Adolfo Castro – CEO.

Santiago Perez Teuffer – Credit Suisse Benjamin Theurer – Barclays Capital Neal Dihora – Morningstar Karla Pena – Scotiabank Gene Grenier – BBVA Compass.

Good day ladies and gentlemen and welcome to the ASUR Second Quarter 2014 Results Conference Call. My name is Jennifer and I will be your operator. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of the conference.

(Operator Instructions) As a reminder, today’s call is being recorded. For opening remarks and introductions, I would now like to turn the call over to Mr. Adolfo Castro, Chief Executive Officer. Please proceed, sir..

Thank you, Jennifer. And good morning everybody. Thank you for joining us today for the conference call to discuss our second quarter 2014 results.

Allow me to remind you that certain statements made during the course of our discussion today may constitute forward-looking statements, which are based on current management expectations and beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially, including factors that may be beyond our company’s control.

For an explanation of these risks, please refer to our filings with the Securities and Exchange Commission and the Mexican Stock Exchange. I will start today’s conference with an update on San Juan, Puerto Rico International airport. Afterwards I will briefly review the results for the quarter.

Passenger traffic at San Juan airport was 2.2 million, up 6.4% year on year and 4.7% sequentially. This quarter, Aerostar contributed with a gain of Ps. 21.9 million for ASUR's 50% ownership stake, compared with a 26.8 million gain in the second quarter 2013. Note we also reported a Ps.

9.1 million loss in stockholders’ equity from the impact of depreciation of the peso during the period. In terms of the upgrading of San Juan airport facilities, we remain on track with the remodeling of terminal B which is expected to be completed by November this year.

Following that, we will start remodeling process for terminal C and we are almost concluding minor adjustments that we are making on terminal 1 or terminal A. Moving on to results of the quarter. Passenger traffic increased 10.7% year on year to 3.2 million, the highest level for a second quarter.

Remember that Holy Week enabled this quarter compared to March last year, facilitating encompass [ph]. Domestic traffic was up 11.82% from last year’s levels to 2.6 million passengers, a record for the second quarter, with increases across all airports. Traffic at Cancún was strong up by 12% to 1.4 million passengers.

International traffic grew 9.7% year on year to 3.2 million passengers, the highest for a second quarter. The share of international traffic rose [ph] 40 basis points to 55.7% of the total traffic reflecting the strong growth in domestic market.

Passenger traffic between Mexico, Canada and the United States, represented 88% of the total traffic compared with the 88.8% a year ago. Total revenues, excluding the 47.1% decline in construction services, increased 8.1% year on year reflecting the 3% reduction in our aeronautical service this year.

As anticipated, commercial revenues per passenger fell 1.12% year on year to Ps 73.03, it’s been affected by capacity constraints. Despite the opening of terminal 1 at Cancún last November, as discussed in the past, the investments contemplated in the new MDP should contribute to alter the situation.

Operating costs and expenses fell 0.12% during the quarter but increased 7.6% when excluding the 47% decline in construction costs. In addition to additional expenses resulting from the reopening of terminal 1 at Cancún last November, costs were affected by higher direct cost of sales from the 15% increase in revenues from direct operations.

EBITDA was up 8.6% year on year to Ps. 874 million resulting in an EBITDA margin of 65.18%, an expansion of 248 basis points. In addition, this quarter we invested 49 million mainly to complete expansion work in the Veracruz terminal.

On this front, you will see a very strong pickup in CapEx in the second half of the year as we complete the committed investments for the year. Finally, on the balance sheet front, we closed the quarter with cash and cash equivalents of Ps. 2.4 billion while bank debt stood at Ps. 2.8 billion at the quarter end. Now let me open the floor for questions.

Please, Jennifer, go ahead..

(Operator Instructions) We will take our first question from Santiago Perez Teuffer from Credit Suisse..

I wanted to ask on Cancún, could you please give us more color on Cancún’s profitability? We saw 450, 430 basis points margin contraction year on year in the second quarter, was it fully related to increase in your own retail activity and how do you see this margin evolving throughout the rest of the year? Thanks..

Santiago, good morning. Well, basically you know that the contraction has resulted from the additional costs we are having since November last year from terminal 1. Terminal 1 was opened in November, and this is generating a cost because we have to spend some money on lighting, security, maintenance etc.

