Grupo Aeropuerto del Sureste, S.A. de C.V.

40 Boulevard Manuel Avila Camacho
11000 Mexico City, D.F.
Mexico
Telephone: (525) 284-0400
Fax: (525) 202-1911
Web site: http://www.asur.com.mx

Public Company
Incorporated: 1998
Employees: 598
Sales: 2.81 billion pesos ($306.6 million) (2001)
Stock Exchanges: Mexico City
Ticker Symbols: ASUR
NAIC: 488112 Airport Operations, except Air Traffic Control; 531190 Lessors of Other Real Properties; 551112 Offices of Other Holding Companies

Grupo Aeroportuario del Sureste S.A. de C.V. (Asur) is a holding company that, through its subsidiaries, is engaged in the operation, maintenance, and development of nine airports in southeastern Mexico. As operator of these airports under a 50-year concession from the Mexican government, Asur charges fees to airlines, passengers, and others for the use of airport facilities. The company also derives rental and other income from commercial activities conducted at its airports, such as the leasing of space to restaurants and retailers. Asur’s chief source of revenue is the airport at Cancun, Mexico’s second-busiest in terms of passenger traffic. Like Cancun, the airports serving Cozumel and Huatulco mainly accommodate beach vacationers. Merida, Oaxaca, Veracruz, and Villahermosa draw, in addition to business travelers, tourists interested in the archeological sites and museums that display Mexico’s indigenous past. Minantitlan, like Villahermosa, is close to the heart of Mexico’s petroleum-extracting and petrochemical industries. Tapachula’s airport is near the Pacific Ocean and the border with Guatemala.

Under Federal Administration: 1939–95

Mexico’s first airfield was built in 1910. This became the center of the nation’s military training in aviation. During the 1920s more airfields were built by state and local governments and by the nascent commercial carriers. The secretariat of communications and public works constructed Mexico City’s airport, inaugurated in 1939. During the 1940s, the federal government built a number of others with World War II aid from the United States. Those in Asur’s future territory were in Campeche, Chetumal, Ciudad del Carmen, Cozumel, Itxtepec, Merida, and Veracruz. The state and municipal governments built the airport in Oaxaca.

Aeropuertos y Servicios Auxiliares (ASA) was established in 1965, after the introduction of jet airliners made larger facilities essential. A decentralized federal agency, it assumed administration of 33 airports. Among those that came under ASA’s jurisdiction in this period were the airports serving Tapachula and Villahermosa. The airports in Cancun and Cozumel came under AS A jurisdiction between 1970 and 1976, and the one in Minatitlan was added between 1976 and 1982. In 1977 the ASA administered 47 airports, of which 28 were in the international category.

Interviewed for the Mexican business magazine Expansion at this time, director general Enrique M. Lodeza said, concerning the agency’s finances, “Three years ago the enterprise was self-sufficient, but given the increased costs of operation without any rate increase, the increase in personnel to staff new airports and the effects of the [1976] devaluation [of the peso], our expenses have gone up so that now, we have an operating deficit of 70 million pesos [about $3 million]. We don’t deny the necessity of a rational administrative effort, in order to be a self-supporting entity again. We hope to reach this point in 1980, based on a new financial as well as administrative organization.” At this time, airport services—such as landing fees—were accounting for 72 percent of ASA’s annual revenues of 550 million to 600 million pesos ($24 million to $26 million). The rest of its revenues came from such sources as rent received from airport shops and airport-located government facilities such as postal, telephone, and telex offices.

In 1988, the federal government began to seek investment by private capital in airport infrastructure. Hakim Grupo Industrial, a large construction firm, was put in charge of expanding Mexico City’s Benito Juarez International Airport, and the privatization of the nation’s airports was seen as the only solution for a government with other financial priorities. In April 1991, ASA’s director general, José Andres de Oteyza, told the federal district’s assembly of representatives. “Notwithstanding that our resources are very valuable and our investments are productive, our budget hasn’t been augmented in a corresponding manner, because what we collect goes to the treasury to support the public finances.”

In 1991, the ASA administered 61 airports that served 36.1 million passengers, and it registered a profit of some 400 billion pesos (about $133 million). However, the agency’s own budget came to only 148.29 billion pesos ($49.27 million), and both infrastructure and services were suffering. The ASA reserved for itself the construction and administration of runways, platforms, control towers, fuel, security, and basic operation, and its projects at this time included construction of the airport at Huatulco and the expansion of the Cancun and Merida airports. The agency was, however, seeking private investment for other infrastructure and commercial operations. Grupo Constructor Dicas, for example, had signed an agreement to build a satellite terminal at Cancun for international traffic. By the fall of 1995, 22 joint-venture projects had been carried out, representing investment of about $350 million in the nation’s 14 largest airports.

