AIRPORT REVIEW JANUARY 2009 Turbulence Remains Keep Your Seatbelts Fastened

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1 Latin American Equity Research Assumption of Coverage Mexico City, January 6, 2009 Mexico Aerospace & Transportation AIRPORT REVIEW JANUARY 2009 Turbulence Remains Keep Your Seatbelts Fastened Luis Miranda*, CFA Mexico: Banco Santander S.A. (5255) We are assuming coverage of the airport groups in Mexico, ASUR, GAP and OMA in this report, and lowering our estimates for YE2009 and adjusting our target prices. After these adjustments, and considering the challenging outlook for the sector in 2009, we are maintaining our Buy rating for ASUR and making it our top pick, and downgrading our recommendations for GAP and OMA to Hold from Buy. We are lowering our estimates and target prices to account for the weaker-thanexpected economic growth, the suspension of operations of some airlines, and the rationalization of routes and frequencies. This partly explains the weak, performance of the group during 2008, when the IPC index yielded a negative return of 40% in U.S. dollar terms, ASUR, GAP and OMA posted negative returns of 39%, 48% and 56%, respectively, in U.S. dollar terms. We believe that the airport groups will face difficult YoY comparisons during 2009, particularly in 1H09, notably as a result of a reduction in domestic traffic. As such, in our view, ASUR, provides a defensive approach within the sector. Challenging outlook for The current economic slowdown has led to industry consolidation and a reduction in the number of total passenger (PAX) during the last months of 2008, a trend which we estimate will continue during However, we believe that the groups still have positives such as high margins, FCF generation, flexible balance sheets and dividend yields, while the recent decline in the price of oil could give the airlines some room to breath. Industry consolidation. During 2008, airlines such as Aerocalifornia, Avolar and Alma have suspended operations mainly due to finanancial problems. We estimate that these airlines represented 8% of total PAX in Mexico in 2007 and close to 6% for the first nine months of 2008 (considering latest official figures). Given that they suspendend operations during 2H08, we expect tough YoY comparisons for total traffic during the first half of 2009 Weakening PAX figures. We estimate 2008 total PAX growth of 0.5% for the three airports groups in Mexico. However, numbers have been weak in October and November, with consolidated YoY declines of 10% and 9%, respectively. We expect this trend to continue in 2009, with a decline of 1.5% in total PAX during 2009 for the three groups and a recovery of 4.8% in Domestic traffic most affected. During October and November 2008, the main driver for weak traffic numbers has been domestic traffic, with declines of 12% and 14%, respectively (YoY monthly figures), while international traffic has declined 4% and 1%, respectively, in the same period. We expect this to continue, especially during the first half of On the back of this outlook, we are lowering our estimate for the three airport groups. We reduced our estimate of total PAX for 2009 for ASUR, GAP and OMA by 7.9%, 15.5% and 8.3%, respectively, while we lowered our EBITDA estimates by 25%, 36% and 40%, respectively in U.S. dollar terms (affected by a weaker outlook for the Mexican peso). In nominal pesos, we estimate EBITDA decline of 1.5% for ASUR in 2009, and 6.8% and 7.8% for GAP and OMA, respectively. In terms of valuation, the sector trades at a 19% discount to international peers in terms of 2009E FV/EBITDA and a 29% discount in terms of 2009E P/E and ASUR specifically at discounts of 4% and 2% for the same multiples respectively, while it trades at FCF yield of 10%, according to our estimates. Universe of Coverage (U.S. Dollars in Millions a ) Price Target Upside/ Net Earnings P/E FV/EBITDA Mkt. Company Ticker Rec. Dec 31 Price Down 2008E 2009E 2010E 2008E 2009E 2010E 2008E 2009E 2009E Cap ASUR ASR BUY % ,121 GAP PAC HOLD % ,291 OMA OMAB HOLD % Average a Except per share/adr amounts. Sources: Company reports and Santander estimates. U.S. investors inquiries should be directed to Santander Investment Securities Inc. at (212) / (212) * Employed by a non-us affiliate of Santander Investment Securities Inc. and is not registered/qualified as a research analyst under FINRA rules.

