, S.A. de C.V. (“SIAP”), (ii) Corporativo de Servicios Aeroportuarios, S.A. de C.V. (“CORSA”) and (iii) Puerta Cero Parking, S.A. de C.V. (“PCP”), and (iv) Aerocomercializadora del Pacífico, S.A. de C.V. (“ADP”). We also have a non-profit foundation, Fundación Grupo Aeroportuario del Pacífico, A.C. (“Fundación GAP”).

SIAP was incorporated as a subsidiary in June 1998 to provide technical assistance and corporate services to our airport operating subsidiaries. SIAP was set up as part of the Mexican government’s privatization plan for the airports operated by us. SIAP invoices our airports for three types of services:

CORSA was incorporated as a subsidiary on November 8, 2007, and began operations in January 2008. CORSA employs unionized personnel to perform services at our airports according to their capabilities and expertise and collects fees on a monthly basis for the services performed.

PCP was incorporated as a subsidiary on November 28, 2007, and began operations in January 2008. PCP provides operating and administrative services for airport parking lots. PCP employs both unionized and non-unionized personnel and collects fees on a monthly basis for the services performed.

We incorporated ADP as a subsidiary on February 14, 2018 to provide hotel infrastructure and other commercial services. ADP thus far remains inactive.

We established this non-profit foundation in May 2013 with the aim of improving social welfare in the communities near our airports. The foundation’s focus is on children’s education, as well as other charitable activities. See “Item 4, Information on the Company – Business Overview – Corporate Social Responsibility – Community Initiatives and Philanthropic Efforts – Fundación GAP.”

As of December 31, 2019, eighteen international airlines and seven Mexican airlines operated passenger flights at our twelve Mexican airports. Volaris is our principal airline customer in terms of total passengers at our Mexican and airports, with Aeromexico Group and VivaAerobus providing the second and third largest number of total passengers. In 2017, 2018 and 2019 revenues from Volaris and the passengers it moved through our airports totaled Ps.2,263.2 million, Ps.2,694.1 million and Ps.3,270.9 million respectively, of which Ps.2,043.7 million, Ps.2,429.1 million and Ps.2,963.3 million respectively, were paid to the airports in the form of passenger charges, representing 22.1%, 22.7% and 24.6% respectively, of the sum of our aeronautical and non-aeronautical revenues for 2017, 2018 and 2019. Revenues from the Aeroméxico Group and the passengers it moved through our airports were Ps.1,080.5 million, Ps.1,161.0 million and Ps.1,095.7 million, during 2017, 2018 and 2019, respectively, of which Ps.955.0 million, Ps.1,028.8 million and Ps.975.5 million, respectively, were paid to the airports for the passengers they moved in the form of passengers charges, representing 10.3%, 9.6%, and 8.1% respectively, of the sum of our aeronautical and non-aeronautical revenues for 2017, 2018 and 2019. Revenues from VivaAerobus and the passengers they moved through our airports were Ps.392.7 million, Ps.662.6 million and Ps.737.4 million in 2017, 2018 and 2019, respectively, of which Ps.358.3 million, Ps.605.7 million and Ps.672.3 million respectively, were paid to the airports in the form of passenger charges. Such passenger charges represented 3.9%, 5.7% and 5.6%, respectively, of the sum of our aeronautical and non-aeronautical revenues for 2017, 2018 and 2019.

In 2017, revenues from American Airlines and the passengers it moved through the Montego Bay airport totaled Ps.249.9 million, of which Ps.166.6 million was paid to MBJA in the form of passenger charges. Revenues from American Airlines and its passengers represented 13.5% of the sum of aeronautical and non-aeronautical revenues for the Montego Bay airport. In 2018, revenues from American Airlines and the passengers it moved through the Montego Bay airport totaled Ps.295.3 million, of which Ps.162.9 million was paid to MBJA in the form of passenger charges. Revenues from American Airlines and its passengers represented 14.7% of the sum of aeronautical and non-aeronautical revenues for the Montego Bay airport. In 2019, revenues from American Airlines and the passengers it moved through the Montego Bay airport totals Ps.275.9 million, of which Ps.186.6 million was paid to MBJA in the form of passenger charges, representing 8.9% of the sum of aeronautical and non-aeronautical revenues for the Montego Bay airport. However, passenger charges from American Airlines do not represent a significant portion of our total revenues across all airports. In 2017, 2018 and 2019 passenger charges collected by American Airlines at MBJA accounted for 1.3%, 1.2% and 1.1% respectively, of total revenues in our airports (1.5%, 1.3% and 1.3% respectively, of the sum of aeronautical and non-aeronautical revenues generated in our airports in 2017, 2018, and 2019).

In addition to passenger charges (revenues generated by the services provided by airports to passengers), we also earned revenues from aircraft landing and parking charges and the leasing of space to these airlines.

As a result of certain disputes with our airline customers in Mexico, beginning in 2003 we entered into an agreement with the Mexican National Air Transportation Chamber of Commerce and the SCT pursuant to which we resolved certain existing disputes with our airline customers and entered into: (i) contracts governing charges for aeronautical services; (ii) lease contracts for property used by the airlines; and (iii) contracts governing collection of passenger charges. In March 2012, we renewed the agreement, which represented: (i) virtually all of the relevant contracts governing the collection of passenger charges; (ii) a substantial majority of the agreements for the leasing of space in our terminals; and (iii) a substantial majority of the contracts governing our aeronautical services. This contract expired on December 31, 2014. We continue to maintain a good relationship with the Mexican National Air Transportation Chamber of Commerce and the SCT following the expiration of the aeronautical services agreement.

Our principal complementary services clients are our three principal providers of baggage handling services: Aveespress, S.A. de C.V., Menzies Aviation, S.A. de C.V. and Administradora Especializada en Negocios, S.A. de C.V. (a subsidiary of Aeroméxico Group), which provided Ps.37.0 million, Ps.36.6 million and Ps.26.2 million in revenues, respectively, each in the form of access fees, in 2019. Our primary catering clients are Aerococina, S.A. de C.V. and Gate Gourmet & Maasa México, S. de R.L. de C.V., which respectively provided Ps.14.0 million and Ps.4.5 million of revenues in the form of access fees in 2019.

We receive a fee from our complementary services clients equivalent to 10% to 15% of their reported sales.

As of December 31, 2019, we were party to approximately 1,158 contracts – 20% more than the 964 contracts we were party to as of December 31, 2018 – with providers of commercial services in the commercial spaces in our Mexican airports, including retail store operators, duty-free store operators, food and beverage providers, timeshare developers, financial services providers, car rental companies, telecommunications providers, VIP lounges, advertising, travel agencies, tourist information and promotion services. The increase in the number of contracts is due to the consolidation of the Kingston airport and the opening of various commercial areas due to the expansions in our airports. In 2019, our largest commercial customers in terms of revenues paid to us were Dufry México, S.A. de C.V. (duty-free stores; Ps.306.7 million in revenues for 2019 compared to Ps.268.1 million in 2018), Aerocomidas, S.A. de C.V. (food and beverages; Ps.138.7 million in revenues for 2019 compared to Ps.123.5 million in 2018), Operadora Aeroboutiques, S.A. de C.V. (retail; Ps.95.9 million in revenues for 2019 compared to Ps.100.6 million in 2018), and Servicios Inmobiliarios Alsea, S.A. de C.V. (food and beverages Ps.52.4 million in revenues for 2019 compared to Ps.52.6 million in 2018). In Jamaica, MBJA’s largest commercial customer in terms of revenues paid to MBJA were World Duty Free (duty free stores; U.S.$10.9 million in revenue for 2019, compared to U.S.$9.3 million in 2018) and Express Catering (food and beverages; U.S.$3.4 million in revenue for 2019, compared to U.S.$2.8 million in 2018).

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, terrorism or threat of terrorism, weather, air traffic control delays, health crises and general economic conditions, as well as the other factors discussed above. As a result, our results of operations for a quarterly period are not necessarily indicative of results of operations for an entire year, and historical results of operations are not necessarily indicative of future results of operations.

Excluding our airports servicing tourist destinations, our airports generally are natural monopolies in the geographic areas that they serve and generally do not face significant competition. However, the Mexican and Jamaican governments could grant additional concessions to operate existing government-managed airports, authorize the construction of new airports or allow existing privately held domestic airports to become international airports and permit them to receive regular domestic and international flights, all of which could lead to increased competition for our airports.

For instance, our Los Cabos airport may experience greater competition in the future from a small private airport near Cabo San Lucas, which received a permit to operate public service in March 2008 from the SCT. On November 4, 2009, this airport received authorization to operate regular commercial routes for domestic and international flights. Consequently, we implemented commercial strategies to improve our level of service in order to ensure that we remain the best airport option for airlines serving the San Jose del Cabo and Cabo San Lucas corridor. Also, in order to serve the private aviation market, we started operations at our new state-of-the-art Fixed Base of Operations in the Los Cabos airport. This allowed us to increase our capacity, and we redesigned our fee structure in order to make our service the most attractive in the region.

On September 2, 2014, the federal government announced plans to alleviate congestion at the Mexico City International Airport by building a new international airport in Texcoco with double the capacity of the current airport. Construction began in 2015 and operations were expected to start in 2022. However, in January 2019, the new Mexican administration that took office on December 1, 2018 cancelled the construction of the Texcoco airport project and announced plans to replace it with two different airport infrastructure projects. Specifically, the new Mexican administration announced that it would seek to alleviate congestion at the existing airport by (i) converting a military air force base located in San Lucia, approximately 40 kilometers (24.9 miles) outside of Mexico City, into a commercial airport and (ii) expanding the Toluca International Airport, which is approximately 60 kilometers (37.3 miles) outside of Mexico City. There is still uncertainty about whether or when these renovations will be completed and what impact congestion may have on the existing Mexico City International Airport. This change could limit growth in the routes to and from Mexico City from our airports, as the expansion of the air force base is expected to be ready in no less than three years, and the current airport has limited availability for traffic growth.

ASA currently operates seven small airports in Mexico’s Pacific and Central regions. We believe that these airports collectively account for only a small fraction of the passenger traffic in these regions.

In recent years, the Jamaican government has discussed plans to build a third international commercial airport in Jamaica, most likely on the southern coast at Vernamfield, to meet long-term requirements for the growth of air transport. We do not expect the Jamaican government’s Vernamfield airport plan to be executed in the near term. Also see “Item 3, Key Information – Risk Factors – Risks Related to the Regulation of our Business – The Mexican and Jamaican governments could grant new concessions that compete with our airports.”

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 the attractiveness of other commercial and industrial centers in Mexico that may affect the attractiveness of Guadalajara, Tijuana and other growing industrial centers in our group, such as Hermosillo, Leon, Aguascalientes and Mexicali.

Because our Puerto Vallarta, Los Cabos, La Paz, Manzanillo and Montego Bay airports are substantially dependent on tourism, 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 Acapulco and Cancun, and abroad, such as Hawaii, Puerto Rico, Florida, Cuba, the Dominican Republic, other Caribbean islands and Central America. In addition, with respect to Puerto Vallarta, Los Cabos, La Paz, Manzanillo and Montego Bay, factors beyond our control include promotional activities and pricing policies of hotel and resort operators, weather conditions, natural disasters (such as hurricanes and earthquakes), security concerns, health crises 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.

We maintain an environmental management system according to ISO 14001:2015 requirements, which provides a reference point for best practices and allows us to measure environmental performance and efficiency. This system is in place and has been independently certified in all of our airports.

Additionally, our Master Development Programs approved for the 2020-2024 period included measures prioritizing the reduction of our airports’ environmental impacts through (i) wastewater and sewage separation; (ii) improvements to residual water treatment plants; and (iii) storage of hazardous and other special wastes. In 2017, 2018 and 2019 we invested Ps.70.5 million, Ps.37.0 million and Ps.19.2 million respectively, in these projects.

In 2015, we established the following objectives for our environmental programs: (i) to reduce consumption of water per passenger; (ii) to increase the use of treated residual water; and (iii) to maintain our electricity consumption levels. The following table sets forth certain performance indicators tracked by our environmental management systems.

Environmental Management by MBJA: To ensure continuous improvement in environmental performance, and to meet the environmental performance requirements of the MBJA Concession Agreement and the International Finance Corporation (“IFC”) Performance Standards, MBJA has in place an Environmental Management Plan (“EMP”).

MBJA’s EMP guides business planning across departments to facilitate compliance with local regulations, the IFC Performance Standards and industry best practices, and represents MBJA’s commitment to integrating environmental management measures into planning, design, construction and operation of the airport. The EMP prescribes actions for the mitigation of the environmental impacts of MBJA’s operations and includes management plans for fuel and other hazardous materials storage, storm water run-off, ground water, preexisting contaminated sites, solid waste, aviation noise and wildlife hazard. MBJA’s EMP is managed by the Environment, Health and Safety Manager.

MBJA continues to assess its environmental performance through independent audits and investigations with the goal of implementing practical recommendations to ensure continued improvement in its environmental performance and stewardship. MBJA’s EMP was certified by the JCAA in 2017.

Environmental Management by PACKAL: To ensure continuous improvement in environmental performance, and to meet the environmental performance requirements of the PACKAL Concession Agreement, PACKAL has in place an Environmental Policy.

PACKAL’s policy guides business planning across departments to facilitate compliance with local regulations and represents PACKAL’s commitment to integrating environmental management measures into planning, design, construction and operation of the airport. The policy prescribes actions for the mitigation of the environmental impacts of PACKAL’s operations and includes management plans for fuel and other hazardous materials storage, waste water treatment plant, preexisting contaminated sites, solid waste, aviation noise, air quality and wildlife hazard. PACKAL’s Policy is managed by the Environment and Quality Manager.

PACKAL continues to assess its environmental performance through independent audits and investigations with the goal of implementing practical recommendations to ensure continued improvement in its environmental performance and stewardship. PACKAL’s policy was certified by the JCAA in 2019.

We are analyzing the implementation of solar photovoltaic technology over the carports in our parking lots in all our airports, except for the Los Cabos airport, in order to generate electricity for internal consumption. We expect begin with these projects in 2020.

Additionally, we have the interest to build solar plants in the Guadalajara, Los Cabos and Montego Bay airports. We expect to begin these projects in 2021, concluding in 2022.

Our Aguascalientes, Guanajuato, Guadalajara, Hermosillo, La Paz, Los Mochis, Manzanillo, Mexicali, Morelia and Tijuana airports are “Environmental Quality” certified by the Federal Office for the Protection of the Environment (Procuraduría Federal de Protección al Ambiente), or “PROFEPA”. Also, our Aguascalientes, Guadalajara, Los Mochis and Morelia airports are certified on the higher level of “Environmental Performance” by PROFEPA. During 2019, we start the process to get the “Environmental Quality” certification at our Los Cabos and Puerto Vallarta airports.

Our Puerto Vallarta, Aguascalientes and Guadalajara airports have Level 2 Airport Carbon Accreditation (“ACA”) from the Latin America and Caribbean Region of the Airports Council International (the “ACI-LAC”) and our Tijuana, Guanajuato, Hermosillo, La Paz, Los Mochis and Los Cabos airports have a Level 1 ACA from the ACI-LAC. We plan to have all of our airports enrolled in this program by 2020.

With the goal of guaranteeing occupational health and safety, as well as institutionalizing the prevention of occupational hazards, we have begun implementing a self-administered program, promoted by the Ministry of Labor and Social Welfare (Secretaría del Trabajo y Previsión Social), or “STPS,” and based on national and international standards and regulations, to promote the operation of a safe and clean airport network in Mexico. The voluntary compliance program comprises three levels of recognitions: (i) for compliance with health and safety regulations, (ii) for actions that promote continuous improvement in health and safety standards, and (iii) for successful management of health and safety standards. Under this program, we have obtained the following levels of certification: Level 1 (Los Mochis, La Paz and Morelia airports), Level 2 (Manzanillo), and Level 3 (Guadalajara and Puerto Vallarta airports).