The Privatization Process: 1995–2000

At this time, ASA was administering the 68 most important airports in Mexico, but only seven were profitable. Only 32 of the 68 had computers. The number of computers averaged only 2.8 for each airport, and 49 percent were obsolete. Even so, ASA turned a profit of about $200 million that year, since the profitable airports accounted for 65 percent of all air traffic. With Mexico in recession following a new peso crisis, however, the nation’s Congress in December 1995 approved a constitutional amendment authorizing privatization of the airports. The secretariat of communications and transport then divided 35 of Mexico’s most valuable airports into four regions, each of which contained both profitable and unprofitable airports so that the holding companies for each group would receive an overall annual return on their investment that ASA officials calculated at about 15 percent. A New York investment banker later told Brian Caplen of Euro-money, “These will be some of the first businesses in Mexico not to be controlled by a family or a single shareholder. The government doesn’t desperately need the money from privatization but it wants to take them out of the public sector to improve the management and modernize them.”

The next stage of the privatization process authorized strategic partnerships between foreign and Mexican investors as official operating service providers. Groups interested in bidding for the concessions were screened to avoid the purchase of the airports by drug cartels. The investing partners were restricted to a 15 percent share of the holding company, with the remaining shares to be publicly sold later. They were required to hold at least 7.5 percent of the shares for ten years. Foreign investment was limited to 49 percent of the holding company. Bidders had to place a $10-million bond before being given access to data profiles of the airports. The process moved slowly because of the government’s much-criticized and poorly executed “rescue” of the banking system and its failed conversion of public highways into privately operated toll roads.

Grupo Aeroportuario del Sureste (Asur) was incorporated as a wholly-owned entity of the federal government in 1998. The concession to operate its nine airports in southeastern Mexico was awarded to a consortium called Inversiones y Tecnicas Aeroportuarias (ITA), comprised of Copenhagen Airports A/S (majority-owned by the Danish government); the French construction firm Groupe GTM; the Mexican construction firm Triturados Basalticos y Derivados (Tribasa), S.A. de C.V.; and Cintra Concesiones de Infraestructura de Transporte, S.A., a subsidiary of the Spanish company Grupo Ferrovial SA. ITA paid 1.17 billion pesos ($120 million) for its 15-percent stake. The concession was for 50 years, with the possibility of extension for up to an aggregate of an additional 50 years. Under a technical-assistance agreement, ITA also assumed management and consulting services to Asur in exchange for a fee.

The Asur concession consisted of the airports serving Cancun, Cozumel, Huatulco, Merida, Minatitlan, Oaxaca, Tapachula, Veracruz, and Villahermosa. Only Cancun, Mexico’s second-busiest in terms of passenger traffic, was profitable. Asur had revenues of $88.84 million in 1998 and $105.53 million in 1999. Net income came to $32.7 million in 1998 and $17.59 million in 1999. Another 74 percent of Asur’s shares were sold to the public in 2000. Of the $335.8 million raised, 92 percent was placed outside Mexico in the form of American Depositary Receipts, with the buyers including institutional investors such as Morgan Stanley & Co.’s asset management group. No single investor was allowed to hold more than 10 percent of the company. ITA retained management responsibility but did not control the board of directors.

Asur in the New Century

At the beginning of 2000, Asur began the process of receiving bids for concessions to operate shops at the airports of Cancun, Cozumel, and Merida for ten years. Commercial areas of the Cozumel and Merida airports began operations in late 2001. The company was investing $59 million in the remodeling and expansion of the Cancun airport, with new areas to include restaurants, bars, cafeterias, convenience stores, banks, and playgrounds. This project included a 13,777-square-foot shopping center, the installation of air conditioning, an integrated operational system to facilitate airline activities, and 239 monitors to enable passengers to check on the status of their flights.

Company Perspectives:

At ASUR, we are committed to the development of Mexico. We therefore want to contribute our experience in airport operations, and that of our Strategic Partner, to the growth of the air cargo industry. Our airports, mainly those at Cancuun, Veracruz and Meerida, have the potential to become major air cargo hubs, and to position themselves among the most important on the American continent.