2 Turbulence Remains - keep Your Seatbelt Fastened TABLE OF CONTENTS Airport Review... 1 Recommendations, Target Prices, and EBITDA Estimates... 3 Weaker Economic Growth... 4 Only the stronger Airlines made it through Domestic vs. International Traffic... 7 Some Relief in Oil Prices... 7 Changes in Estimates... 8 International Peers Attractive Dividend Yields and Free cash Flow ASUR GAP OMA Important Disclosures Important Disclosures (Continued) U.S. investors inquiries should be directed to Santander Investment Securities Inc. at (212) / (212)

3 RECOMMENDATIONS, TARGET PRICES, AND EBITDA ESTIMATES Company From To Inv Code Target Price 2008E 2009E 2010E From ( 08YE) To ( 09YE) From To % From To % From To % ASUR BUY BUY (24.8) (20.9) GAP BUY HOLD (15.8) (35.9) (32.0) OMA BUY HOLD (13.4) (40.3) (32.4) All data in US$. Sources: Company reports and Santander estimates. Figure 1. Mexico Select Economic Projections, E E 2009E 2010E Real GDP (%) 3.2% 2.0% 0.6% 3.2% CPI Inflation (%) 3.8% 6.2% 4.3% 3.9% US$ Exchange Rate (Year-End) US$ Exchange Rate (Average) Interest Rate (Year-End) 7.4% 8.1% 7.3% 7.0% Interest Rate (Average) 7.2% 7.7% 7.5% 7.0% Fiscal Balance (% of GDP) 0.0% 0.0% 0.0% NA Current Account Balance (% of GDP) -1.2% -1.5% -1.6% NA International Reserves (US$ Bn) NA Total External Debt (% of GDP) 12.8% 12.1% 11.5% NA NA not available. Source: Santander historicals and forecasts. U.S. investors inquiries should be directed to Santander Investment Securities Inc. at (212) / (212)

4 Turbulence Remains - keep Your Seatbelt Fastened TOUGH INDUSTRY OUTLOOK We are lowering our estimates for the three airport groups, mainly on the back of the following events: the global economic slowdown, the reduction in airlines and frequencies and a weaker exchange rate. WEAKER ECONOMIC GROWTH The outlook for economic growth has deteriorated, and news related to lower manufacturing activity, reduction in investments and labor force layoffs are expected during the 2009, particularly at the beginning of the year. Global economic growth will be a key driver for the performance of air traffic figures. For Mexico, the two main drivers will the performance of the U.S. and Mexican economies. During 2007, when total PAX traffic in Mexico reached 55.3 million, 63.7% of passengers were carried by domestic airlines and 36.7% by international airlines. Of the latter, 73% were transported by U.S. carriers. Furthermore, of the passengers traveling into Mexico (either by international or domestic airlines), the United States and Canada accounted for 82% of the total PAX. Figure 2. Mexico - Total PAX by Destination and Origin of International PAX (2007) Total PAX by Airline - Destination Internatinoal PAX by Origin International 34% Canada 4% Dom. Internatinoal 13% Source: SCT/D.G. Aeronautica Civil. Dom. National 53% USA 78% Europe 9% Asia 0.4% Cam & Caribean 5% S-America 4% On the back of this industry exposure to North America, a key driver for traffic growth will be the economic performance of the U.S. and Mexico. Although we expect a weak 2009 in terms of GDP numbers for Mexico, our economics team estimates that the worst performance will be during the first half of the year. This is also true for the U.S. economy, based on the economic estimate of Macroeconomic Advisers (MA), a U.S. consultancy firm. Figure 3 summarizes our GDP estimates for Mexico and MA s estimates for the U.S. economy. Therefore, our scenario considers that 2009 will be a very challenging year, although we expect a marked difference between the first and second half of the year. The depreciation of the Mexican peso against the U.S. dollar could somewhat help tourist destinations by making them more competitive. 4 U.S. investors inquiries should be directed to Santander Investment Securities Inc. at (212) / (212)

