Adolfo Castro – CEO.

Santiago Perez Teuffer – Credit Suisse Bernardo Velez – GBM Robby Jane – HSBC Kevin Kaznica – Citi Ana Zinser – Credit Suisse.

Good day ladies and gentlemen and welcome to the ASUR Third Quarter 2014 Results Conference Call. My name is Taylor 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 towards the end of today’s conference.

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

Thank you, Taylor. And good morning everybody. Thank you for joining us today for the conference call to discuss our third 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. Let me start by providing a brief update on San Juan, Puerto Rico International airport. And afterwards I will over the results for the quarter.

Passenger traffic at San Juan airport was 2.2 million, up 3.7% year-on-year. This quarter, Aerostar contributed with a MXN21.3 million gain for ASUR’s 50% ownership stake, compared with a MXN0.3 million gain in the third quarter 2013.

We also reported a MXN51.2 million gain in stockholders’ equity in this quarter from the impact of the depreciation of the peso during the period. We continue to make progress upgrading the San Juan airport facilities. The remodeling of terminal B is almost complete. And we expect to finalize it in that month in line with our original plan.

We also conducted some minor adjustments at terminal A. The next major step will be remodeling work at terminal C which we expect to close one or two months are terminal B is reopened. Now moving on to ASUR’s results of the quarter. Passenger traffic rose 8.9% year-on-year to MXN5.8 million, the highest level for a third quarter.

Domestic traffic continue [indiscernible] increasing 8% to MXN2.9 million, the highest level with [indiscernible]. All passengers [indiscernible] traffic increases at [indiscernible]. Traffic at Cancún rose by 24% which [indiscernible] of 1.7 million passengers.

International traffic was up 9.9% year-on-year to 2.8 million passengers, a record for the third quarter and up 40 basis points to 49.1% as a percentage of total traffic. Passenger traffic between Mexico, Canada and the United States, represented 86.7% of the total traffic compared with the 86.3% a year ago.

Total revenues, excluding the 48% increase construction services rose 8.8% year-over-year despite the 3.4% reduction in our aeronautical service early this year. Despite the capacity constraints at Cancún Airport, commercial revenues per passenger rose 0.27% year-on-year to MXN71.4.

The investment established in our master development plan [ph], should contribute to drive positive commercial revenue growth as we continue to add this [indiscernible]. In fact, we invested MXN235 million this quarter. And we will focus on meeting our committed investments for the year.

This quarter, we continue the expansion of terminal fee and that we expect to conclude that in the fourth quarter 2015. Revenue earnings should contribute to increase annual capacity of these terminals to MXN10 million from the MXN206 million.

We are also in process of [indiscernible] terminal 4 [indiscernible] which we expect to have ready by the year 2017. Moving into cost, operating costs and expenses rose 7.9%, but excluding the 48.7% increase in construction costs.

Higher cost resulted mainly from the reopening of terminal 1 at In addition to additional expenses resulting from the reopening of terminal 1 at Cancún International Airport, higher direct cost of sales from the 3.9% increase in revenues from direct operations.

EBITDA was up 9.2% year-on-year to MXN880 million with EBITDA margin adjusted by excluding commercial revenue, construction revenue was 67.6% compared to 67.3% in the third quarter 2013. Finally, we maintained a healthy balance sheet with cash and cash equivalent of MXN3.1 billion and bank debt of MXN2.9 billion at the quarter end.

Now let me open the floor for questions. Please, operator, go ahead..

Thank you. (Operator instruction) And we’ll take our first question from Santiago Perez Teuffer with Credit Suisse..

Hello. Thanks a lot of your time. My first question is regarding CapEx deployment. It seems that [indiscernible] for this year. First of all, do you think you’re going to make that investment committed on the fourth quarter? And also, if this has any impact on the expansions plan in Cancún..

Yes, good morning Santiago. Thank you for your question. We are not [indiscernible] in our in house plan. You should remember that we started with approval of this plan at the last day of last year.

So the first part of the year was basically to design the projects [indiscernible] projects, finding contractors, hiring them and then to begin all the process of the construction. And in terms of the amount of the committed investment from a cash flow perspective for this year is MXN1.1 billion.

