ASUR Reports 2Q17 Passenger Traffic Up 14.6% YoY in Mexico and 5.0% in San Juan, Puerto Rico

Highlights for the Quarter

• Increased ownership position in San Juan Airport from 50% to 60%.
• Agreements to acquire controlling interest in two Colombian airport groups, subject to governmental approval.
• Paid ordinary cash dividend of Ps.6.16 per share, for a total of Ps.1,848 million.
• Passenger traffic in Mexico up 14.6% YoY, supported by increases of 18.0% and 12.0% in domestic and international traffic, respectively. Cancun Airport was the main traffic driver, with contributions from most of ASUR's airports.
• Traffic at LMM Airport up 5.0% YoY, 4.4% in domestic traffic and 9.6% in international traffic.
• Consolidated commercial revenues per passenger reached Ps.102.3.
• Consolidated EBITDA up 33.7% YoY, reaching Ps.1,787.9 million.
• Closed the quarter with a cash position of Ps.2,829.8 million. Net Debt to LTM EBITDA stood at 1.3x, reflecting consolidation of Aerostar.
• On track to complete construction of Terminal 4 at Cancun Airport, scheduled to open in 4Q17.

Passenger Traffic

ASUR's total passenger traffic in 2Q17 rose 12.3% YoY to 10.4 million passengers, driven by increases of 14.6% in Mexico and 5.0% in Puerto Rico. Note that 2Q17 passenger traffic, particularly in Mexico, benefited from the impact of Holy Week, which began on April 7, while during 2016, it began on March 18.

The 14.6% YoY growth in passenger traffic achieved in Mexico reflects increases of 18.0% and 12.0% in domestic and international traffic, respectively. Cancun was the main driver behind traffic growth, reporting increases of 24.0% and 12.2% in domestic and international traffic, respectively, with the majority of ASUR's airports also contributing to higher traffic.

Total passenger traffic at LMM Airport in 2Q17 rose 5.0% YoY, reflecting increases of 4.4% and 9.6% in domestic and international traffic, respectively.

Tables with detailed passenger traffic information for each airport can be found on page 13 of this report.

Review of Consolidated Results

In May 2017 ASUR increased its share ownership in Aerostar to 60% from its prior 50% ownership. Accordingly, until May 31, 2017, ASUR's ownership in Aerostar was accounted for by the equity method, while starting June 1, 2017, ASUR began to fully consolidate Aerostar results on a line by line basis.

Consolidated Revenues

Consolidated Revenues for 2Q17 rose 30.8% YoY to Ps.2,935.3 million, principally due to increases of:

• 36.7% in revenues from aeronautical services, mainly as a result of the 12.3% increase in total passenger traffic, as well as the inclusion of one month of aeronautical revenues for LMM airport, which represented 9.9% of total aeronautical revenues for the quarter;
• 31.7% in revenues from non-aeronautical services, principally reflecting the 33.8% increase in commercial revenues. Non-aeronautical revenues at Aerostar for June 2017 represented 7.2% of consolidated non-aeronautical revenues;
• 12.1% in revenues from construction services in Mexico that resulted from higher capital expenditures and other investments in concessioned assets during the period.

Excluding revenues from construction services, which are deducted as costs under IRFS accounting standards, total revenues would have increased 34.7% YoY to Ps.2,507.4 million. Total revenues at Aerostar for June 2017 represented 11.9% of ASUR's consolidated revenues excluding revenues from construction services.

Commercial Revenues in 2Q17 rose 33.8% YoY, principally due to the 12.3% increase in total passenger traffic, the inclusion of one month of commercial revenues at LMM Airport which represents 7.2% of consolidated commercial revenues. Commercial revenue growth in Mexico was mainly driven by increases in Duty Free, Retail Sales, and Food and Beverages. Consolidated Commercial Revenues per Passenger rose to Ps.102.3 in 2Q17, from Ps.97.2 in 2Q16, with Mexico contributing with Ps.104.7 in 2Q17 and LMM Airport with Ps.80.4 revenues per passenger in June 2017.

Consolidated Operating Costs and Expenses

Consolidated Operating Costs and Expenses for 2Q17 increased 27.4% YoY to Ps.1,321.9 million, wtih 9.7% of consolidated costs and expenses in 2Q17 attributable to June 2017 results from Aerostar. Excluding construction costs, however, operating costs and expenses rose 36.4% to Ps.894.0 million.