5 Figure 3. U.S. and Mexico GDP Forecast * E 1Q09E 2Q09E 3Q09E 4Q09E 2009E 2010E United Status* 2.3% -0.7% -4.2% 0.0% 2.0% 2.6% 0.1% 5.0% Mexico** 3.2% 2.0% 0.2% -0.7% 1.3% 1.7% 0.6% 3.2% Sources: Santander estimates and Macroeconomic Advisers * QoQ SAAR * YoY Real Change. ONLY THE STRONGER AIRLINES MADE IT THROUGH 2008 During 2008, the aforementioned economic slowdown, coupled with the high price of oil and excess capacity in the industry in Mexico, have led to financial problems for some airlines, which in turn, has led to a reduction in the number of airlines and flight frequencies. During 2008, the Ministry of Communications (SCT), suspended three airlines (Aerocalifornia, Avolar and Novair), while two have filed for bankruptcy protection ( Concurso Mercantil ) and are currently grounded (Alma and Aladia). These airlines had a combined market share of almost 8% in Aerocalifornia, which represented 2.4% of total PAX in Mexico during 2007, was suspended on July 24 by the Ministry of Communications (SCT), as the company had not fulfilled its legal obligations to continue operating. At the end of 2007, the company had a fleet of 22 DC-9 aircraft and offered mainly regional routes; with only a modest presence in international routes. ALMA (Aerolineas Mesoamericanas). On November 7, 2008, the company decided to seek shelter under the Mexican bankruptcy laws. During 2007, the company accounted for 1.6% of total PAX in Mexico (2.1% YTD in September 2008), with a fleet of 18 Bombardier CL-600s. The company could be considered a regional LCC. Avolar. This regional LCC was suspended on October 28, 2008 by the Ministry of Communications. During 2007, this airline accounted for 1.7% of total PAX in Mexico and 1.2% in 2008 (YTD September). The company operated 12 Boeing B-737s ( ). Aladia and Novair were two small players with marginal impact on total PAX traffic. The suspension of these airlines has led to a reduction in the number of flights from Mexican airports. However, based on the official government figures from the Ministry of Communications, which are delayed by almost three months; we started to see the negative effect of this effect in September. We must also underscore that the the decline is mainly explained by other domestic airlines, rather than the legacy carriers (Aeromexico and Mexicana). When we discuss the Aeromexico and Mexicana groups, we include Aeromexido Connect in Aeromexico and Click in Mexicana, which are the regional airlines that compete directly with the LCCs. Considering these figures and recent events, we would expect a further decline in 4Q08 numbers, which will be released during 1Q09 by the Ministry. The record-high figures were posted in March 2008, with thousand flights in operation in the last 12 months. As of September 2008, this number had fallen 5.3% to thousand flights. U.S. investors inquiries should be directed to Santander Investment Securities Inc. at (212) / (212)

6 Turbulence Remains - keep Your Seatbelt Fastened Figure 4. Mexico - Total Flights LTM (2000 to Date in Thousands) J-00 N-00 S-01 J-02 M-03 M-04 J-05 N-05 S-06 J-07 M-08 LCC Regional AeroMx & Mexicana (Group)* Domestic Foreign Total Source: SCT (Ministry of Communications) Although the number of flights on a LTM basis started to decline in April 2008, the upward trend in the number of total PAX continued until June 2008, when it reached 54.7 million PAX. Since then, we have seen a MoM reduction to 54.2 million in September 2008 (Ministry of Communication figures). We estimate a further decline in the last quarter of 2008, based on PAX figures reported by GAP and OMA in the October-November period, with YoY declines of 15.1% and 11.9%, respectively. ASUR was the only group to post growth of 2.1% in PAX in the same period. On a consolidated basis, the three publicly traded airport groups reported a decline of 9.4% during October-November 2008, and we estimate that these three groups represent close to 60% of total PAX in Mexico. Figure 5. Mexico - Total