A key component of the voluntary compliance program is the Safety and Hygiene Commission, which we have established in each of our airports. These commissions conduct investigations and reviews of the work area, verifying the implementation of the voluntary compliance program and recommending additional improvements to create optimal working conditions depending on the airport’s needs. To accomplish our voluntary compliance program goals and to raise awareness among our workers, our workers also received a Safety and Hygiene course about the importance of preventing occupational hazards to mitigate accidents and occupational diseases, generate healthy environments, and comply with the health and safety regulations of the Ministry of Labor and Social Welfare.

In conjunction with these commissions, we have also formed brigades to help minimize the impact and risk, through evacuation and first aid plans, of any kind of natural phenomenon that could negatively affect the safety of our employees or our operations.

In addition, as part of our company policies, we provide an annual general medical review for certain employees. As part of our philosophy of well-being and quality of life, we also allocate approximately Ps.19 million per year to organize cultural and sports activities, thus encouraging physical activity. Together, these measures help provide a suitable workplace for our employees, as well as the relevant safety tools and equipment to prevent accidents and diseases to the extent possible.

Our policy is to provide the same job opportunities to all qualified applicants and to provide employees with a work environment free of harassment or discrimination, where each employee behaves respectfully towards their co-workers, promoting a spirit of collaboration regardless of gender, age, religion or hierarchical level.

We provide financial aid for our employees and scholarships for our employees’ dependents. In 2017, 2018 and 2019, we invested Ps.1.9 million, Ps.2.1 million and Ps.2.4 million, respectively, in these programs.

Since 2009, we have been evaluated by Expansión Magazine as a “Super Company” in Mexico with respect to workplace culture and professional climate. Since 2013, we have been ranked among the top ten companies in Mexico according to this publication’s annual evaluations of workplace culture. On November 24, 2017, we were awarded the highest recognition as a “Safe Company” by the Ministry of Labor and Social Prevention (for registering a rate of 0.21 accidents per 100 workers, that is, 90.4 percent below the national average of 2.2). Likewise, we were awarded with the certification for best corporate practices by the Mexican Institute of Best Corporate Practices, with recognition by the Mexican Stock Exchange.

With respect to labor matters, we have a social policy in place whereby we negotiate contracts and salary increases with our workers’ unions with the aim of increasing the social welfare of each of our workers within the context of equality, productivity and a commitment to merging our workers’ individual objectives with those of our business. Salaries for our non-union workers are reviewed based on their performance evaluation and the degree to which their individual and business objectives are met.

Training programs are available at all levels of our organization. The Management Skills, Leadership and Execution program is available for our senior management. The Succession and Career Development Plan was prepared for our key personnel, which defines specific objectives and promotion requirements. Through this program, we have achieved a turnover rate of less than 3% per year for key personnel. The career professionalization program is a model of professional growth for our operations and maintenance workers at our airports. The

objective of the program is to promote the growth and skills of our employees in those areas, thus creating flexibility for the operation of our airports. Our new Workplace Culture program is oriented towards the generation of work habits, productive practices and organizational values, with the goal of developing competencies that allow, in turn, increased productivity and competitiveness within GAP, thus allowing the Company to raise the level of life of the workers and their families, promoting their integral development.

The company's benefits package is maintained at very competitive levels compared to the labor market in each of the regions where our airports are located, thus reducing turnover.

In our bidding process for suppliers, we include our code of ethics as part of the initial information package with the intention that our suppliers comply with our ethical standards. The terms and conditions of our contract with suppliers then include provisions designed to ensure that our suppliers comply with labor laws and regulations, including requirements to monitor legal and regulatory compliance in the areas of employer responsibilities and occupational health and safety.

In our supplier development program, suppliers are strategically selected by us based on the contracting amounts, technical complexity of their work or impact on the quality of the service provided by us. Once the provider is selected, visits and face-to-face monitoring are carried out at its facilities in order to verify, among other things, the supplier’s policies, guidelines and processes comply with legal and regulatory requirements, as well as the management’s approach to staff development and the safety of the work environment. Once a contracted supplier has completed their work, we evaluate their performance to determine whether they should be invited to participate in future bids.

In May 2013, we established a non-profit foundation, Fundación GAP with the aim of improving social welfare in the communities near our airports. The foundation’s focus is education, and it engages in other charitable activities, as well.

In September 2014, we inaugurated the first Fundación GAP School near our Guadalajara airport. The first year began with a class of first-grade students, and we have been adding a new class each consecutive year. In 2018, we reached 300 students for grades one through five. Additionally, in 2016 we opened another school near our Los Cabos airport, which began activities with another 60 students, reaching 180 students in 2018. In 2018, we opened a third school near our Guadalajara airport, with 60 students. In 2019, we reached 452 students in Guadalajara and 240 students in Los Cabos.

In 2019, Fundación GAP opened four community centers in Guadalajara, Los Cabos, Aguascalientes and Puerto Vallarta. The goal of these community centers is to support and promote our employees and their families by helping them gain access to life changing professional and economic opportunities through education. At these centers, our employees have access to free elementary, secondary and high school educations, as well as to technical training courses designed to strengthen the professional skills and knowledge that they use on the job. In 2019, we taught 323 students at these community centers.

Our board of directors annually reviews our donation to the foundation. For 2019, our board of directors authorized a Ps.24 million donation, and over past five years GAP has authorized more than Ps.74 million in donations. The foundation is supervised by a board of trustees, which is presided over by Mrs. Díez Barroso.

The following are the principal laws, regulations and instruments (each as subsequently amended) that govern our business and the operation of our Mexican airports:

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, a concession granted by the SCT is required to 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 (a) entities considered part of “the federal public administration” as defined under Mexican law and (b) any private company the principal shareholder of which is a state or municipal government; (ii) concessions granted to operators of private airports (that have operated privately for five or more years) wishing to begin operating their facilities as public service airports and complying with certain requirements; and (iii) complementary concessions granted to existing concession holders that comply with certain requirements. 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 SCT granted twelve concessions to operate, maintain and develop the twelve principal airports in Mexico’s Pacific and Central regions 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, our privatization, through which our strategic shareholder acquired 15% of our capital stock, was conducted through a public bidding process. Each of our Mexican concessions was amended on November 15, 1999, in order to, among other things, 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. We believe we are currently complying with the material requirements of the Mexican Airport Law and its regulations. Non-compliance with these regulations could result in fines or other sanctions being assessed by the SCT and are among the violations that could result in termination of a concession if they were to occur three or more times.

The Mexican National Assets Law, among other things, establishes regulations relating to concessions granted with respect to property held in the public domain, including the airports that we operate. The Mexican National Assets Law requires concessionaires of real property held in the public domain and used for administrative or non-public purposes to pay a tax, and establishes grounds for revocation of concessions for failure to pay applicable taxes, but does not specify which taxes must be paid, including whether certain taxes to municipalities must be paid by a concessionaire.

Under the Mexican Federal Duties Law, each of our subsidiary concession holders is required to pay the Mexican government a concession tax based on its gross annual revenues (excluding revenues from improvements to concession assets) 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 annually by the Mexican Congress. Our Mexican concessions provide that we may request an amendment of our maximum rates if there is a change in this concession tax.

The SCT intended to establish a new regulatory agency, expected to be authorized to monitor our activities and those of the other airport groups, enforce applicable regulations, propose amendments to concessions, set maximum rates, resolve disputes between concession holders and airport users (such as airlines) and collect and distribute information relating to the airport sector. An initiative was introduced in Mexico’s Congress on February 26, 2009, to establish such an agency and reform a substantial part of the current Mexican Airport Law, but it was rejected by the legislature on April 20, 2010. On December 14, 2011, a new bill was introduced in Mexico’s Congress to amend the Mexican Airport Law. Among other items, the bill proposes to give the SCT additional authority to plan and apply the standards, policies and programs for the Mexican airport system, to oversee the correct operation of civil aviation in Mexico, and to establish rules for airport service providers and the general basis for flight schedules, so as to guarantee the competitiveness of Mexico’s airports. On January 26, 2015, Congress published changes to the Mexican Airport Law and Civil Aviation Law, however, these changes are less extensive than those proposed in the 2011 bill. Among other things, the amendment includes provisions that seek to ensure a competitive market for suppliers of complementary services. The principal effect on airport concessionaires such as us is the requirement for concession holder not limit the number of providers of complementary services and fixed base operations in its airports, except for reasons of space availability, operational efficiency and safety. If a concession holder denies entry to any complementary service provider for a reason other than the above, which service provider may file a complaint with the SCT. On November 8, 2017, changes to the Mexican Airport Law took effect, which modified various regulations, primarily impacting airlines. One of the changes contemplated is the payment of indemnification for passengers delayed for longer than two hours. The new law further clarifies that the payment will be made if the airport concessionaire or airline is at fault for the delay. As of the date hereof, there is no process in place to determine who is responsible for delays. See “Item 3, Key Information – Risk Factors – Risks Related to the Regulation of Our Business – We cannot predict how the laws and regulations governing our business will be applied.”

As a result of certain 2013 amendments to Mexico’s Constitution, on July 6, 2014, a new Federal Economic Competition Law (Ley Federal de Competencia Económica) went into effect, which, among other things, extinguished the former Federal Competition Commission and created the Federal Economic Competition Commission (Comisión Federal de Competencia Económica), or “COFECE,” as an autonomous agency to be the competition authority for all industries except telecommunications and broadcasting. The law grants broader powers to COFECE, including the ability to regulate essential facilities, order the divestment of assets and eliminate barriers to competition. The law also sets forth important changes in connection with mergers and anti-competitive behavior, increases liabilities and the amount of fines that may be incurred for violations of the law, and limits the availability of legal defenses against the application of the law. If COFECE determines that a specific service or product is an essential facility, it has the ability to regulate access conditions, prices, tariffs or technical conditions for or in connection with the specific service or product. As of the date of filing, COFECE has not made any determination that the services we render are considered an essential facility. See “Item 3, Key Information – Risk Factors – Risks Related to the Regulation of Our Business – Changes to Mexican laws, regulations, and decrees applicable to us could have a material adverse impact on our operations.”

The SCT is the principal regulator of airports in Mexico and is authorized by the Mexican Airport Law to perform the following functions:

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 SCT is required to provide air traffic control, radio assistance and aeronautical communications at Mexico’s airports. The SCT provides these services through the Mexican Air Traffic Control Authority, which is a division of the SCT. Since 1978, the Mexican air traffic control authority has provided air traffic control for Mexico’s airports.

We hold concessions granted to us by the Mexican government to operate, maintain and develop twelve airports in the Pacific and Central regions of Mexico in accordance with the Mexican Airport Law. As authorized under the Mexican Airport Law, each of the concessions is held by our subsidiaries for an initial 50-year term, each of which terms began on November 1, 1998. This initial term of each of our Mexican concessions may be renewed for one or more terms for up to an additional 50 years, subject to the concession holder’s acceptance of any new conditions imposed by the SCT and to its compliance with the terms of its concession. Each of the concessions held by our subsidiary concession holders allows 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 regulations thereunder; 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, 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 must be implemented in accordance with the requirements set forth in the National Program for Airport Security (Plan Nacional de Seguridad Aeroportuaria). In addition, the regulations pertaining to the Mexican Airport Law specify that an airport concession holder is responsible for inspecting passengers and their carry-on baggage before they reach the departure gates, while the transporting airline is responsible for the inspection of checked baggage and cargo. If public order or national security is endangered, the responsible federal authorities are authorized to act to protect the safety of aircraft, passengers, cargo, mail, installations and equipment.

The shares of a concession holder and the rights under a concession may be subject to a lien only with the approval of the SCT. No agreement documenting liens approved by the SCT 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 SCT. The SCT 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 SCT may require.

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 insurance in specified amounts and covering specified risks, such as damage to persons and property at the airport, in each case as specified by the SCT. To date, the SCT has not specified the required amounts of insurance. We may be required to obtain additional insurance once these amounts are specified. We and our subsidiary concession holders are jointly and severally liable to the SCT 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 the concession held by any one of our subsidiaries, the SCT is entitled to revoke the concessions held by all of our subsidiaries.

Substantially all of the contracts entered into prior to August 25, 1999, by ASA 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 ASA for any loss suffered by ASA due to the concession holder’s breach of its obligations under an assigned agreement.

The Mexican Airport Law and the regulations thereunder classify the services that may be rendered at an airport into the following three categories:

A third party providing complementary or commercial services to an airport is required to do so only pursuant to a written agreement with the relevant concession holder. On November 1, 2012, we entered into an agreement with a third party with respect to the provision of airbus and passenger walkway services in all of our airports. Accordingly, we will no longer provide these services directly. As of the date of this report, this is the only agreement with a third party regarding the provision of regulated services. All agreements relating to airport or complementary services are required to be approved by the SCT. 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. 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 SCT 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. See “Item 3, Key Information – Risk Factors – Risks Related to the Regulation of Our Business – The Mexican government may terminate or reacquire our Mexican concessions under various circumstances, some of which are beyond our control.”

A concession holder is also required to take all necessary measures to create a competitive market for complementary services. A concession holder may not limit the number of providers of complementary services in its airport, except in instances where space, efficiency and/or safety considerations warrant such limitation. If a concession holder denies entry to any complementary services provider for reasons other than the above, such service provider may file a complaint with the SCT, which shall determine within 60 days of the filing of the complaint whether entry of the service provider into the airport shall be authorized.

Each concession holder is required to submit to the SCT a Master Development Program describing, among other things, the concession holder’s construction and maintenance plans.

Each Master Development Program is required to be updated every five years and resubmitted for approval to the SCT. 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 with the approval of the SCT, typically provided pursuant to a concession holder’s Master Development Programs.

Information required to be presented in the Master Development Programs includes:

Each concession provides for a 24-month period for the preparation and submission of the concession holder’s Master Development Program, and requires the concession holder to engage recognized independent consultants to conduct polls among airport users with respect to current and expected quality standards and to prepare air traffic projections and assess investment requirements. The concession holder must submit a draft of the Master Development Program to an operations committee (Comité de Operación y Horarios), composed of each of the airport’s principal users, for their review and comments six months prior to its submission for approval to the SCT. Further, the concession holder must submit, six months prior to the expiration of the five-year term, the new Master Development Program to the SCT. The SCT may request additional information or clarification as well as seek further comments from airport users. The Ministry of Defense (Secretaría de Defensa Nacional) may also opine on the Master Development Programs.

Any major construction project, renovation or expansion relating to an airport can only be done pursuant to the Master Development Program of the concession holder or with the approval of the SCT. We are required to spend the full amounts set forth in each investment program under our Master Development Programs.

Changes to a Master Development Program, including the related investment program, require the approval of the SCT, except for emergency repairs and minor works that do not adversely affect an airport’s operations.

Once capital expenditures related to the Master Development Programs are established, they are adjusted annually according to increases in the Mexican PPI’s construction price index, and the concessionaire is obligated to meet the adjusted amounts.

On December 12, 2019, the SCT approved new maximum tariffs and Master Development Programs for the five-year period from 2020-2024 for each of our Mexican airports. The combined maximum tariffs are expressed in workload units for each airport, and were determined by the SCT based on traffic projections, operating costs and capital investments included in the Master Development Programs, as well as in accordance with pre-determined parameters for the calculation of the maximum tariff set forth in the concession for each airport.