And we are going to comply with that by the end of the year. So you would see a huge increase in terms of the investments that you have seen for the last couple of quarters during the fourth quarter..

Perfect. Thanks. And then I kind of have a follow up on comments on San Juan.

Is there any chance you can give us some light on the commercial revenues on that airport if you’re covering consolidated or [indiscernible] or some color on that front?.

Yes. And you can find the numbers in the [indiscernible] reports on commercial revenues that we published April of this year. The numbers, I don’t have a gut feeling [ph] at the top of my head. But the numbers are enhanced [ph] but the revenue, the number was low risk revenue [indiscernible].

It’s important to say that terminal B was closed in November last year. So this year is not exactly the best in terms of commercial [indiscernible]. It’s going to be very important to see here once we’ve opened terminal B I think the real potential of San Juan, Puerto Rico Airport in terms of commercial revenues.

And of course, finally, when we open terminal C, and we’re going to do the same process as we did in terminal B for terminal C. So that means that we’ve got a closer terminal and refurbished completely, but let’s take the redesign in the traffic flow, signed the new operators, redesigned basically the commercial offer corner [indiscernible].

So that’s what I’m going to you for the moment..

Thanks, Adolfo..

You’re welcome..

And we’ll go next to Bernardo Velez with GBM..

Hi, good morning, Adolfo. Thanks for the time. You mentioned you’re not behind your MDP plan for the year.

But could you walk us through the seasonality and through the main investment of ASUR’s MDP CapEx for the next year?.

Absolutely. In terms of the [indiscernible], you know that we do our plan every five years. So we were not ready to do anything about the project for this year until this plan was approved. And it was approved the last day of last year.

So as I said before, you show a very low number during the first quarter because basically we were designing or hiring the design of this project. As we go further, you will see an increase on its speed of implementing. The most important project we have on hand today is terminal 3. Terminal 3 should be very ripe the end of next year.

Construction of terminal 3 is to increase the traffic from 3 to 10, so it’s an increased capacity of 4 million. It’s around 30,000 square meters that we’re going to construct. So basically, what you’re going to see is around MXN700 million investment during the fourth quarter.

Apart from these, the other projects which is of course not the same size, but it’s also a very important [indiscernible], we should conclude in the first place of the expansion of this terminal and expansion is around 150% of what we have today. And that should be concluded by the [indiscernible] half of the month of November.

We are going to have some event there during that period and we have to be ready for that. So we are going to comply with the date as well. That’s the two most important projects that we are in that construction process. The other projects we are working, I’m quoting that with [ph], is the design in terminal 4.

The constructional design has been concluded and we are now in the process for expanding [ph] this project for terminal 4. And construction for that should start, and I quote, by the second half of next year [ph]..

Okay. Thanks a lot, Adolfo.

And also I’d like to ask you, do you have any update regarding the – any building [ph] processes that you guys are currently working on?.

The only process that we are registering now in the case of Santiago de Chile. Santiago de Chile, as of today, the offer should be presented in November the 18th. We are analyzing these projects but I don’t see a huge potential on it. Maybe we will not be at the end presenting as an offer..

And we’ll take our next question from Robby Jane [ph] with HSBC..

Hi, Adolfo. Thank you for your time. My first question was in the commercial revenue per passenger.

Do you expect with the expansion of the third terminal, will there be any meaningful increase in the revenue per passenger or will that happen only with the fourth terminal coming in at Cancún?.

Hi, good morning. Well, I expect an increase in the commercial revenue per passenger once the expansion of terminal 3 is concluded basically, because that will give a relief on terminal 2. And normally because terminal 3 is just international, terminal 2 is domestic and international.

The major effects that we are expecting is once terminal 4 is completed. So that’s what I can say..

Sure, thanks. And the second question was, as we look at the traffic expectations for next year, do you expect the airlines to continue to add capacity at your airports? I mean just to get a feel as to – we have seen a huge increase in capacity in the last 12 to 18 months.

Do you see that continuing into 2015 or are you seeing that slowing down in 2015, the addition to airline capacity?.

Well, let me tell you, I have been always [indiscernible] last year. I mean what we have seen in the last 10 months is it’s been too high. If you see the last 10 months, it’s almost 10% of the year. In the case of domestic airlines, they are – the most of you are in the [indiscernible] next year.