PAX LTM (2000 to Date in Million) J-00 N-00 S-01 J-02 M-03 M-04 J-05 N-05 S-06 J-07 M-08 LCC Regional AeroMx & Mexicana (Group)* Domestic Foreign Total Source: SCT (Ministry of Communications) Going forward, we would expect a further adjustment in the number of flights, as airlines reduce frequencies in order to rationalize non-profitable routes. In our view, this decline should continue, at least into the first half of 2009, as YoY figures will be negatively affected by a high basis of comparisons for the first half of U.S. investors inquiries should be directed to Santander Investment Securities Inc. at (212) / (212)

7 DOMESTIC VS. INTERNATIONAL TRAFFIC Considering the total monthly PAX figures reported by the three public airport groups in Mexico, ASUR, GAP and OMA, we can see that domestic traffic has been the weakest YoY. This is at large, in our view, due to the aforementioned reduction in the number of airlines and the rationalization of routes and fleets. In the meantime, international PAX figures have held up relatively well, given the economic slowdown. Figure 1. ASUR+GAP+OMA Total PAX (Monthly YoY % Change) 40% Total Domestic International 35% 30% 25% 20% 15% 10% 5% 0% -5% -10% J-07 F-07 M-07 A-07 M-07 J-07 J-07 A-07 S-07 O-07 N-07 D-07 J-08 F-08 M-08 A-08 M-08 J-08 J-08 A-08 S-08 O-08-15% Source: Company reports. Considering that international PAX has been the segment with the best performance, this explains the relatively better performance of ASUR versus its peers in YoY monthly changes in traffic. We have to consider that as of November 2008, ASUR international PAX represented 56.7% of total PAX, while this figure was lower for GAP and OMA with 34% and 16.5%, respectively. Figure 2. ASUR GAP - OMA Total PAX (Monthly YoY %Change) J-07 F-07 M-07 A-07 M-07 J-07 J-07 A-07 S-07 O-07 N-07 D-07 J-08 F-08 M-08 A-08 M-08 ASUR GAP OMA J-08 J-08 A-08 S-08 O-08 N-08 Source: Company reports. SOME RELIEF IN OIL PRICES During 2008, the price of oil reached US$145 per barrel in July. This was a 51% increase from December 2007 levels. However, as of December 2008, the price had declined 54% during the year and 69% from its high. As we can see in Figure 8, jet fuel prices have risen and fallen in tandem with oil prices. Although we recognize that the decline in prices has been driven by U.S. investors inquiries should be directed to Santander Investment Securities Inc. at (212) / (212)

8 Turbulence Remains - keep Your Seatbelt Fastened weaker demand and the economic outlook, we have to highlight that the price of jet fuel is traditionally one of the most important costs for airlines, together with labor for legacy carriers. Therefore, we believe that the steep decline in the price of jet fuel could be a relief for the airline industry in 2009 if we do not see a steep recovery in the price of jet fuel. Figure 8. Oil Price & Jet Fuel* (July 2000 to Date USD/M$ (left) and US$ cents/ gallon (right) J-00 N-00 M-01 J-01 D-01 A-02 A-02 D-02 A-03 A-03 D-03 M-04 S-04 J-05 M-05 S-05 J-06 M-06 O-06 F-07 J-07 O-07 F-08 J-08 O-08 WTI NY Harbour Sources: Bloomberg * Oil Price WTI and Jet Fuel: NY Harbour. CHANGES IN ESTIMATES On the back of the aforementioned changes in outlook and new macroeconomic estimates, we have lowered our estimates for the three airport groups in Mexico. Our changes in estimates for 2008 were heavily affected by the devaluation of the currency, which depreciated 33.5% from August to December. ASUR. During 2008, ASUR has been the most resilient group in terms of traffic figures, reporting YoY total growth of 10.2% YTD (January-November 2008). We have to highlight that ASUR has been the least affected by the suspension of operations of LCCs and other airlines, as Cancun, its main airport (71% of total PAX), is less dependent on these airlines. Figure 9. ASUR Estimates Revisions, 2008E-20010E (U.S. Dollars in Millions*) 2008E 2009E 2010E Previous