Cost of Services rose 49.3%, mainly reflecting maintenance expenses as well as higher cost of sales from convenience stores directly operated by ASUR. Higher energy, security and professional fees also contributed to the increase in cost of services. Aerostar's June 2017 results contributed with 19.2% of cost of services in 2Q17.

Construction Costs rose 12.1% YoY, mainly due to higher levels of capital improvements made to the Mexican concessioned assets during the period.

G&A Expenses, which reflect administrative expenses in Mexico, increased 1.6% YoY.

The Technical Assistance fee paid to ITA increased 23.8% YoY, reflecting EBITDA growth in Mexico during the quarter, a factor in the calculation of the fee.

Concession fees, which include fees paid to the Mexican government and Puerto Rican Authorities, rose 23.7%, mainly due to an increase in regulated revenues in Mexico, a factor in the calculation of the fee.

Depreciation and Amortization increased 33.3% and mainly reflects capitalized investments. Aerostar contributed with 20.4% of depreciation and amortization as a result of the consolidation of June 2017 results.

Consolidated Operating Profit and EBITDA

Consolidated Operating Profit in 2Q17 increased 33.7% to Ps.1,613.4 million. Operating Margin for 2Q17 increased to 54.97% from 53.78% in 2Q16, principally as a result of the 30.8% increase in revenues and lower increase in costs and expenses. Aerostar's results for June 2017 represented 5.9% of consolidated operating profit.

Adjusted Operating Margin, which excludes the effect of IFRIC 12 with respect to the construction or improvements to concessioned assets in Mexico, and is calculated as operating profit divided by total revenues less construction services revenues, was 64.35% in 2Q17 compared with 64.80% in 2Q16.

EBITDA rose 33.67% to Ps.1,787.9 million in 2Q17, reflecting higher operating leverage. Aerostar June 2017 results also contributed with 7.3% of EBITDA for the period. During 2Q17, ASUR recognized Ps.427.9 million in revenues from "Construction Revenues," a year-on-year increase of 12.1%, due to higher capital expenditures and investments in concessioned assets. As a result, 2Q17 EBITDA Margin was 60.91% compared to 59.61% in 2Q16.

Adjusted EBITDA Margin, however, which excludes the effect of IFRIC 12 with respect to the construction or improvements to concessioned assets in Mexico, was 71.31% in 2Q17 compared to 71.83% in 2Q16.

Consolidated Comprehensive Financing Gain (Loss)

In 2Q17, ASUR reported a Ps.22.0 million Comprehensive Financing Loss, compared to an Ps.11.3 million loss in 2Q16. Interest expense rose by Ps.42.1 million during the period, mainly due to a higher debt balance reflecting the full consolidation of Aerostar along with the increase in interest rates during the period. Aerostar's interest expenses for June 2017 totaled Ps.41.9 million. Interest income increased by Ps.9.7 million, reflecting a higher cash balance and the increase in interest rates.

In 2Q17, ASUR reported a foreign exchange loss of Ps.5.8 million, reflecting a 1.2% quarterly average appreciation of the Mexican peso against the U.S. dollar on ASUR's foreign currency net liability position. This compared to a Ps.27.6 million foreign exchange loss in 2Q16 resulting from the 4.5% quarterly average Mexican peso depreciation during that period.

Income Taxes

Income Taxes for 2Q17 rose by Ps.96.0 million year-over-year, principally due to the following factors:

• A Ps.131.8 million increase in the provision for income taxes, reflecting a higher taxable income base at Cancun Airport; and
• A Ps.35.8 million decline in deferred income taxes, largely reflecting the recognition of the effects of the 0.25% increase in inflation during 2Q17 on the fiscal tax balance.

Majority Net Income

Majority Net Income for 2Q17 increased by 30.7% to Ps.1,132.6 million, up from Ps.866.6 million in 2Q16. Earnings per common share for the quarter were Ps.3.7755 and earnings per ADS (EPADS) were US$2.0902 (one ADS represents ten series B common shares). This compares with earnings per share of Ps.2.8887 and EPADS of US$1.5993 for the same period last year. The higher majority net income principally reflects the 12.3% growth in passenger traffic and ASUR's increased ownership in Aerostar. During 2Q17, ASUR reported a Ps.43.5 million gain corresponding to its participation in Aerostar, the joint venture to operate SJU airport, for the months of April and May 2017, compared to a net gain of Ps.58.2 million in 2Q16, while Aerostar results for June 2017 were fully consolidated line by line.