We allocated 86.8% of our committed investments for the 2020-2024 period to our Guadalajara, Puerto Vallarta, Tijuana and Los Cabos airports. The investments of the new Master Development Programs for the 2020-2024 period represent the fifth investment period within the terms of the concession, assume an increase of over 215.0% for the period 2015-2019 and reflect the highest investment amounts committed to date.

Our Master Development Programs are approved by the SCT for periods of five years, as stated in our Mexican concessions. We are required to comply with the five-year period investment obligations under the Master Development Programs, and the SCT may apply sanctions if we do not so comply. Recently, the SCT has reviewed our compliance on an annual basis. The SCT may choose to do this revision officially and apply sanctions on an annual basis if it determines that we have failed in our investment obligations. In March 2018, 2019 and 2020, the SCT certified our compliance with our Master Development Programs through 2017, 2018 and 2019, respectively.

The Mexican Airport Law directs the SCT to establish price regulations for services for which there is no competitive market, as determined by the Mexican Antitrust Commission. In 1999, the Mexican 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 SCT 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 November 15, 1999, a new regulation, the Rate Regulation (Regulación Tarifaria), was incorporated within the terms of each of our Mexican concessions. This regulation provides a framework for the setting by the

SCT of five-year maximum rates. See “Item 3, Key Information – Risk Factors – Risks Related to the Regulation of Our Business – Changes to Mexican laws, regulations and decrees applicable to us could have a material adverse impact on our results of operations.”

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 an aircraft’s weight and arrival time, an aircraft parking fee, a fee for the transfer of passengers from an aircraft to the terminal building, a security charge for each departing passenger and the leasing of space to, and collection of access fees from, third parties that provide complementary services at our airports.

Since January 1, 2000, all of our revenues from aeronautical services have been subject to a price regulation system established by the SCT. Under this price regulation system, the SCT 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 passenger, or 100 kilograms (220 pounds) of cargo, including those transported in passenger airplanes. The combined maximum tariffs are expressed in workload units for each airport and were determined based on: (i) projected workload units; (ii) capital investments; and (iii) the operating expenses authorized for the five-year period in the Master Development Programs.

The maximum tariffs for the five-year period are expressed in constant pesos and are adjusted by the rate of inflation according to the Mexican PPI, excluding petroleum, and by the efficiency factor at the end of any given year. Since the inflation rate for each applicable year, as measured in terms of the variation of the Mexican PPI, excluding petroleum, is not known at the beginning of the application of the maximum tariffs negotiated with the Mexican Directorate General of Civil Aviation, the adjustment for inflation is not included in the maximum rates set at the beginning of each five-year period. These adjusted tariffs will be applicable once they are published.

We are able to set the specific prices for each aeronautical service every six months (or more frequently if accumulated inflation since the last adjustment exceeds 5%), as long as the combined revenues from regulated services at an airport do not exceed the maximum rate per workload unit at that airport. Each year, the SCT certifies that our regulated revenues divided by workload units are equal to or below the established maximum rate for the period. The SCT has reviewed our maximum rates and certified that we did not collect revenues in excess of the permitted level in 2016, 2017 and 2018. The review for 2019 will take place during the second quarter of 2020. Since our aggregate revenues resulting from regulated services are not otherwise restricted, increases in passenger and cargo traffic permit greater revenues overall within each five-year interval for which maximum rates are established.

In 2017, 2018 and 2019, approximately 66.5%, 69.6% and 65.0%, respectively, of our Mexican airports’ total revenues were earned from aeronautical services subject to price regulation under our maximum rates (75.4%, 75.4% and 74.9%, respectively, of the sum of aeronautical and non-aeronautical revenues).

Our revenues from non-aeronautical services, including revenues that we earn from most commercial activities in our terminals, are not regulated under our maximum-rate price regulation system and are therefore not subject to a ceiling under any regulation. For a description of how we classify our revenues into aeronautical and non-aeronautical services, see “Item 5, Operating and Financial Review and Prospects – Overview – Classification of Revenues.”

Each airport’s maximum rate is determined by the SCT based on a general framework established in our Mexican 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 SCT. The schedule of maximum rates for each airport is established every five years.

On December 12, 2019, the SCT set new airport maximum rates for the five-year period from January 1, 2020 through December 31, 2024 expressed in constant pesos as of December 31, 2017. On January 2, 2020, these rates were published in the Official Gazette of the Federation (Diario Oficial de la Federación). These maximum rates are subject to adjustment only as described above or under the limited circumstances described below under “Special Adjustments to Maximum Rates.” The following table sets forth the maximum rates for each of our airports under the Master Development Programs that went into effect as of January 1, 2020:

The Rate Regulation provides that each airport’s annual maximum rates are to be determined in five-year intervals based on the following variables:

Our Mexican concessions specify a discounted cash flow formula to be used by the SCT to determine the maximum rates that, given the projected earnings before interest, taxes, depreciation and amortization, 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. The maximum rates ultimately established by the SCT historically have resulted from a negotiation between the SCT and us regarding these variables. Once the maximum rates are established, they must be adjusted each year by the efficiency factor and by the Mexican PPI, excluding petroleum. Also, once the maximum rates are established based in part on the capital expenditures included in our Master Development Programs, the capital expenditures must be adjusted according to the Mexican PPI’s construction price index.

The concessions provide that each airport’s reference values and discount rate and the other variables used in calculating the maximum rates do not in any manner represent an undertaking by the SCT 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 are 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 any shortfall.

To the extent that such aggregate revenues per workload unit exceed the relevant maximum rate, the SCT 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 Mexico. On January 1, 2020, the daily general minimum wage in Mexico was Ps.123.22. As a result, the maximum penalty at such date could have been approximately Ps.6.1 million (approximately U.S.$326.7 thousand) per airport.

As established by the SCT, the calculation of workload units does not include transit passengers for subsequent years. The current workload unit calculation is therefore equal to one terminal passenger or 100 kilograms (220 pounds) of cargo.

Once determined, each airport’s maximum rates are subject to special adjustment only under the following circumstances:

The Mexican concessions require us to retain a 51% direct ownership interest in each of our twelve Mexican concession holders throughout the term of these concessions. Any acquisition by us or by one of our Mexican 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 Mexican Antitrust Commission. In addition, the Mexican 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.

Mexican concession holders and third parties providing services at airports are required to provide the SCT access to all airport facilities and information relating to an airport’s construction, operation, maintenance and development. Each Mexican concession holder is obligated to maintain statistical records of operations and air traffic movements in its airport and to provide the SCT with any information that it may request. Each Mexican concession holder is also required to publish its annual audited 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 SCT for such control acquisition. For purposes of this requirement, control is deemed to be acquired in the following circumstances:

Pursuant to the regulations under the Mexican Airport Law, any company acquiring control of a Mexican 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 SCT requires notification 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 SCT 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.

Under the Mexican Airport Law and the terms of the concessions, a concession may be terminated upon any of the following events:

Following a concession’s termination, the concession holder remains liable for the performance of its obligations during the term of the concession.

The SCT is entitled to revoke a concession without prior notice as a result of the first six events described above. Regarding the other violations listed above, violations may result in revocation of a concession only if sanctions have been imposed at least three times with respect to the same violation.

Pursuant to the terms of our Mexican concessions, in the event the SCT revokes one of our Mexican concessions, it is entitled to revoke all of our Mexican concessions.

According to the Mexican National Assets Law, the surface area of our airports and improvements on such space are government-owned assets. A concession concerning government-owned assets may be “rescued,” or reverted 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 reversion (rescate), 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 operation (requisa) of any airport and any airport assets, as well as any airport and complementary services. 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 must be determined by experts jointly appointed by both parties and the amount of losses must be determined based on the average net income of the concession holder during the previous year.

The Mexican Airport Law provides that a sanction of up to 200,000 times the general daily minimum wage in Mexico may be assessed for a failure to comply with the law or terms of a concession. Such sanction may be duplicated in the event of reiterative failures to comply. As a result, the maximum penalty on January 1, 2020, was Ps.24.6 million (U.S.$1.3 million) for an individual failure to comply.

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 SCT. 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 Mexican concessions would prevail over those of the Mexican Communications Law. Accordingly, there can be no assurance that upon expiration or termination of our Mexican 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.

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. The Federal Competition Commission has the power, under certain circumstances, to prohibit a party from bidding and to cancel an award after the process has concluded. In addition, the government may grant concessions without a public bidding process to the following entities:

Our operations are subject to Mexican federal, state and municipal laws and regulations relating to the protection of the environment. The major federal environmental laws applicable to our operations are: (i) the General Law of Ecological Balance and Environmental Protection (Ley General de Equilibrio Ecológico y Protección Ambiental, or the “General Environmental Law”) and its regulations, which are administered by the Ministry of the Environment and Natural Resources (Secretaría de Medio Ambiente y Recursos Naturales) and enforced by the Ministry’s enforcement branch, the Federal Office for the Protection of the Environment (Procuraduría Federal de Protección al Ambiente); (ii) the General Law for the Prevention and Integral Management of Waste (Ley General para la Prevención y Gestión Integral de los Residuos, or the “Law on Waste”), which is also administered by the Ministry of the Environment and Natural Resources and enforced by the Federal Office for the Protection of the Environment; and (iii) the National Waters Law (Ley de Aguas Nacionales) and its regulations, which are administered and enforced by the National Waters Commission (Comisión Nacional del Agua), also a branch of the Ministry of the Environment and Natural Resources.

Under the General Environmental Law, regulations have been enacted concerning air pollution, environmental impact, land use, soil contamination, noise control, hazardous waste, environmental audits and natural protected areas. The General Environmental Law also regulates, among other things, vibrations, thermal energy 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, owners and/or possessors of 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.

Pursuant to the National Waters Law, companies that discharge waste waters into national water bodies must comply with, among other requirements, 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 Mexican concessions and the National Waters Commission.

In addition to the foregoing, Mexican Official Norms (Normas Oficiales Mexicanas), or “NOMs,” which are technical standards issued by competent regulatory authorities pursuant to the General Normalization Law (Ley General de Metrología y Normalización) and the General Law of Ecological Balance and Environmental Protection (Ley General del Equilibrio Ecológico y la Protección al Ambiente), establish limits on air emissions, waste water discharges, the generation, handling and disposal of hazardous waste and noise control, among other matters.

The General Environmental Law and Law on Waste establish the main policies for soil remediation. Remediation standards and procedures are gradually beginning to be implemented through NOMs.

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 Ministry of the Environment and Natural Resources (Secretaría de Medio Ambiente y Recursos Naturales) and the Federal Office for the Protection of the Environment (Procuraduría Federal de Protección al Ambiente) are the responsible regulators. 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 Ministry of the Environment and Natural Resources, 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 had to be performed at each of our airports. Based on the results of these audits, the Federal Office for the Protection of the Environment issued recommendations for improvements and corrective actions to be taken at each of our airports. In connection with the transfer of the management of our airports from our predecessor, we entered into environmental compliance agreements with the Federal Office for the Protection of the Environment on January 1, 1999, and July 12, 2000, pursuant to which we agreed to comply with a specific action plan and adopt specific actions within a determined time frame.

The Federal Office for the Protection of the Environment has confirmed that we have complied with all of the relevant environmental requirements derived from the aforementioned environmental audits and has issued compliance certificates for all of our airports. These certificates, which are known as Environmental Quality Certificates (Certificados de Calidad Ambiental) certify compliance with applicable Mexican environmental laws, regulations and applicable NOMs and must be renewed periodically.

In June 2013, a decree was published in the Official Gazette of the Federation (Diario Oficial de la Federación) issuing the Federal Environmental Responsibility Law (Ley Federal de Responsabilidad Ambiental). As part of the Federal Environmental Responsibility Law, various provisions were amended, added and revoked of the General Law of Ecological Equilibrium and Protection of the Environment, the General Law of Wildlife, the General Law for the Comprehensive Prevention and Waste Management, the General Law for Sustainable Forest Development, the National Water Act and the Federal Criminal Code, among others, to the effect that any person or company whose acts or omissions directly or indirectly causes harm to the natural environment, is obligated to repair the environmental damage, or when reparation is not possible, to compensate for the harm, and undertake any necessary actions to avoid increasing the harm. A second general aspect of this reform is the creation of expanded standing so that individuals, including Mexican environmental non-profits, may initiate lawsuits for the protection of property that they do not directly own.

During 2018, a new carbon dioxide (“CO2”) market will commenced operating in Mexico. The market will require that industries that generate above a certain amount of CO2 emissions, including airport concession owners, pay for rights to excess emissions. Commencing in 2019, the legislation requires that companies subject to it report their global emissions as verified by the Mexican Emissions Registry (Registro Nacional de Emisiones). We are subject to this legislation, and began reporting our emissions in 2018. In 2019, we began submitting our emissions reports for verification by the Mexican Emissions Registry. In addition, new water quality standards are being discussed, which would require greater water quality for all of our wastewater disposal. For more information see “Item 3, Key Information – Risk Factors – Risks Related to Mexico – Increased environmental regulation and enforcement in Mexico may affect us.”

The legal framework of environmental liability applicable to our operations is generally outlined above. Under the terms of our Mexican concessions, the Mexican government has agreed to indemnify us for any environmental liabilities arising prior to November 1, 1998, and for any failure by ASA 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 its agreements with environmental authorities. For further information regarding these liabilities, see Note 29 to our audited consolidated financial statements.

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 USMCA, 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.

Our aeronautical operations are subject to national and international regulations regarding maintaining acceptable safety standards. Compliance with these safety regulations is overseen by the Mexican Directorate General of Civil Aviation, which conducts audits and inspections of each of our Mexican airports.

In 2013, the Mexican Government issued a Mexican Official Standard (Norma Oficial Mexicana), which created an obligation to implement the ICAO’s Safety Management System (“SMS”). The SMS is a systematic approach to managing safety, including the necessary organizational structures, accountabilities, policies and procedures. The ICAO encourages various types of product and service providers that design, manufacture, operate or support the operation of aircrafts to implement this system. The Civil Aviation Authority can bring administrative proceedings against providers that do not comply with SMS regulations, and it also has the power to impose a variety of sanctions or close non-complying facilities.

We began implementing this system as soon as the standard was issued. In 2015, after two years of work and having completed four stages, we obtained SMS certification for the Puerto Vallarta, Los Cabos and Tijuana airports, which were the first three airports to receive SMS certification in Mexico. In 2016 and 2017, we obtained SMS certification for each of our other Mexican airports. Currently, twelve of the sixteen SMS-certified airports are our airports.

In addition, the ICAO provides certification based on compliance with safety, regulatory and efficiency standards for aircraft operations at aerodromes and ensures that certified aerodromes are in compliance with relevant ICAO standards and recommended Civil Aviation Authority practices. Eleven of our twelve airports have obtained ICAO aerodrome certification. Currently, Guadalajara airport has completed three of five phases of the certification procedure. We completed the remaining phases and obtained the certification for the Guadalajara airport in 2019.

The following are the principal laws, regulations and instruments that govern our business in Jamaica and the operation of our Jamaican airports and the concessionaires:

Legislation specifically applicable to the operation of airport concessions and airports in Jamaica are the Civil Aviation Act, the Airports Authority Act and the Airports (Economic Regulation) Act, and each of their respective subsidiary legislation and regulations. In addition, our Jamaican airports are subject to all applicable laws and regulations related to the operation of a private limited liability company in Jamaica.

The Civil Aviation Act and the regulations thereunder provide the general framework regulating air transportation and establish the JCAA, under the authority of the MTM, to oversee safety and security, provide air navigation services and regulate aviation industry prices. The Civil Aviation Act’s stated intent is to promote the development of air transport in Jamaica.