Current Change Previous Current Change Previous Current Change PAX Total (000) 17,826 17, % 19,134 17, % 20,510 18, % Revenue % % % Op. Profit % % % Op. Margin 42.1% 43.9% 4.2% 44.0% 42.1% -4.4% 44.3% 43.5% -1.8% EBITDA % % % Net Income % % % EPADR % % % * Except per share data. Sources: Company reports and Santander estimates. GAP. On top of the new macroeconomic estimates, GAP has also been affected by the suspension of operation of airlines in Mexico, which is evident in the reduction in our 2008 and 2009 estimates. We have to consider that during Jan-Nov-08 period, GAP reported a YoY decline in total PAX of 3.4%. 8 U.S. investors inquiries should be directed to Santander Investment Securities Inc. at (212) / (212)

9 Figure 10. GAP Estimate Revisions, 2008E-20010E (U.S. Dollars in Millions*) 2008E 2009E 2010E Previous Current Change Previous Current Change Previous Current Change PAX Total (000) 24,683 22, % 26,084 22, % 28,156 23, % Revenue % % % Op. Profit % % % Op. Margin 45.8% 41.4% (4.43) 47.4% 37.9% (9.50) 49.2% 39.9% (9.24) EBITDA % % % Net Income % % % EPADR % % % * Except per share data. Sources: Company reports and Santander estimates. OMA. During the first 11 months of the year, this group has reported total PAX growth of 0.2%. However, we believe that by the end of 2008 and in 1H09, comps will not be favorable. Figure 11. OMA Estimate Revisions, 2008E-20010E (U.S. Dollars in Millions*) 2008E 2009E 2010E Previous Current Change Previous Current Change Previous Current Change PAX Total (000) 14,418 14, % 15,119 13, % 16,048 14, % Revenue % % % Op. Profit % % % Op. Margin 37.8% 33.4% (4.42) 36.7% 28.3% (8.39) 36.5% 29.3% (7.26) EBITDA % % % Net Income % % % EPADR % % % Except per share data. Sources: Company reports and Santander estimates. VALUATION During 2008, the airport groups in Mexico were, overall, underperformers, with the exception of ASUR. The IPC index had a negative return of 40% in U.S. dollar terms. In the same period, ASUR (ASR) had a negative return of 39%, GAP (PAC) had a negative 48% and OMA a negative 56%. All figures are based on the performance of the ADRs. As a consequence, the valuation of the sector has become more attractive, from an average 10.9 times forward FV/EBITDA in October 2007 to the current level of our average estimate of 6.6 times for Figure 12. FV/EBITDA Forward Multiples, Nov Apr J-07 F-07 M-07 A-07 M-07 J-07 J-07 A-07 S-07 O-07 N-07 D-07 J-08 F-08 M-08 A-08 M-08 J-08 J-08 A-08 S-08 O-08 N-08 D-08 Source: Santander estimates. ASUR GAP OMA Avg. U.S. investors inquiries should be directed to Santander Investment Securities Inc. at (212) / (212)

10 Turbulence Remains - keep Your Seatbelt Fastened INTERNATIONAL PEERS Compared with international airport operators, the sector in Mexico is trading at a discount of 19% in terms of 2009E FV/EBITDA and 29% in terms of 2009E P/E. Although we would not expect a narrowing of the discount in the short term, we would expect a reversion to the mean in the medium term, toward the end of 2009, anticipating a healthier 2010 for PAX figures. Figure 13. Comparative Valuation of Mexican and International Airport Operators Price US FV/EBITDA PE Airport Ticker 31-Dec Mkt Cap 2008E 2009E 2010E 2008E 2009E 2010E Copenhagen KBHL DC , Fraport AG FRA GR , Flughafen Wien (Vienna) FLU AV Havalimanlari (Turkey) TAVHL TI Beijing Airport 694 HK Guangzhou Baiyun CH , Hainan Meilan 357 HK Airports of Thailand AOT TB Macquarie MAP AU , Auckland AIA NZ , Average International 14, ASUR ASR , GAP PAC , OMA OMAB Average Mexico Mexico vs International -31% -19% -22% -44% -29% 3% All data in US$. Sources: Company reports, Santander estimates, and Bloomberg estimates for international airports. ATTRACTIVE DIVIDEND YIELDS AND FREE CASH FLOW The Mexican airport groups have a strong cash flow generations and dividend yield. Although we lowered our dividend payment estimates to account for weaker economic