Grupo Aeroportuario del Sureste Q4 2024 Earnings Report

Grupo Aeroportuario del Sureste EPS Results

• Actual EPS: $5.48
• Consensus EPS: $5.54
• Beat/Miss: Missed by -$0.06
• One Year Ago EPS: N/A

Grupo Aeroportuario del Sureste Revenue Results

• Actual Revenue: $449.41 million
• Expected Revenue: $408.15 million
• Beat/Miss: Beat by +$41.26 million
• YoY Revenue Growth: N/A

Grupo Aeroportuario del Sureste Announcement Details

• Quarter: Q4 2024
• Date: 2/24/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, February 25, 2025
• Conference Call Time: 9:00AM ET

Grupo Aeroportuario del Sureste (NYSE:ASR), S.A.B. de C.V. (NYSE: ASR), commonly known as ASUR, is an airport infrastructure company that develops, operates and maintains airports under long-term government concessions. Its activities include passenger and aircraft operations, terminal services, commercial facilities, parking and other airport-related services.

ASUR operates nine airports in southeastern Mexico, including Cancún International Airport, one of the country’s major tourism gateways, as well as airports serving Mérida, Oaxaca, Veracruz, Villahermosa, Cozumel, Huatulco, Tapachula and Minatitlán. The company’s Mexican facilities serve domestic and international travelers, with significant exposure to tourism and business traffic in the region.

Through subsidiaries and affiliated operations, ASUR also manages airports in Colombia and operates Luis Muñoz Marín International Airport in San Juan, Puerto Rico. The company was established in 1998 as part of Mexico’s airport privatization program and has expanded its portfolio through additional international airport concessions and operating agreements.

Grupo Aeroportuario del Sureste Q4 2024 Earnings Call Transcript

Key Takeaways

• Q4 passenger traffic was flat year-over-year (-0.3%), with Colombia up mid-teens and Puerto Rico +10% offsetting an 8% decline in Mexico.
• Total revenues rose 19% to ARS7.24 billion, driven by a 30% increase in Colombia, mid-teens growth in Mexico (mainly from aeronautical tariff hikes) and high-20s in Puerto Rico.
• Adjusted EBITDA grew 23% to over ARS5 billion with a margin expansion of 200 bps to 69.7%, while net income increased 33% to $13.6 billion aided by a $2 billion FX gain.
• Q4 CapEx accelerated to $2.5 billion on projects like Cancun Terminal 1, Oaxaca expansion and Puerto Rico Terminal B, with major investments (including Tulum and new terminals) ramping up through 2028.
• The balance sheet remains strong with $1 billion in cash and a debt/EBITDA ratio of 0.3x; management expects traffic normalization in Q1 2025 and net income to normalize by 2026.

Presentation

[Operator]

Good day, ladies and gentlemen, and welcome to ASUR's Fourth Quarter 2024 Results Conference Call. My name is Melissa, and I'll be your operator. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session toward the end of today's conference. If you'd like to ask a question, please press star one. If you'd like to withdraw your question at any time, please press star two. If you're using a speakerphone, please lift the handset before making your selection. As a reminder, today's call is being recorded. And now, I'd like to turn the call over to Mr. Adolfo Castro, Chief Executive Officer. Please go ahead, sir.

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

Thank you, Melissa, and good morning, everyone. Before I begin discussing our results, let me remind you that certain statements made during the call today may constitute forward-looking statements which are based on current management expectations and beliefs and are subject to several risks and uncertainties that could cause adverse results to differ materially, including factors that may be beyond our company's control. Additional details about our quarterly and full 2024 year results can be found in our press release, which was issued yesterday after market close, and is available on our website in the investor relations section. Following my presentation, I will be available for Q&A. As usual, all comparisons discussed on this call will be year-on-year, and figures are expressed in MXN unless specified otherwise. Let me start with a review of ASUR's operational performance for the quarter.

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

Passenger traffic was basically flat year-over-year, down 0.3%, at 17.7 million passengers. This brought our full year to close 71 million passengers traveling to our airports in 2024. Sustained growth in Colombia and Puerto Rico largely offset weaker passenger traffic in Mexico. Now, taking a deeper look at our geography, Colombia remained our strongest performance market, with passenger traffic increasing in the mid-teens year-on-year, supported by the favorable comps following the suspension of two local carriers in early 2023. Travel demand remained solid, with international traffic up 29% and domestic traffic rising 7%, as Avianca and LATAM Airlines continued to resume routes lost last year. Looking ahead, we expect traffic trends to be normalized in the first quarter of the year towards the more sustainable levels of 2023.