Writing in the Mexico City News in 2000, José Antonio O’Farrill Avila offered an unflattering view of Asur’s administration of the Cancun airport. He claimed that the company’s officers were at odds with the car-rental companies and vendors in the commercial area and also with taxi drivers serving the airport. He also wrote that airport employees were extorting space-rental fees for Asur from tourism service agencies and taking bribes from “the hotel time-share promoters who lobby in the airport. They are a constant plague for tourists soon off the planes…. Intolerance, inefficiency and bad administration are Asur’s trade marks.” The company was reported in 2002 to be sending all airport employees to three-day customer-service training programs.

Asur’s revenues reached 1.16 billion pesos ($120.62 million) in 2000. Its net income was 209.58 million pesos ($21.81 million). Its nine airports accommodated 11.45 million passengers. The September 2001 World Trade Center took a heavy toll on the company’s fourth quarter for that year, with passenger traffic dropping 12 percent compared to the same period in 2000. Nevertheless, revenues for 2001 reached a new high of 1.21 billion pesos (about $131.8 million), of which revenue from aeronautical services accounted for 85 percent. (Passenger charges collected by airlines accounted for 76 percent of aeronautical revenues in 2000.) Nonaeronautical services included leasing space in the airports to commercial tenants. Revenue from Cancun alone accounted for about two-thirds of the total. The company’s airports served 11.24 million passengers during the year, of which Cancun accounted for about two-thirds. Fifty-nine percent of the passengers were on international flights.

Business was still slow in the first quarter of 2002, with passenger volume down by 9 percent and operating profits falling by 21 percent from the corresponding period in 2001. The remodeling of the Cancun airport and expansion of the Cozumel airport were scheduled to be completed in 2002. An Asur executive said the company expected no increase in the number of passengers before 2003 but predicted a small gain in revenues. He said that Asur had no debt and no plans to seek credit. The company intended to raise its revenue from airport businesses such as retailers, restaurants, and advertisers to 25 percent of the total by 2004 and was redrawing its rental agreements to achieve that goal.

Principal Subsidiaries

Aeropuerto de Cancun, S.A. de C.V.; Aeropuerto de Cozumel, S.A. de C.V.; Aeropuerto de Huatulco, S.A. de C.V.; Aeropuerto de Merida, S.A. de C.V.; Aeropuerto de Minatitlan, S.A. de C.V.; Aeropuerto de Oaxaca, S.A. de C.V.; Aeropuerto de Tapachula, S.A. de C.V.; Aeropuerto de Veracruz, S.A. de C.V.; Aeropuerto de Villahermosa, S.A. de C.V.; Servicios Aeroportuarios del Suereste, S.A. de C.V.

Principal Competitors

Aeroports de Montreal; Aeroports de Paris; British Airports Authority; Fraport AG.

Key Dates:

1965:

Aeropuertos y Servicios Auxiliares (ASA) assumes control of 33 Mexican airports.

1995:

A constitutional amendment authorizes the privatization of the nation’s airports.

1998:

A consortium, Grupo Aeroportuario del Sureste S.A. de C.V. (Asur), wins the concession to run nine airports in southeastern Mexico.

2001:

Asur’s airports serve 11.24 million passengers.

Further Reading

Amaro Gonzalez, Rodolfo, and José Aribal Habeica Villanueva, Problema de information asimetrica en aeropuertos y servicios auxiliares, Thesis, Mexico City: Instituto de Tecnologica Autonoma Mexicana, 1996.

“ASA: a vuelo de pajaro,” Expansion, March 15, 1978, pp. 37–8.

Beard, Alison, “Mexican Airport Group Poised for Take-Off,” Financial Times, May 20, 2002, p. 23.

Caplen, Brian, “Creating a Corporate Role Model,” Euromoney, October 1998, p. 18.

Fritsch, Peter, “Investors to Get a Play on Cancun, Mexico’s Fast Growth,” Wall Street Journal, September 8, 2000, p. A15.

Javier Calderon, Lino, “Air Pressure,” Business Mexico, September 1995, pp. 12, 14-15.

Monjaras Moreno, Jorge A., “Por no poder atenderlos,” Expansion, October 28, 1992, pp. 55–7.

Nirdlinger, Dan, “In Flight,” Business Mexico, April 1998, pp. 54–5.

O’Farrill Avila, José Antonio, “Serious Problems at Cancun’s International Airport,” Mexico City News, August 28, 2000.

“A Public Privatization Out of Mexico,” LatinFinance, November 2000, p. 70.

Ruiz Romero, Manuel, La aviacion civil en Mexico, Mexico City: Universidad Nacional Autonoma de Mexico, 1999, pp. 40–8.

—Robert Halasz