growth, we expect attractive dividend and FCF yields for For ASUR, we estimate a 3.2% dividend yield in 2009, and a FCF yield of 10%. We must underscore that this number could change, once the company announces the official capex program for its updated MDP for For GAP, we estimate a 4.3% dividend yield, and a FCF yield of 6.9%. Finally for OMA, we estimate a dividend yield of 4.2%, and a FCF yield of 4.2%. This figure looks relatively weaker than its peers, although it is partly explained by the fact that we assume a higher capex in 2009, due to its diversification project into Mexico City Terminal 2 s commercial area and hotel. 10 U.S. investors inquiries should be directed to Santander Investment Securities Inc. at (212) / (212)

11 ASUR Resilient Tourist Destination and Low Exposure to LCCs Luis Miranda*, CFA (5255) BUY (12/31/08) CURRENT PRICE: US$37.38/M$51.57 TARGET PRICE: US$48.80/M$60.30 What s Changed Rating: Price Target YE09: EBITDA Estimates (US$ Million): Company Statistics Unchanged at Buy To US$48.80 from US$ From 180 to From 197 to From 207 to 164 Bloomberg ASR US 52-Week Range (US$) E P/E Rel to the IPC Index (x) E P/E Rel to the A&T Sector (x) 1.4 Mexbol (US$) 1,618 3-Yr EBITDA CAGR ( E) 1.6% Market Capitalization (US$ Mn) 1,121 Float (%) Mth Avg Daily Vol (US$000) 4,650 Shares Outst - Mn (ADR 10:1) 300 Net Debt/Equity (x) -.12 Book Value per ADR (US$) Estimates and Valuation Ratios E 2009E 2010E Net Earn (M$ Mn) , , ,152.0 Current EPS Net Earn (US$ Mn) Current EPADR P/E (x) P/Sales (x) P/CE (x) FV/EBITDA (x) FV/Sales (x) FCF Yield (%) Div per ADR (US$) Div Yield (%) Sources: Bloomberg, Company reports, and Santander estimates. Investment Thesis: We are lowering our YE2009 target price to US$48.80 per ADR (M$60.30) from US$68.00 (M$73.00). This reduction is mainly due to three factors: a) the expected decline in the PAX for 2009 (1% YoY), b) our updated economic forecasts, and c) an increase in the country risk and equity risk premium in our DCF model. After factoring in these changes, we maintain our Buy rating for the stock, as it offers a total return of 34%, including a 3.2% dividend yield, which compares favorably to our benchmark of 21.9%. ASUR is our top pick in the sector, as we believe that the defensive characteristics that the stock has been showing during the second half of 2008 will continue to improve its performance in the first half of 2009, where we expect weakness in the industry. Therefore, although 1H09 will be a very difficult period for the airlines groups, we believe that in relative terms, ASUR will continue posting better figures than its peers. This is explained by the group s high exposure to the Cancun airport, which represents more than 79% of its total PAX, and has proven to be a resilient tourist destination. Also, we estimate that industry traffic will continue to be negatively affected by the reduction in supply due to lower airlines and frequencies, especially due to LCCs. We estimate that ASUR is the group with the lowest exposure to these airlines groups. Reasons for Changes to Price Target/Estimates: The global economic slowdown, the reduction in the number of airlines and reduced frequencies, are the main variables that explain the reduction in our estimates. We project an EBITDA decline of 1.4% in 2009 in nominal terms and a 6.5% growth in 2010, with total PAX decline of 1% in 2009 and 4.7% growth in Valuation and Risks: Our YE2009 target price is based on a DCF model with an 11.98% discount rate and a 2.0% terminal growth rate and implies a trailing 2009E FV/EBITDA multiple of 8.4 times and forward multiple of 7.2 times. Main risks: (1) further deterioration of growth prospects for the U.S. and Mexican economies; (2) ASUR could be barred from bidding on the construction of the airport in the Mayan Riviera, which would compete with its Cancun airport (3) the upcoming revision of its Master Development Plan in 2008; (4) natural disasters (such as hurricanes), terrorist threats (which could affect the tourism industry), (5) increases in operating costs and insurance, as well as (6) volatility and sudden increase in oil prices that could negatively impact the operation of airlines. U.S. investors inquiries should be directed to Santander Investment Securities Inc. at (212) / (212)