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

Puerto Rico was the next best market and similar to past quarters, maintaining its positive trend with total traffic up nearly 10%, supported by a strong growth in international traffic up 29%, while domestic traffic was up 7%. We expect traffic in this market also to normalize after benefiting from increasing operations by Frontier Airlines a year ago. Lastly, performance in Mexico remained soft as anticipated, declining 8% year-on-year, with both international and domestic traffic down in the high single digits. Moving next to more details on the performance, international traffic continued to experience year-on-year declines from all regions during the quarter. Specifically, traffic from Europe decreased 6.4%, from Canada 0.6%, from the U.S. 8.8%, and from South America by 11.1%.

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

With respect to domestic traffic, the ongoing traffic-limiting restrictions to weather with the air traffic capacity constraints at Mexico City Airport, in fact, since early 2024, are constraining traffic flows. In addition, Cancun Airport is slightly impacted by the initial ramp-up phase of new Tulum Airport. Tulum Airport captured around 1.2 million passengers from Cancun last year and is expected to capture another 1.7 million this year, compared to the 30.4 million passengers that traveled through Cancun Airport last year. Looking ahead, we expect to normalize in 2026 as travel-limiting effect is reduced and Tulum initial ramp-up concludes. From that point, we anticipate passenger traffic at Cancun Airport and Tulum Airport to grow at a pace consistent with each region's dynamics. Now, as we turn to the P&L, recall that all reference to revenue and cost figures are excluding construction.

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

Total revenues for the quarter increased 19% year-on-year to MXN 7.24 billion, reflecting a strong performance across all three regions. Colombia once again led growth, posting a 30% increase in top-line revenue, supported by rising passenger traffic. Mexico and Puerto Rico also delivered solid results with revenue growth in the low teens. Mexico, which accounted for 72% of total revenues, posted a mid-teen increase in top-line performance. Growth was primarily driven by a low 20% increase in aeronautical revenues following the recent tariff adjustments, while non-aeronautical revenues rose in the low single digits. Puerto Rico represented 15% of total revenues and delivered high 20% growth, supported by a strong increase in both aeronautical and non-aeronautical revenues, further boosted by the foreign exchange benefit from the weaker peso. Colombia contributed 12% of total revenues recorded as a robust 31% increase in top-line revenue.

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

This growth was fueled by strong performance in both aeronautical and non-aeronautical segments. With revenues rising in the low 30s, both segments benefited from continued recovery in the domestic international traffic. Colombia, as part of the strategy to expand commercial offerings, opened 45 new commercial spaces over the last 12 months. This included 12 locations in Mexico, five in Puerto Rico, and 28 in Colombia. As a result, total commercial revenues grew in the high single digits, with Puerto Rico posting a 26% increase, Colombia delivering a strong year-over-year growth of 31%. In Mexico, commercial revenues saw a low single-digit increase, marking a positive shift from the previous trend. On a per-passenger basis, commercial revenue grew in the high single digits year-on-year, reaching MXN 130 in the quarter. This solid performance was supported by the growth across all three markets.

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

In Puerto Rico and Colombia, commercial revenues per passenger rose in the mid-teens, with Puerto Rico benefiting from a stronger U.S. dollar and Colombia from new openings. Mexico also posted solid growth in the low single digits to MXN 158 per passenger, also benefiting from the FX impact. On the cost front, total expenses increased 13% year-on-year. In Mexico, costs were up 12%, clearly reflecting the 80% increase in the concession fees mandated by the Mexican government and a 20% in minimum wages, mainly affecting cleaning and security services. Now effective since January the 1st last year. These impacts were partially offset by a 50% reduction in technical assistance fees.