So you will see contraction up to the third quarter this year when you complete one year as from the day this terminal was opened..

Thank you. We’ll go next to Stephen Trent from Citi..

Good morning, Adolfo. This is [indiscernible] stepping in for Stephen Trent. Just I guess the first question, earlier in the call, you gave the progress report on facility upgrade, I kind of didn’t catch it, if you could give on that bias again, that would be great..

Probably I couldn’t hear your voice..

Earlier in the call, you gave us an update on like terminal – terminals I think in the Cancún. It was something I didn’t catch it, and I was just wondering if you could just give us – if you can address..

So you are asking about terminals in Cancún. What we are doing today is we started with the expansion of terminal 3, that expansion should be completed by the end of – during mid-year. This expansion is to take terminal 3 capacity from 6 million passengers on a yearly basis to 10 million.

And after that, we will be working on the construction of terminal 4 that we expect to have ready by 2017. Today we are in the process of designing this terminal but I believe this terminal should at least have 6 million passengers capacity..

And the terminal 3, once in that [ph] typically by mid next year?.

I would say, let’s say third quarter..

I guess we just really – little compare [ph] about like what’s happening in San Juan, almost 20% even though traffic increased 6%, and we see that Puerto Rico has had a credit downgrade, credit rating downgrade. So if you give some color on what’s going on in there..

Okay. In the case of San Juan, let me talk about the numbers. It’s important to understand that we closed terminal B for remodeling process since November of last year, so that of course had an impact on commercial revenues and of course this has an impact on margins.

And that’s why you can see the margin decreased, or our net traffic decreased from the second quarter this year against last year. That’s the first step. The second part is we are glad to see a nice number in the passenger traffic growth. And the third one, the down credit – it’s resulted from the downgrade for the state.

You know that economy in San Juan, in Puerto Rico is not growing well, and they were downgraded, and because of this – Moody’s did the same with the better [ph] of the company. I don’t see any major impact from this on the financials of the company.

Please remember that most of the traffic comes from – most of the people that comes to San Juan leaves around the year..

That’s very helpful.

I guess my next question would be – so on the quarter’s decline in sales [ph] like how much of this impact came from mix and what happened to I guess – I don’t know if you guys track same store sales in Cancún year over year?.

Well, we have said this many times capacity constraints are having an impact on the commercial sales. It’s sad to see [indiscernible] decrease this year but the decrease you are seeing is basically the same situation – the passenger traffic growth is so strong, that we’re taking up to a little bit, the building side to pick up..

Okay, so it’s not like a decrease in like the quality of the passenger, like low cost for passenger [inaudible] versus I guess vacation or spending money, it’s more like a volume over capacity issue?.

Well, you are seeing – the comparison, it’s the same kind of passengers. You have different passengers through the year. The passengers in June are not the same as the ones in December.

But the comparison you are seeing is second quarter with second quarter, so the only difference is the Holy Week, but a little change in the passenger mix, but I don’t see that main reason..

And just finally, do you have any thoughts on potential airport investments outside of Mexico, like diversification and to what extent, would you guys consider purchasing some portion of Highstar’s stake in San Juan airport?.

I don’t see that for the moment..

Thank you. We’ll go next to Benjamin Theurer from Barclays..

I have one question just on the CapEx and you mentioned that, so clearly we’ve seen that the first half on construction activity CapEx itself was relatively low. So the MDP for this year was somewhere little bit over north Ps. 1.2 billion.

So does that mean that we basically get a run rate of about equal 600,000 for the next two quarters or is that even more inclined towards the fourth quarter to get a little bit of sense of where construction revenues et cetera and where construction spending is going for the rest of the year and how do you see actually the CapEx into next year split out because clearly next year is some sort of a peak of the MDP you agreed a couple of months ago, so that would be interesting, just to get a little bit of a sense of when the money is actually going to be disbursed? Thanks..

Okay. Good morning. Of course, it’s almost impossible for us to control the peak of the construction process.

But let me say why with the year particularly is very low, the program was approved at the end of December last year, so the first quarter basically was to make the design of each one of the projects and then the second quarter is the one that we are using to make the same process – in order to have a contractor.