12 Turbulence Remains - keep Your Seatbelt Fastened Grupo Aeroportuario del Sureste (ASUR) owns a 50-year renewable concession to operate, maintain, and develop nine airports in the southeastern region of Mexico. The concession was initially granted in November 1998 and includes the operation of Cancun s International Airport, Mexico s number-one tourist destination, and the secondbusiest airport in Mexico in terms of passenger traffic. ASUR s other airports are in Cozumel, Mérida, Oaxaca, Veracruz, Huatulco, Villahermosa, Tapachula, and Minatitlan. During 2007, the group s airports handled 16.2 million PAX, 9.1 million of them international, 7.1 million domestic and 11.3 million of them in Cancun. INVESTMENT THESIS We see ASUR as the defensive play in the sector in Mexico. We believe that the company will benefit from the solid performance of the Cancun airport and lower exposure to the LCCs. Cancun airport. During the first eleven months of 2008, ASUR s airports have delivered a 10.2% total PAX growth, driven by 11.4% growth in international PAX and 8.5% in domestic. Cancun represents 71.1% of total traffic for the group, and it delivered total traffic growth of 12.1% YTD. For November, the group reported total traffic growth of 3.1%, driven by a 12.7% increase in international traffic and a 6.9% decline in domestic. During this month, Cancun reported 7.3% growth, driven by a 14.2% growth in international, which more than offset the 8.8% decline in domestic traffic, which represents 26% of Cancun s traffic. Going forward, we believe that Cancun could maintain its attractiveness as a relatively affordable tourist destination, especially considering the recent devaluation of the Mexican peso vis-à-vis the U.S. dollar, where the company s main source of demand originates. Therefore, ASUR is the group for which we expect the mildest decline in total traffic in 2009, with a 1% decline YoY. Lowest exposure to troubled airlines. Although the company does not disclose the exposure to all the specific airlines, we estimate that ASUR has the lowest exposure to the troubled airlines in Mexico. We estimate that this exposure could be in the 10%-15% of total PAX range. Therefore, in a scenario, where we expect 1H09/1H08 YoY traffic comparisons to be negatively affected by the reduction of airlines in Mexico due to either suspension or bankruptcies, we would expect the company to continue posting the best monthly traffic versus its peers. Furthermore, although the international, and specifically the U.S., carriers have reduced their frequencies to some Mexican destination, ASUR has not been affected as much as the other groups, mainly due to the solid performance of Cancun. This is also explained by the company s lowest exposure to the domestic traffic, which is 43%, versus the 66% of GAP and 83% for OMA. Expecting results for Master Development Plan. The company is currently negotiating the MDP for , which will set the new maximum tariff and capex. The process is based on a discounted free cash flow that takes into account traffic expectations, costs, and mandatory capex and should result in a return consistent with the cost of equity in Mexico. Given the current changes in country risk and prospects for short-term traffic growth, we believe that negotiations in this environment could favor the company. Although the new MDP starts in January 2009, we understand that there could be some delays, without any negative impact for the company. NEW ESTIMATES Figure 14 summarizes our new estimates for ASUR. We estimate a total traffic decline of 1.0% in 2009, mainly driven by the expected decline in economic growth, which we anticipate will negatively affect international PAX numbers. For 2010, we estimate 4.7% growth in PAX, as we believe that the U.S. and Mexican economies, the main drivers for the company, will post healthier growth. In terms of revenues, we estimate total growth of 0.7% in 2009, mainly driven 12 U.S. investors inquiries should be directed to Santander Investment Securities Inc. at (212) / (212)