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

In Puerto Rico, cost increase in the high teens% driven mainly by the depreciation of the Mexican peso against the US dollar, while Colombia cost rose just 7%, benefiting from rebates in the provision for maintenance and consolidation, which helped to mitigate overall cost pressures. Consolidated EBITDA was up 23% year-on-year to over MXN 5 billion in the quarter, while the adjusted EBITDA margin, which excludes construction, improved 200 basis points to 69.7%. Driven by solid profitability across the three regions, Colombia reported the strongest performance with EBITDA up 61%, followed by Puerto Rico with a 39% increase, while Mexico posted an increase of 70% in EBITDA. Our balance sheet remains robust, closing the quarter with cash and cash equivalent of $1 billion with a debt to last 12 months adjusted EBITDA remaining at the negative of 0.3 times.

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

During the quarter, capital expenditure accelerated, reaching MXN 2.5 billion and accounting for half of the full year of total MXN 4.4 billion in 2024. Main projects during the quarter included the reconstruction and expansion of Terminal 1 at Cancun Airport, as well as the expansion of Terminal Oaxaca International Airport. In Puerto Rico, expansion was at Terminal B, and runway remodeling remained on track. As a reminder, all the construction activities will take place outside the operational areas to ensure no disruption to airport operations. We expect investments gradually ramp up Capex through this year as we advance in the key infrastructure projects. Those projects include the reconstruction and expansion of Terminal 1 at Cancun Airport, with estimated completion in 2026, while Terminal 4 is scheduled for completion by 2028.

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

Terminal 2 is expected to see operational improvements once Terminal 1 is completed, helping to alleviate bottlenecks on the non-aeronautical side of the business. This enhancement will also optimize the processing of traffic to and from South America, further supporting revenue generation opportunities. Wrapping up, we closed 2023 with another strong quarter, a solid full-year performance despite navigating industry challenges such as traffic-limiting engine issues and capacity reductions in Mexico City. Net income for the year rose 33% year-on-year to MXN 13.6 billion, supported by a resilient operational performance and a disciplined execution. Our results also benefited from a MXN 2 billion foreign exchange gain driven by the depreciation of the Mexican peso against the U.S. dollar, compared to the FX gain of nearly MXN 840 million in 2023.

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

We remain focused on strengthening our airport network through strategic infrastructure investments that enhance the passenger experience, expand commercial opportunities, support long-term traffic growth, and create value for shareholders. We achieved substantial progress on our strategy objectives and have a solid foundation in place, which positions us room for continued success in 2025 and beyond. This ends my presentation remarks. Melissa, please open the floor for questions.

[Operator]

Thank you. Again, ladies and gentlemen, it is star, then one for questions. And again, please make sure your mute function is turned off or the handset is picked up before pressing the corresponding digits. Our first question comes from the line of Rodolfo Ramos with Bradesco BBI. Please proceed with your question.

[Rodolfo Ramos, Head of Mexico Research and Strategist at Bradesco BBI]

Thank you. Good morning. Thanks, Adolfo, for taking my question. I have a couple, if I may.

[Rodolfo Ramos, Head of Mexico Research and Strategist at Bradesco BBI]

Can you `share with us your traffic growth expectation for this year and whether you're seeing any pickup in route openings or network development by airlines, specifically on the Mexico side? And then the second question is on the commercial revenue per passenger. I mean, the Mexican peso depreciation certainly helps on that front, but all else constant, do you expect the traffic to loom these 3 million passengers that you expect now this year on a full annualized basis to cannibalize your commercial revenue per passenger? I don't know if you see a higher spend per passenger on that particular passenger that was cannibalized from Tulum. Thank you.

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

Thank you, Rodolfo. Good morning. In the case of the Mexican traffic, we will continue suffering from the restriction in capacity of Mexico City and the problem of Pratt & Whitney.

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

I'm sure that you have heard what Volaris has said yesterday, and basically, they are expecting to have or to continue with the Pratt & Whitney engine problem during next year. Of course, they have been receiving airplanes in accordance with the requested airplanes they have done in the past. So it's true that we will suffer from some aircrafts to be on ground as a result of Pratt & Whitney, but the situation is improving. I would say, yes, we will be affected, but not as we were affected last year. I hope that by the end of the third quarter, the situation will improve in that front, as well in the case of the restriction of Mexico City Airport. In terms of commercial revenues, as I said during the initial remarks, we are still suffering in the case of Terminal 2.