Consolidated Financial Position

On June 30, 2017, airport concessions represented 85.9% of the Company's total assets, with current assets representing 12.3% and other assets representing 1.8%.

As of June 30, 2017, ASUR had cash and cash equivalents of Ps.2,829.8 million; a 19.09% decline from Ps.3,497.6 million at December 31, 2016.

Stockholders' equity at the close of 2Q17 was Ps.24,891.1 million and total liabilities were Ps.13,675.2 million, representing 64.5% and 35.5% of total assets, respectively. Deferred liabilities represented 11.8% of ASUR's total liabilities.

Total Debt at the end of the quarter increased to Ps.10,894.4 million, from Ps.3,988.7 million in 2Q16, principally reflecting debt at Aerostar as shown on Tables 5 and 6. The entirety of ASUR's debt is denominated in U.S. dollars.

The Net Debt to LTM EBITDA ratio stood at 1.3x at the end of 2Q17, while the Interest Coverage ratio was 8.2x as of June 30, 2017. This compares with Net Debt to LTM EBITDA and Interest Coverage Ratio of 0.3x and 40.1x as of June 30, 2016, respectively.

Capital Expenditures

During 2Q17, ASUR's capital investments totaled Ps.308.3 million. Of this, Ps.275.8 million relate to the Company's plan to modernize its Mexican airports pursuant to its master development plans, mainly for the construction of Cancun's Terminal 4, which is on track to open in 4Q17. In addition, during June 2017, the Company invested Ps.32.5 million at the LMM Airport in Puerto Rico. Accumulated consolidated capex for 1H17 totaled Ps.391.9 million.

Review of Mexico Operations

Total Mexico Revenues

Total Mexico Revenues for 2Q17 rose 20.9% YoY to Ps.2,713.2 million, principally due to increases of:

• 23.1% in revenues from aeronautical services, mainly as a result of the 14.6% increase in passenger traffic;
• 22.2% in revenues from non-aeronautical services, principally reflecting the 23.3% increase in commercial revenues detailed below; and
• 12.1% in revenues from construction services that resulted from higher capital expenditures and other investments in concessioned assets during the period.

Commercial Revenues in the quarter rose 23.3% year-over-year, principally due to the 14.6% increase in total passenger traffic and reported increases across all categories as shown on table 8. Commercial Revenues per Passenger, in turn, increased 7.7% to Ps.104.7 in 2Q17 from Ps.97.2 in 2Q16.

ASUR classifies commercial revenues as those derived from the following activities: duty-free stores, car rentals, retail operations, banking and currency exchange services, advertising, teleservices, non-permanent ground transportation, food and beverage operations, and parking lot fees.

As shown in table 9, during the last 12 months, ASUR opened nine commercial spaces at Cancun airport and eight commercial spaces at its other eight airports. More details of these openings can be found on page 14 of this report.

Mexico Operating Costs and Expenses

Total Mexico Operating Costs and Expenses for 2Q17 increased 15.1% year-over-year. This includes construction costs, which rose 12.1%, reflecting higher levels of capital improvements made to concessioned assets during the period. Excluding construction costs, operating costs and expenses rose 16.9% to Ps.766.3 million.

Cost of Services rose 20.7% mainly due to higher energy, security and maintenance expenses. Higher cost of sales from convenience stores directly operated by ASUR and professional fees also contributed to the increase in cost of services. Administrative expenses rose marginally 1.6% YoY.

The 23.8% increase in Technical Assistance fee paid to ITA reflects EBITDA growth in the quarter, a factor in the calculation of the fee.

Concession fees, which include fees paid to the Mexican government, rose 22.7%, mainly due to an increase in regulated revenues, a factor in the calculation of the fee.

Depreciation and Amortization increased 6.2% YoY, mainly reflecting capitalized investments.

Mexico Consolidated Comprehensive Financing Gain (Loss)

In 2Q17, ASUR's Mexico operations reported a Ps.19.9 million Comprehensive Financing Gain, compared to an Ps.11.3 million loss in 2Q16. This was mainly due to a lower foreign exchange loss in 2Q17 of Ps.5.8 million, reflecting a 0.6% quarterly average appreciation of the Mexican peso against the U.S. dollar on ASUR's foreign currency net liability position. This compared to a Ps.27.6 million foreign exchange loss in 2Q16, resulting from the 4.5% quarterly average Mexican peso depreciation during that period.