That give some kind of potential for more flights to our airports. Of course this goes against the situation with Mexico City. Mexico City has been declared two, three weeks ago completely saturated [ph] 16 hours a day, 365 days of the year. So that will place a restriction for the year. But they will – they should start flying somewhere else.

They should start using Toluca from now on. And at the end of the day, they need a place to fly for the new airports they are adding. So if this was domestic, I’m positive. Of course I should recommend some cautions. The 9.7 that we saw last year and the 8.9 we are seeing this for, in my opinion, if it’s really high..

That’s very helpful. Thank you, Adolfo. Thank you for your time..

You’re welcome..

And we’ll go next to Stephen Trent with Citi..

Hi, good morning. It’s Kevin Kaznica on for Stephen Trent. Just a couple of questions.

First, can you tell us what’s the status of the vacant CFO slot and is there an active search underway for you to get some help on that side?.

Sure. For the moment, I don’t see any change from the current executive [ph] we are following. I don’t see any particular problem within the field [ph] position. So for the moment, I don’t see any change in the short term..

Okay. And also at one point you’d thought of the idea of launching a hotel near some of your airports like Huatulco seems to be one of the areas that comes to mind.

Are you considering launching an airport project in Cancún or anywhere else or Huatulco?.

Well, in the case of Cancún, we have analyzed this situation for many years. And finally, during the second quarter of this year, the state government has provided us with the possibility of having that installation inside the premises of the airport. Once this is published – this has not been published yet or it has not been official.

It will be official once it is published. That will represent an opportunity for us in terms of someone constructing that and we basically leaving the space to them. We do not expect to operate that facility..

Okay, okay, very helpful. And then just finally, what’s the status – I think somebody mentioned earlier, but of your – and highest consideration for bidding on the airport construction in Santiago? I think you might have – is that the one project you said you were considering but it’s not very –.

That is the only one where we are very concerned now..

And you said this doesn’t seem very attractive at this point?.

No, I have not thought of [ph] yet. I was not being very positive..

Okay. Thank you very much..

You’re welcome..

And we’ll take our next question from Ana Zinser with Credit Suisse..

Good morning, Adolfo. Thank you for the call.

Could you elaborate a bit more on Cancún’s margin contraction? When do you see this stabilizing and in what level?.

Well, margin contraction, once again, I don’t like to talk about margins. I like to talk about revenues and I like to talk about costs because those are in a major proportion independent. The increasing cost that we are seeing today is the result of opening terminal 1 last year. That was the facility that was closed.

Today we have to operate that because of the huge increase back in the traffic we have seen recently. That facility is around 20,000 square meters that we have to illuminate, place air conditioner, fixture and then blah, blah, blah. So as of November last year when we opened this facility, the operational cost in Cancún increased.

Also, if you remember, of course not at the same time but do you remember that at the end of last year as part of our mass [ph] development plan, we increased some of the terminal buildings at the regional levels.

That was for Villahermosa, Mérida and Oaxaca with the same kind of consideration, of course, proportionally, in terms of the size of each one, okay. Then once these have been done, if we talk about next year, you of course will not see again the same kind of cost increase because terminal 1 will be open.

You will see again a cost increase once terminal 3 expansion is completed. Of course not in the same proportion, it’s not the same to expand and closing [ph] that to open one. And finally, you will see that again once we complete or open terminal 4.

I will recommend you to go and see what happened in May 2007 when we opened terminal 3 and what kind of cost increases you’ll see there..

Thank you, Adolfo. And one last question.

What’s your view on the price – on the airlines price war and do you see it continue in 2015?.

Price from the airlines or –?.

Yes, the price war that’s been going on between the airlines..

Well, that, in my opinion, will continue because they will be adding capacity and of course that should of course put pressure on the prices. As I said before, they will need a place to have their planes in operation. And I mean that competition should increase..

Okay. Thank you very much..

You’re welcome..

(Operator instructions) And we have no further questions. And I’d like to turn the conference back over to Adolfo Castro with any closing and additional remarks..

Thank you, Taylor, and thank you everybody for joining us today on the conference call. As always, do not hesitate to contact me if there is any further questions. And thank you for being here today. Good bye..

And this concludes today’s conference. Thank you for your participation..