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

We know that we are losing some commercial opportunities there, and we are expecting those to improve once we open Terminal 1. We expect to open Terminal 1 at the end of the second quarter of 2026. So for the moment, we don't see a decrease, but we know that we are losing commercial opportunities.

[Rodolfo Ramos, Head of Mexico Research and Strategist at Bradesco BBI]

Thank you.

[Operator]

Thank you. Our next question comes from the line of Pablo Ricalde with Itaú. Please proceed with your question.

[Pablo Ricalde, VP Equity Research at Itaú]

Hi. Good morning, Adolfo. I have two questions. One is a follow-up to Rodolfo's. We have seen some press that the capacity of the Mexico City Airport should increase this year. I don't know if you have heard something on that front. And the other one is on dividends. I don't know if you have some expectations on what to propose next shareholders meeting.

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

In the case of the capacity of the restriction in the capacity of Mexico City Airport from 52 to 43 ATMs per hour, what I have seen in the news recently is that the Mexico City Airport manager is open to eliminate this restriction and probably to go back to the 52. Remember that we're coming from the 63. So that's why I'm expecting this to be lifted by the end of the quarter. Also, remember that next year we have or Mexico City will receive some passengers due to the World Cup that will take place in June next year. So I hope that the government will change this restriction by the third quarter. And also, as Volaris has more planes, I'm sure that they will put some pressure on this front.

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

In the case of dividends, I have prepared my proposal, and it will be sent to the board of directors. And I'm sure that you will hear from these on March 14th. That's what I can say for the moment.

[Pablo Ricalde, VP Equity Research at Itaú]

Perfect, Adolfo. Very clear. Thank you.

[Operator]

Our next question comes from the line of Stephen Trent with Citi. Please proceed with your question.

[Stephen Trent, Managing Director at Citi]

Thank you very much for taking my question, Adolfo, and good morning. I know that there's certainly a lot of political rhetoric at the moment in North America, and we've, of course, seen some currency movements, which you've mentioned. Are you seeing any nuances in your international traffic flow, for example, Canadians visiting Mexico more frequently than you expected, and maybe some of these folks are no longer going to Disney World or something like that? Any sort of pivots that you've noticed?

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

I'm sure that you have heard my initial remarks. In the case of international traffic for the quarter, all the regions were negative. In the case of Canadians, they were negative 0.6%, which is almost flat, I would say. I don't see any change due to the situation in the U.S. during the last quarter. The traffic was weaker. Of course, you need to understand that some of this traffic is going to Tulum. Tulum last year got around 1.2 million passenger traffic, and 75% of these was from the U.S. So if you make the math, that's basically what we are losing in terms of the U.S. traffic. Canadians are not so much, and the other, let's say, 20%, it's Mexico. It's domestic traffic. But no, I have not seen any change due to the new politics in the U.S.

[Stephen Trent, Managing Director at Citi]

Appreciate that, Adolfo.

[Stephen Trent, Managing Director at Citi]

And just one other quick follow-up. I wasn't sure if I heard you, but are you getting or do you expect to get any meaningful traffic flow out of Felipe Ángeles, for example, if authorities do not make any adjustment in Benito Juárez air traffic movements?

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

Well, the case of the AIFA is basically traffic to and from Tulum, and I would say in the second place to Cancún. Most of the traffic, it's been managed by Viva Aerobús directly to Tulum. Also, Mexicana Airlines is having some flights there as well. The airport is growing, of course, because of the restriction in Mexico City Airport. And I hope that if the restriction is lifted, we will have some benefit there from Volaris flying directly to Cancún.

[Stephen Trent, Managing Director at Citi]

Okay. Very helpful. Thanks, Adolfo.

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

You're welcome.

[Operator]

Thank you. Our next question comes from the line of Pablo Monsivais with Barclays.

[Operator]

Please proceed with your question.

[Pablo Monsivais, Equity Reserach Analyst at Barclays]

Hi, Adolfo. Thanks for taking my question. Just wanted to learn a little bit more if you had any conversations on feedback, particularly from US carriers towards capacity expansion plans into Cancun for the second half of the year. Thank you.

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

Well, we are in the process to receive the summer season schedule, so that should be received, I would say, in the coming weeks. So for the moment, we do not have visibility for the summer season.