In 1974, the Airports Authority Act transferred to the AAJ, an independent government agency, the concessions for Jamaica’s two international airports – the Montego Bay and Kingston airports. The AAJ continues to own both airports, but has divested operational responsibility for the Montego Bay and Kingston airports through public bidding processes in 2003 and 2017, respectively.

The Airports (Economic Regulation) Act of 2002 establishes the framework for the economic regulation of Jamaica’s airports and governs the provision of services or facilities at the international airports for the purposes of landing, parking, fueling, servicing or taking off of aircraft and handling passengers, baggage and cargo at the airport. The Act allows the MTM to levy airport improvement fees, and authorizes the JCAA to regulate airport charges and deal with public interest issues such as anti-competitive behavior and accounting transparency. Airport operators must submit an application for permission to levy airport charges on airlines and passengers to the JCAA. Airport operators permitted to levy airport charges must also routinely provide the JCAA with their annual accounts and schedules of airport charges.

The regulatory agencies overseeing the operation of airports and airport concessions are the MTM, JCAA and the AAJ.

The MTM’s primary responsibility is Jamaica’s land, marine and air transport and their related infrastructure. The MTM has regulatory responsibility for the safety of all modes of transportation, whether publicly or privately operated. This includes airports, aerodromes and airline operators. The following agencies and departments fall under the MTM and oversee the operation of airports and airport concessions:

On April 3, 2003, MBJA entered into a 30-year concession agreement with the AAJ, which began on April 12, 2003, to operate the Montego Bay airport. MBJA pays both monthly and annual concession taxes to the Jamaican government to allow it to use and develop the assets subject to the concession.

On October 10, 2019, PACKAL entered into a 25-year concession agreement with the AAJ, with a single possible five-year extension, to operate the Kingston airport. PACKAL pays a monthly concession fee of 62.01% of total aeronautical and non-aeronautical revenues to the Jamaican government to allow it to use and develop the assets.

At the end of each concession’s term, MBJA and PACKAL, respectively, will transfer these concession assets back to the AAJ. See “Item 5, Operating and Financial Review and Prospects – Overview – Operating Costs – Concession Taxes – Jamaican Concession Taxes.”

Under the terms of each of the Concession Agreements, the concession holder is responsible for the maintenance, operation and development of the airport, including the management of day-to-day operations in keeping with specific performance criteria and prescribed international standards, in order to render airport, complementary and commercial services. As such, each of MBJA’s and PACKAL’s general obligations as concession holder are thus to: operate and manage the airport in compliance with applicable law; provide airport, complementary and commercial services; report on accounts, financial records, traffic and performance levels; and carry out the capital investments proposed in the Capital Development Program and maintain and develop the tangible concession assets.

The AAJ remains the owner of the land upon which the airport is sited, as well as the physical assets subject to the concession. The concession holder is required to maintain and manage the airport concession with the intent that AAJ or a successor operator would be able to take over the operation and management of the airport business at any time, including through the use of all reasonable endeavors to ensure that the AAJ or such other successor airport operator would have immediate access to all of its airport employees and assets. Following a termination of the concession, the concession holder is obligated to return to the AAJ the facilities and services ordinarily provided or reasonably incidental to the operation of the airport.

Under the Concession Agreements, the concession holder requires the consent of the MTM and the AAJ if it wishes to expand its services into any business, activity, facility or service not permitted by the definition of “core airport services” in the Concession Agreement, which consent shall not be unreasonably withheld.

As owner of the concession assets, the AAJ is entitled, upon seven days’ notice (or sooner in case of emergency) and for so long as may be required, to expel the concession holder from all or part of the airport site or to take over or take steps to carry on the operation and management of the airport or provision of airport services when:

Upon a step-in by the AAJ, the AAJ will account to the concession holder for any revenues collected during the step-in period. Where the AAJ exercises its right to step in pursuant to any uncured concession holder event of default or because traffic at the airport will be materially disrupted and concession holder is unable or unwilling for any reason to resolve the disruption, the concession holder is required to bear all costs and expenses associated with the AAJ exercise of step-in, but not consequential losses. The concession holder is not liable for costs if there is step-in by the AAJ because of a material threat to national security.

The AAJ may terminate the Concession Agreement with the concession holder upon an event of default on the part of the concession holder, after which the AAJ must provide notice of its intention to serve a written termination notice and conduct up to 30 days of good-faith consultations to avoid termination, during which the concession holder fails to cure the event of default. Regardless of cause for termination, a termination fee is due to the concession holder upon termination or revocation of the concession, and the Concession Agreement limits the AAJ’s liability to such termination fee. However, the payment terms of the termination fee depend upon the cause: upon an event of default on the AAJ’s part, the termination fee is payable by the AAJ within three months, with an option to extend for up to twelve months with default interest, while if the event of default is on the concession holder´s part, the termination fee is payable by the AAJ in installments within twelve months.

The Jamaican government may grant new concessions to manage, operate, develop and construct airports. In the Concession Agreement, the concession holder acknowledges that the AAJ may also wish, at the expiry or termination of the concession period, to invite persons to tender for the right to provide all or some of the airport services at the airports. The concession holder may participate in such tenders, if interested, except to the extent that there has been an event of default attributable to the insolvency of the concession holders shareholders, in which case the concession holder would be disqualified from participating. However, in preparation for such tendering process, and regardless of whether the concession holder intends to participate in the tender, the concession holder would be obligated to provide access to employees, assets, books and records related to the airport business, and may not in any way prejudice or frustrate the transfer of the airport business. The Concession Agreement sets out the hand back procedures to be observed as the end of the concession period approaches and the dispute resolution mechanism for addressing objections by either party regarding the hand back. Under the agreement, the concession holder commits to assisting and advising the AAJ or any successor operator (subject to payment of reasonable remuneration and reasonable costs and expenses) in providing and operating the airport for up to six months following completion of the handover, and must post a bond equivalent to the cost of the handback works for the six-month period.

In Jamaica, charges levied on airlines and passengers are regulated by the JCAA using a price cap mechanism based on a forecast return on assets. Permission for any increase in the levy of regulated charges, which include passenger charges, aircraft landing and parking charges, passenger walkway charges and airport security charges, must be granted by the JCAA. The first review period began with the concession on April 12, 2003 and concluded in November 2014 with the determination of new charges effective April 1, 2015. Thereafter, regulated aeronautical charges will be reviewed every five years. The following table sets the maximum rates for each of our Jamaican airports from 2020-20224:

According to the Airport Economic Regulation Act, that governs the tariff, if exceptional circumstances arise during a five-year period which may justify reconsideration of airport charges, the approved airport operator may submit an application to the Authority which shall, after conducting an investigation consider that application, taking into account the provisions in the concession agreement and could adjust the price cap or the capital expenditures.

The Airports (Economic Regulation) Act and the related Airport Expansion Fund Agreement require the airlines operating at the Montego Bay airport to collect the AIF fee of U.S.$5.00 per embarking international passenger, on behalf of the Government of Jamaica and to deposit the fees on a monthly basis in a trust account controlled by the MTM. Subject to the MTM’s approval, MBJA may use these funds for additional capital investments not included in the Capital Development Program, as well as for interest expenses relating to the financing thereof. MBJA is required to commit to such new investments in exchange for the right to use the AIF funds. The MTM approval of collection of AIF funds at the Montego Bay airport was renewed on February 25, 2015 for the period ending April 11, 2030, unless otherwise revoked. Having already completed all projects approved for funding by the AIF to date, MBJA is currently in discussions with MTM for further approval to fund capital investment projects from AIF funds collected after April 11, 2015.

The Airports (Economic Regulation) Act and the related Airport Expansion Fund Agreement require the airlines operating at the Kingston airport to collect the AIF fee of U.S.$10.00 per embarking international passenger, on behalf of the Government of Jamaica and to deposit the fees on a monthly basis in a trust account controlled by the MTM. All AIFs collected and all funds standing to the credit of the Expansion Account shall be the sole property and funds of the Government. The MTM approval of collection of AIF funds at the Kingston airport is valid from October 10, 2019 to December 31, 2030, unless otherwise revoked. PACKAL has no right or power to any funds collected with respect to the Expansion Account or the funds held to the credit thereof.

See “Item 5, Operating and Financial Review and Prospects – Overview – Classification of Revenues – Aeronautical Revenues.”

MBJA was incorporated as a limited liability company to enter into and carry out the terms of the concession with respect to the development, financing, management and operation of the Montego Bay airport. MBJA’s constitutive documents bar the transfer of shares in MBJA to passenger or cargo airlines or persons broadly connected to them, other than AAJ or the Jamaican government. Under the shareholders’ agreement between DCA and Vantage, any transfer of MBJA shares to non-affiliates is subject to a right of first refusal.

PACKAL was incorporated as a limited liability company to enter into and carry out the terms of the concession with respect to the development, financing, management and operation of the Kingston airport.

Pursuant to the regulations under the Jamaican Civil Aviation Act, airport operators must report on compliance with operating procedures and safety measures. MBJA and PACKAL, as airports operators, are required to report to the JCAA any changes in conditions or other hazardous circumstances or occurrences at the airport, including: any reduction in the level of service or closure of any part of the movement area; any obstacle, obstruction or hazard; and any other condition that could affect aviation safety, as well as and what precautions are deemed warranted. MBJA and PACKAL are also obligated to provide reports to the JCAA on the results of internal audits of its safety management system, including inspections of the airport facilities and equipment and of the airport operator’s own administrative functions.

Both airports must report to the Jamaican government the number of passengers paying AIF and the amount of each transfer of AIF made during the previous month, as well as the payments related to the concession fee.

As a Jamaican registered companies, MBJA and PACKAL are also required to file an annual report with the Companies Office of Jamaica reporting any changes in the ownership or management structure and notifying the registrar of any share transactions and changes in the value of shares during the prior year.

Operations at our Jamaican airports are subject to Jamaican laws and regulations relating to the protection of the environment. The major environmental law applicable to these operations is the National Resources Conservation Authority Act, which establishes the National Resources Conservation Authority (now part of the National Environmental Protection Agency) and its subsidiary legislation and regulations. Under the act, regulations have been enacted concerning discharge of pollutants into Montego Bay Marine Park’s waters, the regulating of air emissions, discharge and treatment of wastewater and sludge, safe storage of fuels and responses to industrial emergencies involving hazardous materials.

Other environmental laws of relevance to our Jamaican airports’ operations are: the Noise Abatement Act, aimed at controlling noise (but with no specific reference to aeronautical noise), the Beach Control Act, addressing access to the shoreline; the Watersheds Protection Act, addressing water resource and soil conservation practices; and the Wild Life Protection Act, specifying protected species of fauna. Other related regulations are the Town and Country Planning Act, Public Health Act, Garbage Collection and Disposal Regulations, National Solid Waste Management Act and the Water Resources Act and Clean Air Act. In addition, our airports are also subject to common law principles of tort liability in the event of a nuisance claim resulting from environmental factors.

The legal framework of environmental liability applicable to our Jamaican airports’ operations is generally outlined above. The level of environmental regulation in Jamaica has increased in recent years, and the enforcement of environmental laws is becoming more stringent. For example, the National Solid Waste Management Act and the Water Resources Act each carry certain penalties of JMD1 million (approx. U.S.$7,747). We expect this trend to continue, but we do not expect that compliance with Jamaican environmental laws currently in effect will have a material adverse effect on our Jamaican airports’ results of operations or our financial condition. 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.

We have seventeen subsidiaries in Mexico: one operating subsidiary for each of our twelve Mexican airports; two subsidiaries (SIAP and CORSA) that provide administrative and operational services; one subsidiary (PCP) that provides parking services across our twelve Mexican airports; one non-profit foundation (Fundación GAP); and one operating subsidiary, (ADP), for hotel infrastructure and other commercial services that has thus far remained inactive. We have one Spanish subsidiary (DCA) that holds our 74.5% stake in our Jamaican operating subsidiary (MBJA) for the Montego Bay airport, and one Jamaican subsidiary, PAC Kingston Airport Limited (“PACKAL”), that holds our concession for the Kingston airport since September 2018. We also have a holding company subsidiary in Brazil, GA del Pacífico Participações do Brasil LTDA, established in 2010 but thus far remaining inactive and with no capital contributions.

Our corporate headquarters are located in Guadalajara, Jalisco. We lease the office space for our corporate headquarters, located on the third, fifth and sixth floors of Torre Pacífico, from Guadalajara World Trade Center. In addition to our corporate offices in Guadalajara, we also lease office space in Colonia Polanco, in Mexico City from third parties.

Pursuant to the Mexican National Assets Law (Ley General de Bienes Nacionales), all real estate and fixtures in our Mexican airports are owned by the Mexican government. Each of our Mexican 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 50 years. The option to extend a concession is subject to our acceptance of any changes to such concession that may be imposed by the SCT and our compliance with the terms of our current concessions. Upon expiration of our Mexican concessions, the concession assets automatically revert to the Mexican government, 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, except for those caused by normal wear and tear.

Pursuant to MBJA’s Concession Agreement, the AAJ remains the owner of the land upon which the Montego Bay airport is sited, as well as the physical assets subject to the concession. MBJA’s concession for the Montego Bay airport is scheduled to terminate in 2033. Upon expiration of the Montego Bay airport concession, MBJA is obligated to hand back to the AAJ the facilities and services ordinarily provided or reasonably incidental to the operation of the airport.

Pursuant to PACKAL Concession Agreement, the AAJ remains the owner of the land upon which the Kingston airport sits, as well as the physical assets subject to the concession. PACKAL´s concession for the Kingston airport is scheduled to terminate in 2044. Upon expiration of the Kingston airport concession, PACKAL is obligated to hand back to the AAJ all the assets, including all the improvements made to the airport facilities during the term of the concessions, will automatically revert in favor of AAJ and the facilities and services ordinarily provided or reasonably incidental to the operation of the 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. Our Mexican airports carry a general Ps.3.0 billion insurance policy covering damage to our assets and infrastructure and a U.S.$500.0 million insurance policy covering personal and property damages to third parties. Our Mexican airports are covered by a Ps.500.0 million insurance policy covering damage to our property resulting from terrorist acts and a U.S.$150.0 million insurance policy covering personal and property damage to third parties resulting from terrorist acts. The Montego Bay airport carries a U.S.$351.0 million insurance policy covering property damage and business interruptions and losses and a U.S.$100.0 million insurance policy covering damage resulting from any single terrorist event. The Montego Bay airport also carries a U.S.$750.0 million annual insurance policy covering personal and property damage to third parties. The Kingston airport carries a U.S.$750.0 million insurance policy covering property damage and business interruptions and losses bodily injury. The Kingston airport also carries a U.S.$1.5 million annual insurance policy for loss or damage as a result of the death and/or personal injury suffered by any employee.

The following discussion should be read in conjunction with, and is entirely qualified by reference to, our audited consolidated financial statements prepared in accordance with IFRS, as issued by IASB, and the notes to those financial statements, which are included elsewhere in this annual report. It does not include all of the information included in our audited consolidated financial statements. You should read our audited consolidated financial statements to gain a better understanding of our business and our historical results of operations.

As a result of our taking over control of NMIA through our subsidiary, PACKAL, on October 10, 2019, our consolidated financial and operating information for the fiscal year ended December 31, 2019 includes the consolidation of PACKAL from October 10, 2019. Therefore, financial and operating information for the fiscal year ended December 31, 2019 may not be directly comparable with financial and operating information for prior fiscal years.