Interest income in Mexico increased by 21.2% YoY to Ps.55.3 million in 2Q17, reflecting a higher cash balance and higher interest rates, while interest expense rose by 0.7% to Ps.29.5 million during the period.

Mexico Operating Profit and EBITDA

Operating Profit in 2Q17 increased 25.9% to Ps.1,518.9 million. Operating Margin for the quarter increased 221 bps YoY to 56.0% principally as a result higher operating leverage given YoY increases of 20.9% in revenues and 15.1% in costs and expenses.

Adjusted Operating Margin, which excludes the effect of IFRIC 12 with respect to the construction or improvements to concessioned assets, and is calculated as operating profit divided by total revenues less construction services revenues, increased 167 basis points to 66.5% in 2Q17.

EBITDA rose 24.0% to Ps.1,658.0 million from Ps.1,337.5 million in 2Q16, reflecting higher operating leverage. 2Q17 EBITDA Margin expanded to 61.1% from 59.6% in 2Q16.

During 2Q17, ASUR recognized Ps.427.9 million in revenues from "Construction Revenues," a year-on-year increase of 12.1%, due to higher capital expenditures and investments in concessioned assets. Adjusted EBITDA Margin, which excludes the effect of IFRIC 12 with respect to the construction or improvements to concessioned assets, increased 72 basis points to 72.5% in 2Q17.

Mexico Tariff Regulation

The Mexican Ministry of Communications and Transportation regulates the majority of ASUR's activities by setting maximum rates, which represent the maximum possible revenues allowed per traffic unit at each airport.

ASUR's Mexico's operations accumulated regulated revenues as of June 30, 2017 totaled Ps.4,655.34 million, with an average tariff per workload unit of Ps.171.92 (pesos of December 2016). ASUR's regulated revenues for 1H17 accounted for approximately 60.90% of total Mexico income (excluding construction income) for the period.

The Mexican Ministry of Communications and Transportation reviews compliance with maximum rate regulations at the close of each year.

Review of Puerto Rico Operations

In May 2017, ASUR increased its share ownership in Aerostar to 60% from its prior 50% ownership. Accordingly, 2Q17 consolidated results as presented above reflect line by line consolidation of Aerostar results for June 2017, while prior to that, Aerostar's results were accounted for by the equity method.

However, for purposes of providing a better understanding of the performance of LMM Airport, below we present the stand-alone results of Aerostar for the month of June as consolidated, and reported for the three- and six-month periods ended June 30, 2017, compared with the three- and six-month periods ended June 30, 2016.

Puerto Rico Revenues

Total Puerto Rico Revenues for 2Q17 rose 4.2% YoY to Ps.666.5 million, principally due to increases of:

• 4.1% in revenues from aeronautical services, mainly as a result of the 5.0% increase in passenger traffic; and
• 4.5% in revenues from non-aeronautical services, principally reflecting the 5.2% increase in commercial revenues.

Commercial Revenues in the quarter rose 5.2% year-over-year, principally reflecting the positive impact from the remodeling program at LMM airport completed on 2016 and the 5.0% increase in total passenger traffic. Commercial Revenues per Passenger rose to Ps.89.8 from Ps.89.7 in 2Q16.

As shown on table 15, during the last 12 months, 11 new commercial spaces were opened at LMM Airport. More details of these openings can be found on page 14 of this report.

ASUR classifies commercial revenues as those derived from the following activities: duty-free stores, car rentals, retail operations, advertising, non-permanent ground transportation, food and beverage operations, and parking lot fees.

Puerto Rico Operating Costs and Expenses

Total Operating Costs and Expenses at LMM Airport in 2Q17 increased 3.1% YoY to Ps.388.3 million.

Cost of Services increased 4.0% YoY, while Concession Fees, which include fees paid to the Puerto Rican government, rose 10.0%. Depreciation and Amortization increased 0.8%.

Puerto Rico Comprehensive Financing Gain (Loss)

During 2Q17, LMM Airport reported a Ps.130.2 million Comprehensive Financing Loss, compared with a Ps.133.5 million loss in 2Q16.