[Pablo Monsivais, Equity Reserach Analyst at Barclays]

Perfect. And a second question, if I may. On the commercial revenues, once you do the works that are expected to be done in the MDP, is there any target on commercial revenues per passenger that you are estimating?

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

Well, there is no specific number. I would say, and we used to say internally that it's a moving target.

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

We always want more, and that is why we are always looking for what the passenger is looking in terms of price growth and service. So what we know today is that we are losing commercial opportunities due to the lack of capacity in some commercial areas, specifically in Terminal 2. And that's why we are expanding and reconstructing Terminal 1. Then, as I said before, we're expecting to be open at the end of the second quarter of 2026.

[Pablo Monsivais, Equity Reserach Analyst at Barclays]

Okay. Perfect. Thank you very much.

[Operator]

Thank you. Our next question comes from the line of Alberto Valerio with UBS. Please proceed with your question.

[Alberto Valerio, Business Analyst at UBS]

Thank you. Thank you for taking my question, Adolfo. Two quick follow-ups on my side. Actually, I need one. We see that you have some rebalancing in Colombia and Puerto Rico. If you could provide a little bit of details on this rebalancing.

[Alberto Valerio, Business Analyst at UBS]

And also, from your expectation, how Tulum has been operating so far? How has it been the traffic in Tulum versus your expectation so far? Thank you very much.

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

Well, in the case of Colombia and Puerto Rico, I would say they are working, and they are giving great results. I'm really surprised of the resilience of Puerto Rico. I was expecting the traffic to become more normal. If you see the report from the case of January, it's still strong, very strong. And Colombia, of course, is in the process to, well, it has concluded the process to recuperate the two airlines we lost at the beginning of 2023. So we are back on track, and I hope that Colombia will continue with the normal growth in the coming quarters. That's basically what I can say for the two cases.

[Operator]

Thank you.

[Operator]

Our next question comes from the line of Jens Spiess with Morgan Stanley. Please proceed with your question.

[Jens Spiess, VP Equity Research at Morgan Stanley]

Yes. Thank you, Adolfo. So just one question on capacity in Cancun. Under a hypothetical scenario where international remains weak and there's an increase in capacity that the domestic airlines want to increase to Cancun, are there any constraints in the terminals where you service the national carriers, or would you be able to allocate, or would you need to reallocate basically your operations there? Any color on that? Appreciate it.

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

Absolutely. Well, today we do not have restrictions in terms of operational capacity in Terminal 2. What we have is restrictions in the non-aeronautical side. The capacity, I would say, in the case of the middle of the day, probably you will not find the space to have your meal.

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

But in the case of the operational front, we do not have problems. Of course, once Volaris recuperates its operations from the problem they have with Pratt & Whitney, we will need more capacity. And that's why we're reconstructing and expanding Terminal 1. In Terminal 2, what we have is basically Viva and Volaris plus South America. So what we're intending to do is to subtract South America and move that to Terminal 1, and that will leave additional space for these two airlines.

[Jens Spiess, VP Equity Research at Morgan Stanley]

All right. Perfect. Thank you.

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

You're welcome.

[Operator]

Thank you. Ladies and gentlemen, as a reminder, if you'd like to join the question queue, please press star one on your telephone keypad. Our next question comes from the line of Alan Macias with Bank of America. Please proceed with your question.

[Alan Macias, Equity Research Analyst at Bank of America]

Hi. Good morning, Adolfo. Thank you for the call. Just a question on Mexican tariffs.

[Alan Macias, Equity Research Analyst at Bank of America]

Were you able to implement the increase last year? And is there any spillover that we might see for this year? Thank you.

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

Alan. Hi. Good morning. I cannot hear you. Your line is cutting, so if you can repeat your question, please.

[Alan Macias, Equity Research Analyst at Bank of America]

Yes. Can you hear me better?

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

Better.

[Alan Macias, Equity Research Analyst at Bank of America]

Yeah. Just on Mexican tariffs, if you were able to implement the increase in 2024, and if we might expect some spillover for this year on Mexican tariffs. Thank you.

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

It was basically implemented last year.

[Alan Macias, Equity Research Analyst at Bank of America]

Thank you.

[Operator]

Our next question comes from the line of Rodrigo Torrero with Fundamental Capital. Please proceed with your question.