We operate twelve airports in the Pacific and Central regions of Mexico pursuant to concessions granted by the Mexican government and two airports in Jamaica pursuant to concessions granted by the Jamaican government. The 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, in 2017, 2018 and 2019, approximately 67.0%, 67.3% and 65.0%, respectively, of our total revenues were derived from aeronautical services (in 2017, 2018 and 2019 aeronautical services represented 74.9%, 74.9% and 73.7%, respectively, of the sum of our aeronautical and non-aeronautical revenues). Changes in our revenues from aeronautical services are principally driven by the passenger and cargo volumes 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 SCT and JCAA, respectively. The system of price regulation that applies to our aeronautical revenues allows us to charge up to a maximum rate for each unit of traffic volume (which is measured in workload units) at each airport. Thus, increases in aeronautical services, such as passenger and cargo volume, and therefore the number of workload units that we handle, generate greater revenues.

We also derive revenue from non-aeronautical activities, principally related to the commercial services offered at our airports, such as the leasing of space to restaurants, retailers and service providers. Revenues from non-aeronautical activities are not subject to the system of price regulation established by the SCT and JCAA, respectively. Thus, our non-aeronautical revenues are primarily affected by the passenger volume at our airports and the mix of commercial services offered at our airports, the contracts that we have with the providers of those commercial services and our ability to increase the rates we charge to those service providers. While we expect that aeronautical revenues will continue to represent a majority of our future aeronautical and non-aeronautical revenues, growth of our revenues from commercial activities generally has exceeded, and we expect will continue to exceed, the growth rate of our aeronautical revenues. As a result, in recent years we have completed renovation projects to improve the product mix of retail stores in the commercial areas at our Mexican airports. We also expect to continue renegotiating agreements with terminal tenants to be more consistent with market practices and to recover the rights to certain non-aeronautical businesses at our airports previously or currently operated by third parties and developing new sources of non-aeronautical revenues through the direct operation of certain businesses such as our VIP lounges, advertising, convenience stores and car parking lots, among others. Also, see “Item 4, Information on the Company – Business Overview – Our Sources of Revenues – Non-Aeronautical Services – Recent Expansion and Development of Commercial Areas”.

Traffic at our airports may be adversely affected by increased levels of competition as a result of the attractiveness, affordability and accessibility of competing tourist destinations in Mexico, such as Acapulco and Cancun, or elsewhere, such as Hawaii, Puerto Rico, Florida, Cuba, the Dominican Republic and other Caribbean islands and destinations in Central America. In addition, we expect increased competition as a result of the government granting new concessions or amending existing permits for other airports that may compete with our airports. For more information, see “Item 3, Key Information – Risk Factors – Risks Related to Our Operations – Competition from other tourist destinations could adversely affect our business” and “Item 3, Key Information – Risk Factors – Risks Related to the Regulation of Our Business – The Mexican and Jamaican governments could grant new concessions that compete with our airports. ”

In December 2019, a novel strain of coronavirus, known as COVID-19 was reported to have surfaced in Wuhan, Hubei Province, China. In January 2020, COVID-19 spread to other countries, including the United States, and efforts to contain the spread of COVID-19 intensified. The COVID-19 outbreak has also led to government-imposed travel restrictions, flight cancellations, and a marked decline in passenger demand for air travel. The potential for a period of significantly reduced demand for travel has and will likely continue to result in significant lost revenue. See “Item 3 – Risk Factors – Risks Related to Our Operations – Developments relating to the outbreak of COVID-19 may have a material adverse impact on our financial conditions or results of operations control.” As a result of these or other conditions beyond our control, our results of operations could be volatile and subject to rapid and unexpected change. Accordingly, we have:

These actions seek to manage our liquidity levels. As a result of these actions, the new Ordinary Shareholders’ Meeting is scheduled for July 1, 2020. We have no other debt maturities coming due in 2020. The only debt maturity due in 2020 corresponded to the “GAP 15” debt securities and was paid on February 14, 2020. See “Item 5, Recent Developments – Issuance of GAP 20 Bond Certificates.”

As of April 30, 2020, the balance of our cash position was Ps.12.2 billion, of which 65.0% was dollar-denominated in order to fulfill our commitments with our employees, suppliers and creditors. Consequently, we anticipate that we will be able to meet all financial and operational obligations with our current cash and equivalents.

In addition, we are complying with the health and safety protocols established by the authorities and agencies of each country in which we operate and are monitoring the developments of the COVID-19 outbreak closely. We have taken steps and implemented policies to safeguard our employees, businesses and communities surrounding our operations from the threats posed by the COVID-19 pandemic.

While we are expecting a negative impact to our operational and our financial results due to the COVID-19 outbreak, we do not foresee a risk to the overall continuity of our business. We have carried out a preliminary analysis of the financial results in the short, medium and long term, and we have not identified any significant asset deterioration. Nevertheless, the demand for travel may decrease more than expected, which could magnify the impact of the COVID-19 outbreak. Accordingly, we will continue to monitor and analyze the situation closely. We do not expect interruptions to our business. We have the ability to continue as a going concern and do not foresee the cancellation of our operations at any of our airports.

We are unable to predict with certainty the impact of the COVID-19 outbreak on our business, clients, suppliers and employees, as well as on international air travel. We are also unable to predict the degree to which the COVID-19 outbreak may impact air travel demand in the domestic regions in which we operate, or whether continuous travel restrictions, as well as general population fears with respect to air travel, may have a materially adverse effect on our business and on our operating results. The global and domestic impact of the COVID-19 outbreak on our business will depend on its duration and its impact on the economy of Mexico, United States, Canada, Jamaica and Europe.

On February 20, 2017, the Government of Jamaica issued an invitation to prepare and submit a prequalification application to participate in a bidding process for a public private partnership to operate the Norman Manley International Airport in Kingston, Jamaica. We timely submitted our prequalification application and, after participating in a competitive bidding process with seven other international airport operators, we were selected for the concession.

On October 10, 2018, PAC Kingston Airport Limited, a subsidiary of ours, signed a concession agreement with the AAJ, a statutory body established under the Airports Authority Act, to operate, administer and develop the Norman Manley International Airport in the city of Kingston, Jamaica. The rights and obligations of the parties under the concession agreement were subject to the satisfaction of certain conditions precedent.

On October 10, 2019, the commencement date, the AAJ granted us the exclusive right to carry out the airport improvements and enhancements set forth in the agreement, operate the airport, and collect and receive the aeronautical revenues and the non-aeronautical revenues resulting from such services. In exchange for the concession, we paid the IFC U.S.$2.1 million on November 7, 2018, and must pay the AAJ a concession fee equal to 62.01% of the airport’s gross revenues as well as an additional U.S.$5.0 million which we paid on October 8, 2019. We took control of NMIA on October 10, 2019.

Our operation of the airport business is contingent on our ability to meet certain performance, satisfaction and environmental standards. Our failure to meet such standards may require us to pay certain damages to the AAJ or could lead to termination of the concession agreement.

In addition, the concession agreement allows the AAJ to terminate the concession agreement under certain circumstances, including certain events of default, a force majeure event and certain material adverse government actions, all as defined in the concession agreement. The term of the concession agreement is twenty-five years and may be extended for an additional 5-year period. The concession agreement is governed by and construed in accordance with the laws of Jamaica.

Because tariffs in Mexico are invoiced taking into account the average of the exchange rate for the 30 days prior to the date of a flight, a significant depreciation of the peso during the final two months of any year could result in our exceeding our maximum rates, which would be a violation of our concession and may require us to issue rebates to airline customers to avoid exceeding our maximum rates. As long as we are able to ensure that our revenues do not exceed our maximum rates, a depreciation in the peso has a positive effect on our revenues from a commercial and aeronautical operations perspective while an appreciation in the peso has a negative effect. Tariffs on international passengers and international flights and some of our contracts with commercial services providers are denominated in U.S. dollars, but only in the case of charges for international passengers and international flights are charges invoiced and collected in Mexican pesos. Therefore, depreciation in the peso against the U.S. dollar results in us collecting more pesos than before the depreciation, whereas appreciation of the peso results in us collecting fewer pesos, which may result in lower commercial revenues in the future, especially if the appreciation continues unabated or surpasses historic levels of appreciation. See “Item 3, Key Information – Risk Factors – Risks Related to Mexico – Depreciation or fluctuation of the peso relative to the U.S. dollar could adversely affect our results of operations and financial condition.

In 2017, the peso appreciated, reaching Ps.19.74 per U.S. dollar on December 31, 2017. In 2018, the peso/U.S. dollar exchange rate fluctuated, reaching an appreciation to Ps.19.66 per U.S. dollar on December 31, 2018. In 2019, the peso appreciated, reaching Ps.18.84 per U.S. dollar on December 31, 2019. During 2020, the peso has depreciated against the U.S. dollar, reaching a historical high of Ps.25.13 on March 24, 2020. On May 22, 2020, the exchange rate was Ps.23.2962 per U.S. dollar.

On February 13, 2020, we issued Ps.3.0 billion in new “GAP 20” debt securities on the Mexican market. Proceeds from the issuance were allocated for liability management and to finance investments set forth in our Master Development Programs for 2020. Interest is payable every 28 days at a variable rate of TIIE-28 plus 17 basis points. Principle on these bond certificates will be due at maturity on February 16, 2025.

On February 14, 2020, we paid our “GAP 15” debt securities with Ps.2.2 billion in proceeds from the new issuance.

On April 13, 2020, we utilized a credit line from Scotiabank for Ps.1.0 billion, at a 15-month rate of TIIE-28 plus 100 basis points and principle payment upon maturity and a structuring fee of 40 basis points. The proceeds will be used for corporate purposes. On May 15, 2020, we utilized a credit line from BBVA for Ps.1.0 billion, at a 24-month fix rate of 6.99% and principle payment upon maturity and a structuring fee of 40 basis points. The proceeds will be used for capital expenditures and corporate purposes.

On May 15, 2020, MBJA signed a credit line from Bank of Nova Scotia for U.S.60.0 million, at a 5-years of Libor-1M plus 310 basis points and principle payment upon maturity and an upfront fee of 50 basis points. The proceeds will be used for capital expenditures and corporate purposes.

The majority of the passenger traffic volume in our Mexican airports is made up of domestic passengers. In 2017, 2018 and 2019 approximately 62.9%, 64.1% and 63.9% of the terminal passengers using our Mexican airports were domestic. The total number of domestic terminal passengers for 2019 increased 7.42% as compared to 2018, and the total number of domestic terminal passengers in 2018 increased 13.2% as compared to 2017. In addition, of the international passengers traveling through our Mexican airports, approximately 89.7% traveled on flights originating in or departing to the United States during 2019, as compared to 88.1% and 88.8% in 2018 and 2017, respectively. 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.

In 2019, we had 43.6 million terminal passengers (27.9 million domestic and 15.7 million international), of which 89.4 thousand were on general aviation flights, and an additional 126.4 thousand were transit passengers. Approximately 37.4% of our transit passengers were handled at Tijuana International Airport.

During 2019, the CBX served 2.9 million passengers, who are considered domestic passengers under our internal recording system but are reported as international passengers for market disclosure purposes. Therefore, the proportion of international passengers was 32.5% in our Tijuana airport.

The majority of the passenger traffic volume in Jamaica is made up of international passengers. In 2019, approximately 99.8% of the terminal passengers using our Jamaican airports were international. Additionally, of the international passengers traveling through the Montego Bay and Kingston airport, approximately 70.3% and 70.0%, respectively, traveled on flights originating in or departing to the United States during 2019.

In 2019, MBJA had approximately 4.7 million terminal passengers, of which approximately 17.3 thousand were on general aviation flights and an additional 58.6 thousand were transit passengers.

From October 10, 2019 through December 31, 2019, NMIA had approximately 408.7 thousands terminal passengers, of which approximately 1.9 thousand were on general aviation flights and an additional 2.5 thousand were transit passengers.

The following table sets forth certain operating and financial information relating to certain of our revenues and passenger and cargo volumes in Mexico and Jamaica for the years indicated:

	Year ended December 31,
	2017			2018			2019(1)
Macroeconomic indicators:
Change in Mexican GDP (2)		2.1	%		2.0	%		(0.1	)%
Change in Mexican CPI (3)		6.8	%		4.8	%		2.8	%
Change in U.S. GDP (4)		2.3	%		2.6	%		2.1	%
Change in U.S. CPI (5)		2.1	%		1.9	%		2.3	%
Passenger volumes (thousands of passengers) (6) :
Domestic terminal passengers in Mexico		22,932.8			25,951.3			27,872.3
International terminal passengers in Mexico		13,550.2			14,514.2			15,719.9
Mexican total terminal passengers		36,483.0			40,465.5			43,592.2
Domestic terminal passengers in Jamaica		8.9			8.5			12.4
International terminal passengers in Jamaica		4,216.7			4,474.0			5,104.0
Jamaican total terminal passengers		4,225.6			4,482.5			5,116.4
Total terminal passengers (thousands)		40,708.6			44,948.0			48,708.6
Cargo volumes (thousands of cargo units) (6) :
Cargo units in Mexico		2,029.3			2,138.2			2,145.6
Cargo units in Jamaica		69.1			74.8			92.9
Total cargo units		42,807.0			47,161.0			50,947.1
Other operating and financial information:
Change in total terminal passengers		11.4	%		10.4	%		8.4	%
Change in total workload units		11.0	%		10.2	%		8.0	%
Aeronautical revenues (millions of pesos)	Ps.	8,280.5		Ps.	9,499.1		Ps.	10,547.7
Change in aeronautical revenues		17.7	%		14.7	%		11.0	%
Aeronautical revenues per workload unit	Ps.	193.4		Ps.	201.4		Ps.	207.0
Change in aeronautical revenues per workload unit		6.0	%		4.1	%		2.8	%
Non-aeronautical revenues (millions of pesos)	Ps.	2,772.9		Ps.	3,183.5		Ps.	3,771.5
Change in non-aeronautical revenues		15.8	%		14.8	%		18.5	%
Non-aeronautical revenues per terminal passenger	Ps.	68.1		Ps.	70.8		Ps.	77.4
Change in non-aeronautical revenues per terminal passenger		4.0	%		4.0	%		9.3	%

We classify our revenues into three categories: (i) revenues from aeronautical services; (ii) revenues from non-aeronautical services; and (iii) revenues from improvements to concession assets. Historically, a majority of our revenues have been derived from aeronautical services; however, with the inclusion of revenues from improvements to concession assets, revenues from aeronautical services and from non-aeronautical services will account for a smaller percentage of total revenues. For example, in 2017, 2018 and 2019 with the inclusion of revenues from improvements to concession assets, aeronautical revenues represented 67.0%, 67.3% and 65.0%, respectively, of total revenues. In 2017, 2018 and 2019, with the inclusion of revenues from improvements to concession assets, non-aeronautical revenues represented 22.4%, 22.5% and 23.2%, respectively, of total revenues. Aeronautical revenues and non-aeronautical revenues, however, represented 74.9% and 25.1%, respectively, of the sum of aeronautical and non-aeronautical revenues in 2017, 74.9% and 25.1%, respectively, of the sum of aeronautical and non-aeronautical revenues in 2018, and 73.7% and 26.3%, respectively, of the sum of aeronautical and non-aeronautical revenues in 2019. In 2017, 2018 and 2019, revenues from improvements to concession assets accounted for 10.6%, 10.2% and 11.8%, respectively, of our total revenues.

Our revenues from aeronautical services are 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 non-essential activities) 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 revenues from non-aeronautical services are not subject to price regulation under our maximum rates and generally include revenues earned from car parking, leasing of space in our airports to airlines and complementary service providers (for first class/VIP lounges and similar non-essential activities), rental and royalty payments from third parties operating stores, 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 developers. Additionally, we derive revenues from recovery of costs that are included in our non-aeronautical services.