Third quarter and fourth quarter is going to be the beginning of the work, the real work, I truly believe that second quarter – sorry, fourth quarter is going to be higher than third quarter.

And we will have to spend the 1.1 billion we have committed with our project no matter what, so the 1.2 you mentioned, you have to develop the 140 million we have invested in them. So in cash, the reality is 1.1 billion and that has to be spent during this year..

Okay. So there was no way you’re going to have that postponed somewhat into 2015 for whichever reason, right, you have to spend that –.

Yeah, correct..

(Operator Instructions) And we’ll go next to Neal Dihora from Morningstar..

Just any detail on LMM sort of split out by aeronautical and non-aeronautical revenue, I guess, would be interesting to hear what you’ve seen over the last year..

Neal, hi good morning. You have some numbers in the 20th report of last year, but basically from the top of my head, I will comment to you what the numbers are. First of all, -- is a fixed amount of 62 million every year.

Of course, last year we targeted on further 28 and we cannot say the 62, 62 in terms of proportion of the amount of work we have been doing for last year. In terms of commercial revenue, the number is very close to $4 per passenger, and that’s more or less the numbers we have for last year. I don’t know if that’s what you really want to..

Yeah, no, I think you’re there, the aeronautical was fixed for five years, is that right, the 62 million amount you mentioned?.

It’s fixed for five years, then it will be adjusted for inflation up to the year ’15, and then we can re-negotiate or remain it is..

And then when did you say terminal C was going to be up and ready?.

Okay. Once we conclude with terminal B, let’s say we concluded terminal B on November. Once it’s opened, we will have to move some airlines to terminal B and then some more or less from terminal D to terminal B, close to terminal C. Probably we will be closing terminal C by January or December..

(Operator Instructions) And we’ll go next to Karla Pena of Scotiabank..

I was wondering if you could tell us – we had like an easy comp this year on G&A because of the expenses, you were talking about the MDP and some other related to the Puerto Rico project. I was wondering if you have some of these expenses that were made last year in the following quarter.

And also regarding this closing of the terminal C in Puerto Rico, should this put more pressure into the cost, mainly into the bottom line result that you are showing or should we expect – in the following quarter? Thank you very much..

Karla, good morning. Yes, we won’t have the same kind of expense during the following quarters, the same in the case of Puerto Rico and the same case in the case of MDP. The MDP expenses were during the fourth quarter of last year. In the case of your question San Juan, I don’t know what was your question..

Because you were explaining that part of the pressure, you’ve had a decline in the result you showed, right – and you were explaining that part of it was because some expenses regarding the closing of the terminal.

So I was wondering that now you are going to close the next terminal maybe you might have a little bit more expenses or they should even out, because you’ve already closed one terminal, so you already had those expenses..

No, it’s not expenses, it’s commercial revenues. So just imagine that you had a –.

Right, okay..

Yeah, you had a base open and you had to close that, so all the people that were working there has to leave..

Okay.

So it’s related more to revenues than expenses in Puerto Rico?.

Yes. I would recommend you to see the specific page we have in the presentation that talks about commercial revenues per passenger. And the key – you have to see the year 2000..

We’ll go to Gene Grenier from BBVA..

I just have one question. I know you are not giving any guidance but just to have your point of view on the traffic going forward in the second semester had a good start to the year, using the trend or the rates you have been – first half would be sustainable in the second half? Thanks..

Hi, good morning. Very tough question again. They have been very good so far, comparables are very hard for the remaining of the year. Numbers of second quarter and fourth quarter last year, third quarter and fourth quarter last year were very, very strong as well.

It’s hard to say but I have to say that domestic Mexico [ph] capacity, they are reducing the prices and this is increasing demand. And that’s why we have seen very good domestic figures. On the international front, US traffic has been very strong as well. And the European traffic has been strong.

I believe for the second half of the year we will see a growth. I do not expect to be as strong as it has been for the first half. That’s what I can just give you..

(Operator Instructions) There are no other questions in the queue at this time. And I will turn it back over to you Mr. Castro for any closing or additional remarks..

Thank you, Jennifer and thank you everybody for joining us today on our conference call. As always, do not hesitate to contact me if there is any other question. And thank you for being here today, and have a good day. Good bye..

This does conclude today’s conference. Thank you for your participation..