On February 22, 2013, and as part of the financing of the Concession Agreement, Aerostar entered into a subordinated term loan with Cancun Airport in the amount of US$100 million at an annual interest rate of LIBOR plus 2.10%, payable each July 1 and January 1, and with no fixed maturity date. As of June 30, 2017, the remaining balance is Ps.1,386.2 million.

On March 22, 2013, Aerostar carried out a private bond placement for a total of US$350 million to finance a portion of the Concession Agreement payment to the Puerto Rican Authority, and certain other costs and expenditures associated with it.

On June 24, 2015, Aerostar carried out a private bond placement for a total of US$50 million. In December 2015, Aerostar also contracted a line of revolving credit, which, as of June 30, 2017, had not been utilized.

All long-term debt is collateralized by the Aerostar total assets.

Puerto Rico Operating Profit and EBITDA

Operating Profit in 2Q17 rose 5.8 to Ps.278.2 million, with Operating Margin up 62 bps to 41.7% from 41.1% in 2Q16.

EBITDA rose 4.3% to Ps.385.4 million from Ps.369.5 million in 2Q16, reflecting the positive impact from the increase in passenger traffic and cost savings during the period. EBITDA Margin rose 7 bps to 57.8% in 2Q17.

In accordance with the application of IFRIC 12, Aerostar recognizes on a monthly basis the provision for maintenance of those concession assets that will be replaced before the end of the concession. The monthly amount is Ps.5.6 million.

Puerto Rico Capital Expenditures

During 2Q17, Aerostar invested Ps.88.2 million to modernize LMM Airport, mainly for the construction of the Federal Inspection Station and in equipment for LMM's operations. This compares with investments of Ps.65.1 million in 2Q16. Accumulated capex for 6M17 totaled Ps.136.3 million, compared with Ps.137.6 million in 6M16.

Puerto Rico Tariff Regulation

The Airport Use Agreement signed by Aerostar, the airlines serving LMM Airport, and the Puerto Rico Port Authority governs the relationship between Aerostar and the principal airlines serving LMM Airport. The agreement entitles Aerostar to an annual contribution from the airlines of US$62 million during the first five years of the term. From year six onwards, the total annual contribution for the prior year will increase in accordance with an adjusted consumer price index factor based on the U.S. non-core consumer price index. The annual fee is divided between the airlines that operate at LMM Airport in accordance with the regulations and structure defined under the Airport Use Agreement to establish the contribution of each airline for each particular year.

Definitions

Majority Net Income reflects ASUR's equity interests in each of its subsidiaries and therefore excludes the 40% interest in Aerostar that is owned by other shareholders. Other than Aerostar, ASUR owns (directly or indirectly) 100% of its subsidiaries.

Domestic Passenger Traffic refers to traffic within Mexico for Mexican airports, and within San Juan airport and the U.S. for LMM Airport. International Passenger Traffic refers to traffic between Mexico and other countries for Mexican airports, and between San Juan Airport and countries other than the U.S. for LMM Airport.

EBITDA means net income before: provision for taxes, deferred taxes, profit sharing, non-ordinary items, participation in the results of associates, comprehensive financing cost and depreciation and amortization. EBITDA should not be considered as an alternative to net income, as an indicator of our operating performance or as an alternative to cash flow as an indicator of liquidity. Our management believes that EBITDA provides a useful measure that is widely used by investors and analysts to evaluate our performance and compare it with other companies. EBsITDA is not defined under U.S. GAAP or IFRS and may be calculated differently by different companies.

Adjusted EBITDA Margin is calculated by dividing EBITDA by total revenues less construction services revenues for Mexico and excludes the effect of IFRIC 12 with respect to the construction or improvements to concessioned assets. ASUR is required by IFRIC 12 to include in its income statement an income line reflecting the revenue from construction or improvements to concessioned assets made during the relevant period. The same amount is recognized under the expense line, "Construction Costs," because ASUR hires third parties to provide construction services. Because equal amounts of Construction Revenues and Construction Costs have been included in ASUR's income statement as a result of the application of IFRIC 12, the amount of Construction Revenues does not have an impact on EBITDA, but it does have an impact on EBITDA margin, as the increase in revenues that relates to Construction Revenues does not result in a corresponding increase in EBITDA. Like EBITDA Margin, Adjusted EBITDA Margin should not be considered as an indicator of our operating performance or as an alternative to cash flow as an indicator of liquidity and is not defined under U.S. GAAP or IFRS and may be calculated differently by different companies.