Our revenues from improvements to concession assets represent the fair value of the additions and upgrades to the concession that we undertake in accordance with our Master Development Programs in Mexico and our Capital Development Programs in Jamaica. In exchange for making those additions and upgrades, the governments of Mexico and Jamaica grant us the right to obtain benefits for services provided using those assets, which are recognized as intangible assets. This represents an exchange of dissimilar goods or services rather than an actual cash exchange since we receive an intangible asset for the construction services we provide. Through a bidding process, we hire third parties to make the additions and upgrades. The amount of revenues for these services is equal to the costs of making the additions and upgrades since those values represent the fair value of the goods or services received as there is no profit margin stemming from these construction services. Although these revenues do not generate actual cash inflows, IFRS requires that they be recorded given that revenue generation is inherent in an exchange of dissimilar services, similar to a barter transaction. These revenues do not have a cash impact on our results.

For a detailed description of the components of our revenue categories, see “Item 4, Information on the Company – Business Overview – Our Sources of Revenues.”

The following table sets forth our revenues from aeronautical services for the years indicated:

Under the relevant agreements with airlines, our specific prices are structured such that the substantial majority of our aeronautical revenues are derived from passenger charges, and we expect that this will continue to be the case in any future agreements. We earn passenger charges from each departing passenger at our airports (except certain exclusions in each of Mexico and Jamaica, described above under “Item 4, Information on the Company – Business Overview – Our Sources of Revenues – Aeronautical Services – Passenger Charges”). In 2017, 2018 and 2019, passenger charges represented 81.5%, 81.6% and 81.4%, respectively, of our aeronautical services revenues and 54.6%, 54.9% and 52.9%, respectively, of our total revenues (in 2017, 2018 and 2019 passenger charges represented 61.1%, 61.1% and 60.0%, respectively, of the sum of aeronautical and non-aeronautical revenues).

The following table sets forth the number of passengers paying passenger charges per airport for the years indicated:

The system of price regulation applicable to our aeronautical revenues in Mexico establishes a maximum rate in pesos for each Mexican airport for each year in a five-year period, which is the maximum annual amount of revenues per workload unit that we may earn at that airport from aeronautical services. As of December 31, 2014, the SCT determined the maximum rates for our airports for each year through December 31, 2019. Our aeronautical revenues are determined largely by the number of workload units at each of our airports, which is primarily driven by passenger traffic levels, multiplied by the value of the maximum tariffs approved by the SCT. In addition, aeronautical revenues differ among our airports to the extent passenger traffic levels differ among these airports. See “Item 4, Information on the Company – Regulatory Framework – Mexican Aeronautical Services Regulation” for a description of our maximum rates and the rate-setting procedures for future periods.

Our Mexican concessions provide that our maximum rates must be adjusted on an annual basis as determined by the efficiency factor and by changes in inflation. See “Item 4, Information on the Company – Regulatory Framework – Mexican Aeronautical Revenues Regulation – Methodology for Determining Future Maximum Rates.” Under the regulatory system applicable to our Mexican aeronautical revenues, we can set the specific price for each category of aeronautical services every six months (or more frequently if accumulated inflation since the last adjustment exceeds 5%), as long as the total aeronautical revenues per workload unit each year at each of our airports do not exceed the maximum rate set for such airport for that year. Although the SCT may in some cases authorize an increase in our maximum rates, we must negotiate with our principal airline customers the specific rates applicable to each aeronautical activity. As a result, we are not always able to increase prices up to the amount of maximum rates.

Aeronautical revenue per workload unit is an indicator that is calculated by dividing total aeronautical revenues by the workload units for a given period. This indicator is affected annually, except for years in which the new maximum tariffs are set, by:

For the period from January 1, 2015 until December 31, 2019, the efficiency factor is 0.70%. Our weighted average maximum tariffs, as determined by the SCT (prior to inflation adjustments using the Mexican PPI), increased 2.0% in 2015, decreased 0.7% in 2016, decreased 0.7% in 2017, decreased 0.7% in 2018 and decreased 0.7% in 2019, mainly as a result of the efficiency factor. At the same time, the Mexican PPI, excluding petroleum, increased by 4.4%, 6.8% and 0.6% in 2017, 2018 and 2019 respectively. Our weighted average maximum tariffs as adjusted by the efficiency factor and the Mexican PPI, excluding petroleum, increased 3.8% in 2017, increased 6.2% in 2018 and increased 0.2% in 2019. The total workload units at our Mexican airports were 38.5 million, 42.6 million and 45.7 million in 2017, 2018 and 2019, respectively, representing an increase of 11.3% in 2017, an increase of 10.6% in 2018, and an increase of 7.4% in 2019. Accordingly, when calculating aeronautical revenue per workload units, the result will fluctuate depending on the relative changes in the aforementioned factors. During 2017, 2018 and 2019, average aeronautical revenues per workload unit were Ps.193.4, Ps.201.4 and Ps.207.0 respectively, which represented an increase of 6.0%, an increase of 4.0% and an increase of 2.8% in 2017, 2018 and 2019, respectively. These increases resulted mainly from increases in traffic and tariffs due to adjustments for inflation.

On December 12, 2019, the SCT set new airport maximum rates for the five-year period from January 1, 2020 through December 31, 2024 expressed in constant pesos as of December 31, 2017. On January 2, 2020, these rates were published in the Official Gazette of the Federation (Diario Oficial de la Federación). The maximum rates for each of our airports under the Master Development Programs went into effect as of January 1, 2020, and were adjusted by inflation using the Mexican PPI.

Historically, we have set our prices for regulated services at our Mexican airports as close as possible to the maximum rates allowed in any given year, and we expect to pursue this pricing strategy in the future. However, there can be no assurance that we will be able to collect virtually all of the revenues we are entitled to earn from services subject to price regulation in the future or that we will not be sanctioned in case we exceed our maximum rates. In prior years, in order to ensure our compliance with the maximum rate at a particular Mexican airport when the possibility of exceeding that maximum rate arose, we have taken actions in the latter part of the year, such as reducing our specific prices for aeronautical services and offering discounts or rebates, to ensure our compliance with the applicable maximum rate. For a discussion of risks related to our ability to set specific prices, see “Item 3, Key Information – Risk Factors – Risks Related to the Regulation of Our Business – We provide a public service regulated by the governments of Mexico and Jamaica, and our flexibility in managing our aeronautical activities is limited by the regulatory environments in which we operate ” and “Item 3, Key Information – Risk Factors – Risks Related to the Regulation of Our Business – If we exceed the maximum rate at any Mexican airport at the end of any year, we could be subject to sanctions.”

In Jamaica, revenues from passenger charges, aircraft landing and parking charges, airport security charges and passenger walkway charges are regulated by the JCAA. See “Item 4, Information on the Company – Business Overview – Our Sources of Revenues – Aeronautical Services.”

The system of price regulation applicable to our Jamaican airports’ aeronautical revenues establishes maximum rates in U.S. dollars for a five-year period for charges levied on airlines and passengers using a price cap mechanism. Permission for any increase in the levy of regulated charges, which include passenger charges, aircraft landing and parking charges, passenger walkway charges and airport security charges, must be granted by the JCAA.

For MBJA, the airport charges were established with the concession on April 12, 2003. The first review period was concluded in November 2014 with the determination of new charges effective April 1, 2015. Thereafter, regulated aeronautical charges will be reviewed every five years. Aeronautical charges were adjusted by 2.2% and 2.1% in 2018 and 2019, respectively. In 2020, the new maximum rates for the five-year period from 2020-2024 went into effect as of January 1, 2020.

For NMIA, maximum rates for the five-year period from 2020-2024 will go into effect during 2020. Thereafter, regulated aeronautical charges will be reviewed every five years. The new maximum rates for the five-year period from 2020-2024 went into effect as of April 1, 2020.

See “Item 4, Information on the Company – Regulatory Framework – Jamaican Aeronautical Services Regulation” for a description of MBJA’s and PACKAL’s maximum regulated charges and the procedures for setting maximum regulated charges for future periods.

Non-aeronautical services historically generate a smaller portion of our total revenues as compared to aeronautical services. Non-aeronautical revenues represented 22.4%, 22.5% and 23.2% of total revenues in 2017, 2018 and 2019, respectively. Non-aeronautical revenues per terminal passenger were Ps.68.1, Ps.70.9 and Ps.77.4 in 2017, 2018 and 2019, respectively. None of our revenues from non-aeronautical services are subject to price regulation under our maximum-rate price regulation systems.

Our revenues from non-aeronautical services are principally derived from commercial activities. We divide non-aeronautical commercial activities into revenues from businesses operated by third parties and revenues from businesses operated directly. Businesses operated by third parties include leasing of space in our airports to airlines and complementary service providers (for first class/VIP lounges and similar non-essential activities) and rental and royalty payments from third parties operating stores and providing commercial services at our airports, such as timeshare developers, retail stores, food and beverage providers, car rental agencies and duty-free store operators, as well as fees collected from other miscellaneous sources, such as vending machines. Businesses operated directly by us include car parking, advertising, VIP lounges and convenience stores. Additionally, we derive revenues from recovery of costs which are included in our non-aeronautical revenues.

The following table sets forth our revenues from non-aeronautical services for the years indicated:

	Year ended December 31,
	2017					2018					2019(1)
	Amount		Percent			Amount		Percent			Amount		Percent
	(millions of pesos, except percentages and workload unit data)
Non-aeronautical Services:
Businesses operated by third parties:
Leasing of space (2)	Ps.	203.5		7.3	%	Ps.	229.1		7.2	%	Ps.	246.1		6.5	%
Car rentals		234.8		8.5			310.3		9.7			378.6		10.0
Food and beverage operations		276.3		10.0			337.0		10.6			482.5		12.8
Retail operations		314.9		11.4			345.0		10.8			380.9		10.1
Duty-free operations		397.6		14.3			468.3		14.7			527.3		14.0
Timeshare operators		186.9		6.7			196.5		6.2			222.4		5.9
Ground transportation		120.2		4.3			129.5		4.1			143.2		3.8
Communications and financial services		69.9		2.5			81.7		2.6			87.6		2.3
Other		92.9		3.4			56.8		1.8			65.8		1.8
Total businesses operated by third parties:		1,897.0		68.4	%		2,154.2		67.7	%		2,534.4		67.2	%
Businesses operated directly by us:
Car parking charges		277.2		10.0			320.6		10.1			368.7		9.8
Advertising		154.6		5.6			177.9		5.6			273.1		7.2
VIP lounges		154.7		5.6			222.7		7.0			193.7		5.1
Convenience stores		89.2		3.2			107.2		3.4			165.6		4.4
Total businesses operated directly by us:		675.7		24.4			828.4		26.0			1,001.1		26.5
Recovery of costs (3)		200.2		7.2			200.9		6.3			236.0		6.3
Total non-aeronautical revenues	Ps.	2,772.9		100.0	%	Ps.	3,183.5		100.0	%	Ps.	3,771.5		100.0	%
Other Information:
Total terminal passengers (millions)		40.7					44.9					48.7
Non-aeronautical revenues per terminal passenger	Ps.	68.1				Ps.	70.9				Ps.	77.4
Change in non-aeronautical revenues per terminal passenger (year-on-year)				3.9	%				4.1	%				9.2	%

In 2019, revenues from non-aeronautical services in our airports accounted for 23.2% of the total revenues generated by our airports (in 2019, non-aeronautical revenues represented 26.3% of the sum of aeronautical and non-aeronautical revenues). While we believe that aeronautical revenues will continue to represent a majority of our future revenues, we currently estimate that the growth rate of our revenues from commercial activities will likely exceed the growth rate of our aeronautical revenues (as was the case during the period from 2017 to 2019), except in the years in which the maximum tariffs are reset. In the last year, non-aeronautical revenues per terminal passenger increased 9.2% (from Ps.70.9 in 2018 to Ps.77.4 in 2019, during which time the number of terminal passengers increased 8.4%).

Non-aeronautical revenues per terminal passenger show the average revenue generated by the commercial areas of our airports, and it is calculated by dividing total non-aeronautical revenues by the number of terminal passengers during the same period. Therefore if non-aeronautical revenues decline proportionately less than the decline in the number of terminal passengers during a period, non-aeronautical revenues per terminal passenger will increase despite the decrease in non-aeronautical revenues. Non-aeronautical revenues per terminal passenger are principally affected by:

Certain categories of non-aeronautical revenues are directly impacted by passenger traffic (for example car parking and rental, and food and beverage providers) while others are not (for example leasing of space, on which we earn at least a minimum fixed rent indexed to inflation each year, which may be increased by royalty-based payments as discussed below). Accordingly, non-aeronautical revenues do not always behave in the same manner as passenger traffic or workload units.

Approximately 99.1% of the contracts with third-party tenants that could be arranged as royalty-based have already been executed under those conditions (representing approximately 88.4% of our total non-aeronautical revenues). Under a royalty-based contract the amount tenants must pay is based on tenants’ revenues, subject to minimum guaranteed fixed amounts related to the square footage of the space leased. When the royalty-based amount is lower than the minimum guaranteed amount, the tenant must still pay the latter. Therefore, a decrease in passenger traffic volumes would result in a reduction in non-aeronautical revenues from such tenants only if, prior to such decrease in passenger traffic, the sales of royalty-based tenants were higher than the minimum guaranteed amount. As a result, during periods in which airports experience a reduction in passenger traffic volumes, non-aeronautical revenues may remain stable due to the minimum guaranteed amount received by the airport under the lease contract, thereby resulting in a potential increase in non-aeronautical revenues per workload unit.

During 2017, 2018 and 2019, non-aeronautical revenues were Ps.2,772.9 million, Ps.3,183.5 million and Ps.3,771.5 million respectively, representing an increase of 14.8% in 2018, and an increase of 18.5% in 2019 . During 2019, non-aeronautical revenues increased more than terminal passengers, which increased 8.4%. In 2019, non-aeronautical revenues per terminal passenger increased from Ps.70.9 per passenger in 2018 to Ps.77.4 in 2019, representing an increase of 9.2% from 2018 to 2019.

IFRIC 12 requires, subject to certain conditions, that the infrastructure of a service concession contract falling within its scope not be recognized as property, plant and equipment. It also requires that revenues obtained when the operator performs both construction or upgrade services and operating services under a single contract be recognized according to each type of service provided, based on the fair value of consideration received at the time the service is rendered. We recognize revenues and the associated costs of improvements to concession assets in relation with the concession’s obligation to perform improvements as established in the Master Development Programs in Mexico and Capital Development Program in Jamaica. Revenues represent the value of the exchange between ourselves and the respective government with respect to the improvements, given that we construct or provide improvements to the airports as obligated under the Master Development Programs in Mexico and Capital Development Program in Jamaica, and in exchange, the respective government grants us the right to obtain benefits for services provided using those assets, which are recognized as intangible assets. We have determined that our obligations per the Master Development Programs in Mexico and Capital Development Program in Jamaica should be considered to be a revenue-earning activity as all expenditures incurred to fulfill the Master Development Programs and Capital Development Program are included in the tariffs. Therefore we recognize the revenue and expense in profit or loss when the expenditures are performed. The cost for such additions and improvements to concession assets is based on actual costs incurred by us in the execution of the additions or improvements, considering the investment requirements in the Master Development Programs and Capital Development Program.