[Rodrigo Torrero, Markets Analyst at Fundamental Private Markets]

Hello, Adolfo. Thanks for my question. My question is actually related to passenger growth, and it's a bit of a double-click on some things you mentioned.

[Rodrigo Torrero, Markets Analyst at Fundamental Private Markets]

As you referred, Volaris yesterday stated in the earnings call that they expect GTF issues to affect a significant portion of their fleet all throughout 2025, 2026, and 2027. And they've—

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

Rodrigo, again, could you repeat your question, please? Sorry. It seems that we've lost Rodrigo. We'll move to the next question.

[Operator]

Our next question comes from the line of Gabriel Himelfarb with Scotiabank. Please proceed with your question.

[Gabriel Himelfarb, Equity Research Associate at Scotiabank]

Hi, Adolfo. Thanks for the call. Question on Tulum. Is there any somehow updating mechanisms or compensating mechanisms for the traffic that is being taken from the Tulum airport from Cancún? Thank you. Hi, Gabriel. I would not call it compensation because, at the end of the day, if you go back to the regulatory framework that was published on October 19, 2023, the formula is looking forward, is not looking backward.

[Gabriel Himelfarb, Equity Research Associate at Scotiabank]

Of course, the effects of Tulum airport were included in those calculations.

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

So to give you a very clear response, yes, it has been included, the effects of Tulum. But, of course, we cannot call it compensation.

[Gabriel Himelfarb, Equity Research Associate at Scotiabank]

So they were included on the MDP last year's MDP?

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

Absolutely.

[Gabriel Himelfarb, Equity Research Associate at Scotiabank]

Thank you. Thank you very much.

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

You're welcome.

[Operator]

Thank you. Our next question comes from the line of Anton Morton with GBM. Please proceed with your question.

[Anton Morto, Financial Analyst at GBM]

Hi, Adolfo. Thank you for the call and congrats on the results. I'm sorry if this has already been asked. I had some issues with my line. But my question is related to the commercial side. I mean, we saw really good performance on the non-aeronautical growth.

[Anton Morto, Financial Analyst at GBM]

I was wondering, I mean, is this a result of the mix from having maybe a stronger U.S. dollar and maybe some pent-up demand or something? Or also, if there has been any strategic shift in how you renew your contracts, maybe a little bit of pricing power on that side. I'm not sure if you could provide some color there.

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

Absolutely. Well, it has to do with the effects. You can see it very clearly in the fourth quarter results and partially on the third quarter last year results because we saw some kind of peso devaluations since the third quarter. But, of course, the most important effect was in the fourth quarter. That's basically what we have for the fourth quarter. Some effects, good results, no question about it.

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

I don't see any problem for the future except that we know that we are losing commercial opportunities there.

[Anton Morto, Financial Analyst at GBM]

And also, just a little bit of a follow-up there, Adolfo. Roughly, what amount of your commercial contracts are due each year? And are you able to renew with them, I mean, maybe open terms, or are those getting renewed with maybe fixed terms or an automatic loss or something like that?

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

Well, there is no way to say that this year 20% of the contracts will be there. Every business line has its own term. I would say it could go from seven to three years, depending on the business line. Normally, what we do is to continue with the same kind of terms. As you have mentioned, increasing prices, increasing the concession fee is not the way to maximize revenues.

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

Probably in some cases, it could be the opposite. Remember that what we want is they to sell more and we to get more. So in that sense, the most important thing is to be able to get as much as we can in terms of sales, not in terms of prices.

[Anton Morto, Financial Analyst at GBM]

Perfect. That is really clear. Thank you.

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

You're welcome.

[Operator]

Thank you. Our next question comes from the line of Guilherme Mendes with, I'm sorry, J.P. Morgan. One moment. Please proceed with your question.

[Guilherme Mendes, Senior Equity Research Analyst at J.P. Morgan]

Hey, Adolfo. Thanks for taking the question. First one, it's a follow-up on Tulum. You said it was included on the MDP. But can you share how it's trending when compared to your expectations if it's going in line or not? And the second one, in terms of capital allocation, there was some news on the Dominican Republic asset last year.

[Guilherme Mendes, Senior Equity Research Analyst at J.P. Morgan]

I understand it's still on hold, and if there's anything else that the company would be considered outside Mexico. Thank you.