Through bidding processes, we contract third parties to carry out such construction. The amount of revenues for these services is equal to the amount of costs incurred, as we do not obtain any profit margin for these construction services. The amounts paid are set at market value. As a result, revenues from improvements to concession assets do not have a cash impact on our results. Furthermore, they are not directly related to our passenger traffic, which is the main driver of our revenues. In 2017, we recognized Ps.1,312.5 million in revenues from improvements to concession assets. This represented a decrease of 21.7% as compared to 2016, which was the year with the highest committed investment under the Master Development Programs for 2015-2019. During 2017, MBJA recognized Ps.66.1 million in revenues from improvements to concession assets. During 2018, we recognized Ps.1,440.2 million in revenues from improvements to concession assets. This represented an increase of 9.7% as compared to 2017, due to higher investment commitments under our Master Development Programs. During 2018, MBJA recognized Ps.546.0 million in revenues from improvements to concession assets. In 2019, we recognized Ps.1,906.8 million in revenues from improvements to concession assets. This represented an increase of 32.4% as compared to 2018, due to higher investment commitments under our Master Development Programs. During 2019, MBJA recognized Ps.136.4 million in revenues from improvements to concession assets. From October 10, 2019 through December 31, 2019, PACKAL did not recognize revenues from improvements to concession assets.

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

	Year ended December 31,
	2017			2018			2019(1)
	Amount			Amount			Amount			% change
	(millions of pesos, except percentages and passenger data)
Operating Costs:
Cost of services:
Employee costs	Ps.	663.4		Ps.	773.6		Ps.	877.1			13.4		%
Maintenance		505.3			528.9			578.5			9.4		%
Safety, security and insurance		317.0			386.1			428.2			10.9		%
Utilities		278.9			335.0			380.4			13.6		%
Other		345.8			430.1			480.7			11.8		%
Total cost of services		2,110.4			2,453.7			2,744.9			11.9		%
Technical assistance fees		357.5			411.5			461.5			12.2		%
Concession taxes		944.2			1,076.4			1,318.2			22.5		%
Depreciation and amortization:
Depreciation (2)		324.5			400.2			446.5			11.6		%
Amortization (3)		1,119.1			1,169.4			1,329.6			13.7		%
Total depreciation and amortization		1,443.6			1,569.6			1,776.1			13.2		%
Other (income) expenses - net		(84.0	)		(73.2	)		1.3			(101.8	)	%
		4,771.7			5,438.0			6,302.0			15.9		%
Cost of improvements to concession assets		1,312.5			1,440.2			1,906.8			32.4		%
Total operating costs	Ps.	6,084.2		Ps.	6,878.2		Ps.	8,208.8			19.3		%
Other Information:
Total workload units (thousands) (4)		42,806.9			47,160.9			50,947.1			8.0		%
Cost of services per workload unit	Ps.	49.3		Ps.	52.0		Ps.	53.9			3.7		%
Cost of services / the sum of aeronautical and non-aeronautical revenues (5)		19.1	%		19.3	%		19.2	%

Our cost of services consists primarily of employee costs, maintenance, safety, security and insurance costs, as well as utilities (a portion of which we recover from our tenants) and various other miscellaneous expenses. Cost of services per workload unit is an indicator that is calculated by dividing cost of services by the workload units for a given period. This indicator is affected annually by:

Therefore, if the cost of services increases less in proportion to the increase in workload units, the cost of service per workload unit decreases. Similarly, cost of service per workload units increases in periods in which the costs of service remains stable but workload units declined.

Our cost of services per workload unit was Ps.49.3 in 2017, Ps.52.0 in 2018 and Ps.53.9 in 2019, an increase of 5.5% from 2017 to 2018, and an increase of 3.7% from 2018 to 2019. In 2019, cost of services increased by 11.9%, while total workload units increased by 8.0%. Cost of services increased by Ps.291.2 million, or 11.9%, primarily due to an increase in employee costs of Ps.103.5 million, maintenance costs of Ps.49.6 million, utilities of Ps.45.4 million and safety and security costs of Ps.42.1 million. Cost of services increased by Ps.202.2 million for our Mexican airports, which was mainly due to a Ps.71.1 million increase in employee costs, a Ps.50.4 million increase in other operating cost, a Ps.37.6 million increase in maintenance and Ps.30.0 million increase in utilities. Cost of services at the Montego Bay airport increased by Ps.14.9 million, mainly due to a Ps.13.3 million increase in safety, security and insurance costs, a Ps.8.5 million increase in employee costs, and a Ps.4.2 million increase in maintenance costs, partially offset by Ps.6.5 million decrease in utilities and a Ps.4.6 million decrease in other costs. Cost of services for PACKAL from October 10, 2019 to December 31, 2019 were Ps.74.0 million. Our income from operations divided by the sum of aeronautical and non-aeronautical revenues (operating margin) decreased by 100 basis points from 57.1% in 2018 to 56.1% in 2019 mainly as a result of the consolidation of PACKAL.

Under the technical assistance agreement, AMP provides management and consulting services as well as technical assistance and technological and industry knowledge and experience to us in exchange for a fee. This agreement is more fully described in Item 7 hereof. Since January 1, 2002, the fee has been equal to the greater of U.S.$4.0 million (adjusted annually for U.S. inflation) and 5% of our annual consolidated income from operations, defined as earnings before interest income or expense (calculated prior to deducting the technical assistance fee, income taxes, depreciation and amortization and in each case determined in accordance with MFRS). The technical assistance fee is a component of our maximum tariffs and is collected through the maximum tariffs charged. In 2017, 2018 and 2019, this fee was Ps.357.5 million, Ps.411.5 million and Ps.461.5 million, respectively.

Prior to our acquisition of DCA, MBJA had a technical assistance agreement with Vantage, under which Vantage provided management and consulting services as well as technical assistance and technological and industry knowledge and experience to us in exchange for a fee. This technical assistance agreement expired in 2015 and was not renewed.

NMIA does not have a technical assistance agreement with third parties in place.

We are subject to the Mexican Federal Duties Law, which requires each of our Mexican airports to pay a concession tax to the Mexican government currently equal to 5% of the gross annual revenues (excluding revenues from improvements to concession assets) of each concession holder obtained from the use of public domain assets pursuant to the terms of its concession. The concession tax rate may vary on an annual basis as determined solely by the Mexican Federal Congress, and there can be no assurance that this rate will not increase in the future. If Mexico’s Federal Congress increases the concession tax rate, we are entitled to request an increase in our maximum rates from the SCT; however, there can be no assurance that the SCT would approve our request.

In 2017, 2018 and 2019, this tax amounted Ps.461.2 million, Ps.533.5 million and Ps.599.1 million, respectively.

Under the terms of the Concession Agreement and the relevant tax legislation, MBJA is required to pay a monthly concession fee per workload unit, to the Jamaican government to allow it to use and develop the assets subject to the concession. MBJA is also required to pay an additional concession fee equal to 45% of any revenues earned in excess of the forecast revenues established in the Concession Agreement. This additional concession fee considers the period from April to March of each year, with payment required yearly.

According to the Concession Agreement, once a 25% cumulative annualized internal rate of return hurdle (“IRR Hurdle”) is reached (as measured from the date of the first equity contribution to the concessionaire), any equity distributions above the IRR Hurdle to MBJA’s shareholders must be matched by an equal payment to the AAJ as owner of the concession assets (“Excess Benefit Payment”). Equity distributions include any dividend, capital reduction, interest, fee, loan or other payment to MBJA’s shareholders. To date, MBJA’s IRR Hurdle has not been reached; the aggregate as of December 2019 was of 19.0%.

The concession fee applied in 2017 was U.S.$2.88 per workload unit serviced. In 2017, the sum of these monthly and annual concession fees was Ps.483.0 million. The concession fee applied in 2018 was U.S.$2.87 per workload unit serviced. In 2018, the sum of these monthly and annual concession fees was Ps.542.9 million. The concession fee applied in 2019 was U.S.$2.93 per workload unit serviced. In 2019, the sum of these monthly and annual concession fees was Ps.611.5 million.

The additional concession fee for the concession year ending March 2018, March 2019 and March 2020 was U.S.$14.4 million, U.S.$15.9 million and U.S.$16.9 million, respectively.

Under the terms of the NMIA Concession Agreement and the relevant tax legislation, PACKAL is required to pay a monthly concession fee of 62.01% of the total aeronautical and non-aeronautical revenues based on the gross revenues of NMIA, to the Jamaican government to allow it to use and develop the assets subject to the concession.

From October 10, 2019 through December 31, 2019 PACKAL paid U.S.$5.6 million in concession fees.

Our depreciation and amortization expenses primarily reflect the amortization of our investment in our twelve Mexican concessions, which we began amortizing for accounting purposes in August 1999, the date on which the value of our Mexican concessions was determined based on the value assigned by AMP to our Series BB shares as part of its winning bid to acquire its 15% interest in us. In addition, we amortize the value of certain fixed assets we acquire or build at our Mexican airports pursuant to the investment requirements under our Master Development Programs. In 2017, these write-offs totaled Ps.23.5 million. In 2018, we did not write off any amounts. In 2019, these write-offs totaled Ps.46.8 million. For further information regarding depreciation and amortization expenses, refer to Notes 8, 9, 10, 11 and 12 to our audited consolidated financial statements.

Our depreciation and amortization expenses in Jamaica primarily reflect the amortization of our investment in our Jamaican airports, the value of certain fixed assets the airports acquired pursuant to the investment requirements under their respective Capital Development Programs and amortization of MBJA concessions’ fair value. For further information regarding depreciation and amortization expenses, refer to Notes 8, 9, 10, 11 and 12 to our audited consolidated financial statements.

In compliance with our Master Development Programs in Mexico and the Capital Development Program in Jamaica, we invest in additions and upgrades to our concession assets and these investments are reflected according to IFRIC 12. In our case, because we hire third parties to provide construction and upgrade services and we do not recognize a premium on the cost of services, our revenues from improvements to concession assets are equal to the cost of improvements to concession assets such that the application of IFRIC 12 does not have a cash impact on our results.

We and each of our subsidiaries pay taxes on an individual (rather than consolidated) basis.

Our effective tax rates in 2017, 2018 and 2019 were 23.2%, 26.6% and 25.8%, respectively.

In 2019, our effective tax rate decreased 80 basis points as compared to 2018, resulting from a Ps.61.7 million decrease in our current tax expense mainly due to an exception for airports located along the Mexican border with the United States of America, for which the income tax rate for 2019 was 20%, applying the Decree for Fiscal Incentives in the Northern Border Region (Decreto de Estímulos Fiscales Región Fronteriza Norte) which reduces the applicable income tax by a third and a decrease in deferred income tax of Ps.84.1 million, derived from a lower inflation rate, which went from an inflation rate of 4.8% in 2018 to an inflation rate of 2.8% in 2019, partially offset by an increase in our earnings before income taxes of 4.8%.

In 2018, our effective tax rate increased 340 basis points as compared to 2017, resulting from a Ps.160.5 million decrease in the deferred tax benefits as a result of 4.8% inflation in 2018, versus 6.8% in 2017. These changes were offset by an decrease in our current tax expense by Ps.267.9 million, resulting from an increase in our earnings before income taxes of 13.5%.

In 2017, our effective tax rate decreased 410 basis points as compared to 2016, resulting from an increase in our deferred tax benefits due to higher inflation in 2017.

We paid Ps.1,820.4 million, Ps.2,263.4 million and Ps.2,163.1 million in corporate taxes in 2017, 2018 and 2019, respectively, representing 29.5%, 32.3% and 29.4% of our earnings before taxes.

Beginning in 2014, significant changes to tax laws applicable in Mexico came into force, with substantial effects for Mexican taxpayers (as published in the Official Gazette on December 11, 2013, the “2014 Fiscal Reform”).

The principal change to affect our business from the 2014 Fiscal Reform was the effect on our deferred income taxes caused by the reform to the Income Tax Law, by which the income tax rate was prospectively increased from 28% to 30%. The new income tax rate will apply to all of our Mexican entities except for those entities with operations located on the Mexican side of the border with the United States, which will be subject to an income tax rate of 20% for the next two years pursuant to the Decree for Fiscal Incentives in the Northern Border Region (Decreto de Estímulos Fiscales Región Fronteriza Norte).

We regularly review our deferred tax assets for recoverability, which are reduced as necessary to the extent that a future tax benefit is no longer probable, based on an analysis of historical taxable income, projected future taxable income and the expected timing of the reversals of existing temporary differences. In addition, Mexican tax law allows Mexican companies utilizing tax amortization rates that are lower than the maximum allowable rates to modify their tax amortization rates every five years, without exceeding the maximum allowable rate. Beginning in 2000, we utilized rates lower than the 15% maximum allowable rate to amortize our airport concessions and rights to use airport facilities for tax purposes.

According to the mechanism established to recover existing asset tax credit carryforwards, which ultimately benefit us, we have ten years beginning in 2008 to recover those existing asset tax credits. Every year, we review and adjust, as necessary, our financial projections based on new expectations of revenues, expenses and capital expenditures, whether for our Master Development Programs, for new maximum tariffs or new passenger traffic projections. Based on these changes, which resulted in our ability to recover tax on assets previously determined to be unrecoverable, and our financial projections for 2008 to 2017, we recognized Ps.354.9 million in 2007 associated with a previously paid recoverable tax on assets. In 2017, we decreased the recoverable tax on assets by Ps.7.6 million and Ps.46.6 million were recovered. During 2018, we recovered the remaining Ps.25.3 million of the amount recognized in 2007. In 2019, we recovered Ps.18.5 million, and believe no additional asset tax credit carryforward is recoverable.

Jamaican companies, including our Jamaican airports, are required to pay corporate income tax on taxable profit, employer taxes on certain employee costs and a value-added tax on services offered.

Corporate income tax is applicable on taxable profit at a rate of 25%, but taxable profit may be reduced by an employer tax credit of up to the total amount of employer and certain obligatory employee taxes timely paid during any fiscal year. However, this employer tax credit is clawed back if any dividends are paid to shareholders in the subsequent fiscal years, based on a prescribed formula. In 2017, 2018 and 2019, MBJA incurred U.S.$8.4 million (Ps.158.6 million), U.S.$9.4 million (Ps.179.9 million) and U.S.$9.7 million (Ps.186.8 million), respectively, in corporate income tax liabilities. From October 10, 2019 through December 31, 2019, PACKAL did not incur corporate income tax liabilities for the period due to the fact that expenses exceeded income for the period.

We are subject to the statutory employee profit sharing regime established under the Mexican Federal Labor Law (Ley Federal del Trabajo). Under this regime, 10% of each unconsolidated company’s annual profits (as calculated for tax purposes) must be distributed among its employees, other than its chief executive officer. The profit sharing is derived from the taxable income for the year as adjusted by the income tax for the year as modified per certain provisions.

Under Mexican legislation, we must make payments equivalent to 2% of our workers’ comprehensive daily salary to a defined contribution plan that is part of the retirement savings system. This expense amounted Ps.6.0 million in 2017, Ps.7.2 million in 2018 and Ps.8.0 million in 2019.

MBJA participates in a defined contribution pension scheme, the assets of which are held in a separate fund administered by trustees and a fund Administrator. Under this contribution pension scheme MBJA pays fixed percentage contributions to the fund, which are funded by payments from employees and the company. MBJA’s contributions are charged to the statement of comprehensive income for the year to which they relate.

PACKAL does not currently participate in a defined contribution pension scheme, all employees maintain short-term contracts in accordance with the terms of the concession. The defined contribution pension scheme will begin during October 2020. The assets of the pension will be held in a separate fund administered by trustees and a fund Administrator. Under this contribution pension scheme, PACKAL will pay fixed percentage contributions to the fund, which are funded by payments from employees and the company. PACKAL’s contributions will be charged to the statement of comprehensive income for the year to which they will relate.

The following table sets forth, for the periods indicated, the percentage change in the price of the Mexican peso against the U.S. dollar, the Mexican inflation rate, the U.S. inflation rate, and the Mexican GDP, each as compared to the previous period:

The general condition of the Mexican economy, changes in the value 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, our:

Historically, our most profitable airports have been our Guadalajara, Los Cabos, Montego Bay and Puerto Vallarta international airports, which handle the majority of our international passengers. We determine profitability per airport by dividing income from operations at each airport by total revenues for that airport. Operating margins at our Tijuana airport historically have been lower than at our other principal airports because the maximum rates applicable to aeronautical services provided at our Tijuana airport are lower than those applicable to our other principal airports. This results from the amortization of our concession relative to the level of revenues being much higher at our Tijuana airport than at our other principal airports because the original concession value assigned to Tijuana International Airport was proportionately higher.

The following table sets forth our results of operations for the years indicated for each of our principal airports and our other subsidiaries:

		Year ended December 31,
	2017				2018			2019
		(thousands of pesos, except percentages)
Guadalajara:
Revenues:
Aeronautical services	Ps.		2,426,289		Ps.	2,824,677		Ps.	2,978,617
Non-aeronautical services			645,997			796,739			938,445
			3,072,286			3,621,416			3,917,062
Improvements to concession assets (1)			326,198			110,415			858,807
Total revenues			3,398,484			3,731,831			4,775,869
Total costs			1,325,993			1,277,072			2,176,553
Costs of operations (2)			659,359			769,019			867,224
Cost of improvements to concession (1)			326,198			110,415			858,807
Depreciation and amortization			295,445			310,882			346,587
Other expense			44,992			86,756			103,935
Income from operations			2,072,491			2,454,759			2,599,316
Operating margin (3)			60.98	%		65.78	%		54.43	%
Tijuana:
Revenues:
Aeronautical services	Ps.		1,158,896		Ps.	1,344,122		Ps.	1,568,297
Non-aeronautical services			304,023			326,214			454,098
			1,462,919			1,670,337			2,022,396
Improvements to concession assets (1)			203,664			100,986			300,221
Total revenues			1,666,583			1,771,323			2,322,617
Total costs			782,618			728,956			1,047,716
Costs of operations (2)			347,487			364,605			447,599
Cost of improvements to concession (1)			203,664			100,986			300,221
Depreciation and amortization			161,892			180,904			206,983
Other expense			69,576			82,460			92,914
Income from operations			883,965			1,042,367			1,274,901
Operating margin (3)			53.04	%		58.85	%		54.89	%
Los Cabos:
Revenues:
Aeronautical services	Ps.		1,111,293		Ps.	1,244,106		Ps.	1,364,746
Non-aeronautical services			618,468			698,891			787,424
			1,729,761			1,942,997			2,152,170
Improvements to concession assets (1)			222,106			346,956			299,155
Total revenues			1,951,866			2,289,954			2,451,326
Total costs			780,029			1,017,773			1,053,998
Costs of operations (2)			351,195			403,660			446,048
Cost of improvements to concession (1)			222,106			346,956			299,155
Depreciation and amortization			201,241			217,858			234,669
Other expense			5,488			49,299			74,125
Income from operations			1,171,837			1,272,180			1,397,328
Operating margin (3)			60.04	%		55.55	%		57.00	%

	Year ended December 31,
	2017				2018			2019
		(thousands of pesos, except percentages)
Montego Bay:
Revenues:
Aeronautical services	Ps.		1,290,079		Ps.	1,419,674		Ps.	1,512,164
Non-aeronautical services			496,477			543,878			585,325
			1,786,556			1,963,552			2,097,489
Improvements to concession assets (1)			66,131			545,959			136,363
Total revenues			1,852,687			2,509,511			2,233,853
Total costs			1,287,224			1,866,797			1,604,825
Costs of operations (2)			876,232			986,266			1,068,338
Cost of improvements to concession (1)			66,131			545,959			136,363
Depreciation and amortization			344,861			354,963			399,738
Other expense			-			(20,391	)		386
Income from operations			565,463			642,714			629,027
Operating margin (3)			30.50	%		25.61	%		28.16	%
Puerto Vallarta:
Revenues:
Aeronautical services	Ps.		989,137		Ps.	1,088,417		Ps.	1,183,610
Non-aeronautical services			371,939			399,427			455,699
			1,361,076			1,487,844			1,639,309
Improvements to concession assets (1)			101,235			40,330			57,697
Total revenues			1,462,310			1,528,174			1,697,007
Total costs			599,102			585,623			645,337
Costs of operations (2)			311,346			352,589			386,299
Cost of improvements to concession (1)			101,235			40,330			57,697
Depreciation and amortization			142,763			153,230			156,383
Other expense			43,758			39,474			44,958
Income from operations			863,209			942,551			1,051,669
Operating margin (3)			59.03	%		61.68	%		61.97	%
Guanajuato:
Revenues:
Aeronautical services	Ps.		386,726		Ps.	484,799		Ps.	584,650
Non-aeronautical services			116,686			148,119			180,327
			503,412			632,918			764,976
Improvements to concession assets (1)			122,133			16,244			32,853

Pacific Airport Group		United Mexican States
(Translation of registrant’s name into English)		(Jurisdiction of incorporation or organization)

Title of each class:		Number of Shares
Series B Shares		476,850,000
Series BB Shares		84,150,000

	Forward-Looking Statements	1

Item 1.	Identity of Directors, Senior Management and Advisers	2

Item 2.	Offer Statistics and Expected Timetable	2

Item 3.	Key Information	2

	Selected Financial and Other Data	2

	Risk Factors	5

Item 4.	Information on the Company	25

	History and Development of the Company	25

	Business Overview	32

	Regulatory Framework	62

	Organizational Structure	80

	Property, Plant And Equipment	80

Item 4A.	Unresolved Staff Comments	81

Item 5.	Operating and Financial Review and Prospects	81

Item 6.	Directors, Senior Management and Employees	114

Item 7.	Major Shareholders and Related Party Transactions	122

	Major Shareholders	122

	Related Party Transactions	123

Item 8.	Financial Information	125

	Legal Proceedings	125

	Dividends	128

Item 9.	The Offer and Listing	129

	Trading Markets	129

Item 10.	Additional Information	130

	Corporate Governance	130

	Material Contracts	137


	Taxation	137

	Documents On Display	140

Item 11.	Quantitative and Qualitative Disclosures About Market Risk	140

Item 12.	Description of Securities Other Than Equity Securities	142

Item 12A.	Debt Securities	142

Item 12B.	Warrants and Rights	143

Item 12C.	Other Securities	143

Item 12D.	American Depositary Shares	144

Item 13.	Defaults, Dividend Arrearages and Delinquencies	145

Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	145

Item 15.	Controls and Procedures	145


Item 16.	Reserved	147

Item 16A.	Audit Committee Financial Expert	147

Item 16B.	Code of Ethics	147

Item 16C.	Principal Accountant Fees and Services	147

Item 16D.	Exemptions from the Listing Standards for Audit Committees	147

Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	147

Item 16F.	Change in Registrant’s Certifying Accountant.	148

Item 16G.	Corporate Governance	148

Item 17.	Financial Statements	151

Item 18.	Financial Statements	151

Item 19.	Exhibits	152

	Year ended December 31,
	2017			2018		2019
		(thousands of pesos)
Guadalajara	Ps.		405,868	Ps.	271,966	Ps.	990,610
Tijuana			393,306		377,220		356,236
Los Cabos			316,388		417,856		343,284
Puerto Vallarta			162,955		98,196		70,480
Guanajuato			143,025		114,035		69,496
Hermosillo			202,084		61,107		43,671
Mexicali			42,639		117,174		40,465
La Paz			25,794		93,959		76,181
Aguascalientes			29,990		22,430		70,536
Morelia			18,263		34,223		48,261
Los Mochis			21,014		44,162		32,918
Manzanillo			10,115		36,346		31,339
Other (1)			29,958		153,676		53,505
Total	Ps.		1,801,399	Ps.	1,842,350	Ps.	2,226,982

Large accelerated filer	☒	Accelerated filer	☐	Non-accelerated filer	☐
				Emerging growth company	☐

Airport	For year ended December 31, 2019
Guadalajara		27.4	%
Los Cabos		15.0	%
Montego Bay		14.7	%
Tijuana		14.1	%
Puerto Vallarta		11.5	%
Eight other Mexican airports (combined) and Kingston		17.3	%
Total revenues		100.0	%

	Year ended December 31,
	2020		2021		2022		2023		2024			Total
	(thousands of constant pesos as of December 31, 2017) (1)
Guadalajara	Ps.	2,309,223	Ps.	2,083,147	Ps.	2,627,989	Ps.	2,125,263	Ps.	779,138	Ps.		9,924,760
Tijuana		1,043,430		1,016,012		943,917		108,652		42,104			3,154,115
Los Cabos		991,503		781,576		519,091		127,043		63,723			2,482,936
Puerto Vallarta		1,200,632		1,294,890		761,673		98,598		35,586			3,391,379
Guanajuato		275,191		157,485		63,683		25,391		24,810			546,560
Hermosillo		137,061		142,313		69,659		37,426		32,587			419,046
Mexicali		110,693		76,465		104,186		30,923		16,727			338,994
La Paz		171,756		98,199		66,582		28,591		9,135			374,263
Morelia		128,757		98,011		27,673		20,231		8,468			283,140
Aguascalientes		136,289		104,915		97,645		19,090		21,469			379,408
Los Mochis		112,637		68,768		25,846		10,555		9,295			227,101
Manzanillo		122,220		73,522		88,242		18,261		7,757			310,002
Total	Ps.	6,739,392	Ps.	5,995,303	Ps.	5,396,186	Ps.	2,650,024	Ps.	1,050,799	Ps.		21,831,704

	Commercial Aviation Passengers (1)
	(thousands)
Mexico City		50,308
Cancun		25,482
Guadalajara*		14,846
Monterrey		11,177
Tijuana*		8,926
Los Cabos*		5,609
Puerto Vallarta*		5,052
Merida		2,791
Guanajuato*		2,756
Culiacan		2,459

	Peak air traffic movements per hour (1)	Runway capacity (2)
Guadalajara	48	39
Tijuana	19	36
Los Cabos	35	42
Puerto Vallarta	34	38
Hermosillo	20	33
Guanajuato	12	18
La Paz	9	14
Mexicali	7	14
Aguascalientes	8	14
Morelia	8	13
Los Mochis	8	16
Manzanillo	6	17

	For the year ended December 31,
	2017		2018		2019
Guadalajara		167,274		180,347		179,689
Tijuana		63,292		66,662		69,626
Los Cabos		49,773		51,020		51,718
Puerto Vallarta		54,389		56,472		56,526
Guanajuato		34,097		35,953		37,346
Hermosillo		41,326		41,462		40,221
La Paz		18,409		18,008		17,436
Mexicali		10,457		13,333		11,793
Aguascalientes		15,586		18,133		16,433
Morelia		14,899		13,876		13,771
Los Mochis		10,821		10,639		10,991
Manzanillo		5,336		4,923		5,435
Total		485,659		510,828		510,985

	January 1 to December 31, 2017		January 1 to December 31, 2018		January 1 to December 31, 2019
Revenues (in thousands of pesos):
Sum of Aeronautical and Non-Aeronautical Revenues	Ps.	1,786,556	Ps.	1,963,552	Ps.	2,097,489
Passenger Traffic (in thousands):
Terminal passengers		4,226		4,483		4,690
International passengers		4,217		4,474		4,681
Domestic passengers		9		9		9
Transit passengers		59		55		59
Air Traffic Movements (1) :
Peak air traffic movements per hour (2)		21		21		21
Runway capacity (3)		33		33		33
Total air traffic movements (in thousands):		41		41		43
Commercial aviation		28		30		34
Charter aviation		2		2		0
General aviation and other		12		9		9
Average passengers per air traffic movement		101		109		110

Name of Company	Jurisdiction of Organization	Percentage Owned (1)			Description
Aeropuerto de Guadalajara, S.A. de C.V.	Mexico		100	%	Holder of concession for Guadalajara International Airport
Aeropuerto de Tijuana, S.A. de C.V.	Mexico		100	%	Holder of concession for Tijuana International Airport
Aeropuerto de Puerto Vallarta, S.A. de C.V.	Mexico		100	%	Holder of concession for Puerto Vallarta International Airport
Aeropuerto de San José del Cabo, S.A. de C.V.	Mexico		100	%	Holder of concession for Los Cabos International Airport
Aeropuerto de Hermosillo, S.A. de C.V.	Mexico		100	%	Holder of concession for Hermosillo International Airport
Aeropuerto del Bajío, S.A. de C.V.	Mexico		100	%	Holder of concession for Guanajuato International Airport
Aeropuerto de Morelia, S.A. de C.V.	Mexico		100	%	Holder of concession for Morelia International Airport
Aeropuerto de La Paz, S.A. de C.V.	Mexico		100	%	Holder of concession for La Paz International Airport
Aeropuerto de Aguascalientes, S.A. de C.V.	Mexico		100	%	Holder of concession for Aguascalientes International Airport
Aeropuerto de Mexicali, S.A. de C.V.	Mexico		100	%	Holder of concession for Mexicali International Airport
Aeropuerto de Los Mochis, S.A. de C.V.	Mexico		100	%	Holder of concession for Los Mochis International Airport
Aeropuerto de Manzanillo, S.A. de C.V.	Mexico		100	%	Holder of concession for Manzanillo International Airport
Desarrollo de Concesiones Aeroportuarias, S.L.U.	Spain		100	%	Management administration, maintenance, servicing of all types of infrastructure
MBJ Airports Limited	Jamaica		74.5	%	Holder of concession for Montego Bay International Airport
Servicios a la Infraestructura Aeroportuaria del Pacífico, S.A. de C.V.	Mexico		100	%	Provider of administrative services to our other subsidiaries
Corporativo de Servicios Aeroportuarios, S.A. de C.V.	Mexico		100	%	Provider of operational services to our other subsidiaries
Puerta Cero Parking, S.A. de C.V.	Mexico		100	%	Provider of car parking administration services to our other subsidiaries
GA del Pacífico Participações do Brasil LTDA	Brazil		100	%	Holding company for other acquisitions ( incorporated in 2010; not operational through the date of this filing )
Fundación Grupo Aeroportuario del Pacífico, A.C.	Mexico		100	%	Non-profit company incorporated in 2013 to manage charitable donations and social welfare activities
Aerocomercializadora del Pacifico, S.A. de C.V.	Mexico		100	%	Hotel infrastructure operation and other commercial services
PAC Kingston Airport Limited (PACKAL)	Jamaica		100	%	Holder of concession for Kingston International Airport

	Year ended December 31,
Airport:	2017					2018					2019(1)
	Passengers		% change			Passengers		% change			Passengers		% change
	(in thousands, except percentages)
Guadalajara		5,944.1		13.1	%		6,604.0		11.1	%		6,813.3		3.2	%
Tijuana		3,379.4		12.0			3,726.4		10.3			4,263.8		14.4
Los Cabos		2,425.3		15.8			2,591.1		6.8			2,767.8		6.8
Puerto Vallarta		2,212.7		11.4			2,334.2		5.5			2,476.9		6.1
Montego Bay		2,105.8		8.1			2,236.2		6.2			2,347.7		5.0
Guanajuato		953.3		14.5			1,140.7		19.7			1,342.4		17.7
Hermosillo		780.2		7.4			836.0		7.2			897.2		7.3
Mexicali		382.3		12.7			543.1		42.1			574.5		5.8
La Paz		414.5		0.8			449.4		8.4			492.0		9.5
Morelia		298.6		15.2			358.7		20.1			441.9		23.2
Aguascalientes		367.9		9.3			423.1		15.0			419.1		(0.9	)
Los Mochis		170.3		-			168.1		(1.2	)		192.1		14.3
Kingston		-		-			-		-			187.2		100.0
Manzanillo		88.6		(5.6	)		83.0		(6.4	)		83.8		1.1
Total		19,523.0		11.8	%		21,494.0		10.1	%		23,299.7		8.4	%