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

Yes. In the case of Tulum, what I can say to you is it has respected, basically, probably not so strong. Let me say this year, probably originally we were expecting around three million. I'm saying 2.9 million for this year. And that will be the ramp-up for Tulum. So the ramp-up between 2024 and 2025. And from there, Tulum will have to grow at the dynamics of the region. In the case of Dominican Republic, we do not have any update. We continue with the legal process there. And I hope that we will have some results during this year.

[Guilherme Mendes, Senior Equity Research Analyst at J.P. Morgan]

Okay. Thank you. And just to confirm, anything else outside Mexico and outside Dominican Republic that you would consider?

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

Well, of course, we want to consider all.

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

We review all the projects that are there. But for the moment, I would say I do not have any significant project in front of me in the short term. Perfect.

[Guilherme Mendes, Senior Equity Research Analyst at J.P. Morgan]

Thanks very much, Adolfo.

[Guilherme Mendes, Senior Equity Research Analyst at J.P. Morgan]

You're welcome.

[Operator]

Thank you. Our next question comes from the line of Rodrigo Torrero with Fundamental Investments. Please proceed with your question.

[Rodrigo Torrero, Markets Analyst at Fundamental Private Markets]

Apologies. My line dropped. Were you able to listen to me?

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

Now I can hear you.

[Rodrigo Torrero, Markets Analyst at Fundamental Private Markets]

Okay. Thank you. My question is actually kind of a double-click on some things you mentioned, more specifically Volaris. As you mentioned, yesterday stated in the earnings call that they're going to have GTF engines for this year, next year, and possibly 2027. And they have, moreover, renegotiated their delivery errors with Airbus to further slow down capacity increases. Do you believe that this new information significantly hinders growth in the short to medium term?

[Rodrigo Torrero, Markets Analyst at Fundamental Private Markets]

Do you think it may be indicative of a more weak domestic market and players? Thank you.

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

Yes, Rodrigo. What's important for us is the additional capacity they are including as we speak, not just Volaris, also the case of Viva and the case of Aeroméxico. If you see the report of Volaris, of course, I'm not so sure that what they report is the operational aircrafts. But if you see the report, at the end of 2023, they reported 130. At the end of 2024, they reported 143. So if we just use those two numbers, we will say they have more aircrafts than in comparison to what they had before Pratt & Whitney. The problem with those two numbers is that we don't know how many of those are in the shop.

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

Also, it has been announced yesterday by them that some of the aircraft that have already been recalled will have to go again for some additional works. So that is why I said during my remarks that next year, we will see the problem will still there. Of course, in a more smaller manner, my expectation is that these first three quarters are going to be the last strong effects from Pratt & Whitney in the case of Volaris.

[Rodrigo Torrero, Markets Analyst at Fundamental Private Markets]

Great. Thank you very much.

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

You're welcome.

[Operator]

Thank you. Ladies and gentlemen, as a final reminder, if you'd like to ask a question, please press star one on your telephone keypad. We'll pause a moment to allow for any other questions. Mr. Castro, it seems there are no other questions at this time. I'll turn the floor back to you for any closing comments.

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

Thank you, Melissa.

[Adolfo Castro Rivas, CEO at Grupo Aeroportuario del Sureste]

Thank you all of you again for joining us today for this fourth quarter 2024 conference call. We wish you a good day and goodbye. Now you may disconnect.

[Operator]

Thank you, ladies and gentlemen. This concludes today's conference call. You may now disconnect.

Participants

Executives

• Adolfo Castro Rivas, CEO

Analysts

• Rodolfo Ramos, Head of Mexico Research and Strategist at Bradesco BBI
• Rodrigo Torrero, Markets Analyst at Fundamental Private Markets
• Gabriel Himelfarb, Equity Research Associate at Scotiabank
• Alan Macias, Equity Research Analyst at Bank of America
• Pablo Monsivais, Equity Reserach Analyst at Barclays
• Stephen Trent, Managing Director at Citi
• Alberto Valerio, Business Analyst at UBS
• Pablo Ricalde, VP Equity Research at Itaú
• Anton Morto, Financial Analyst at GBM
• Guilherme Mendes, Senior Equity Research Analyst at J.P. Morgan
• Jens Spiess, VP Equity Research at Morgan Stanley