13 by a modest growth in non-aeronautical revenues, for which we estimate some growth in peso terms, although we expect a deterioration in revenue per passenger in U.S. dollar terms due to the depreciation of the peso. We also believe that the company will benefit from the increase in commercial space due to the coming online of Terminal 3 in Cancun, which started operations in May On a consolidated basis we estimate EBITDA declining 1.4% in nominal terms during 2008 and increasing 6.5% in These estimates consider an EBITDA margin of 61.7% in 2009 and 61.8% in Figure 14. ASUR - Operating Summary (Passengers and Pesos in Million), E E 2009E 2010E Traffic (Million PAX) Total Traffic 16,239 17,789 17,616 18,452 Growth 17.8% 9.5% -1.0% 4.7% Cancun 11,340 12,594 12,492 13,073 Other Airports 4,899 5,196 5,124 5,379 Domestic 7,181 7,843 7,940 8,336 Growth 24.5% 9.2% 1.2% 5.0% International 9,058 9,947 9,676 10,116 Growth 13.0% 9.8% -2.7% 4.5% Millions of Nominal M$ Pesos Total Revenues 2,734 3,086 3,106 3,301 Real Growth 22.1% 12.9% 0.7% 6.3% Aeronautical 1,855 2,051 2,051 2,159 Real Growth 16.8% 10.6% 0.0% 5.3% Non Aeronautical 879 1,035 1,056 1,143 Real Growth 35.1% 17.7% 2.01% 8.25% Commercial Commercial Rev per Pass Commercial per Pass US$ Cost of Services Administrative Expenses Technical Assistance Fee Concession Fees Depreciation & Amortization Total Costs and Expenses 1,592 1,745 1,796 1,866 Operating Profit 1,143 1,342 1,310 1,435 Operating Margin 41.8% 43.5% 42.2% 43.5% EBITDA 1,674 1,943 1,915 2,040 EBITDA Margin 61.2% 63.0% 61.7% 61.8% Net Fin. Cost Income Before Taxes 1,179 1,472 1,539 1,646 Taxes Tax Rate 55.7% 29.9% 30.0% 30.0% Net Income 522 1,031 1,077 1,152 Net Margin 19.1% 33.4% 34.7% 34.9% Sources: Company reports and Santander estimates. What about the Riviera Maya Airport. The project for a new airport in the Mayan Riviera is on hold, as it is a private project, and, under current economic conditions, its viability is not clear. Furthermore, the coming on line of ASUR s second runway in Cancun for the second half of 2009 creates additional pressure for another airport in the region. This is because Cancun would have all the capacity to absorb any potential growth in the long term. On top of this, the company s structure and management team make the company a very tough competitor, in our view. U.S. investors inquiries should be directed to Santander Investment Securities Inc. at (212) / (212)

14 Turbulence Remains - keep Your Seatbelt Fastened VALUATION Our YE2009 target price is based on a DCF model, using an 11.98% discount rate and a 2.0% terminal growth rate and implies a target trailing FV/EBITDA multiple of 8.4 times for 2009 and 7.2 times forward multiple. Our target price offers potential upside of 34% from current levels, including an expected dividend yield of 3.2%, thus we are reiterating our Buy rating on the stock. Figure 15 shows our DCF model highlights. Figure 15. ASUR Free Cash Flow, 2010E-2019E (U.S. Dollars in Millions) 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E Terminal Sales EBITDA Taxes (Cash) Capex Chg in Wk Cap FCF ,555 Present Value Firm Value 1,247 Net Debt 2009E (217) Equity Value 1,464 Curr Price (US$) TP/ADR (10:1) Upside 30.6% Div. Yield 09E 3.2% Total Return 33.8% Source: Santander estimates. Relative valuation. In relative terms, the company trades at a 4% discount to its Mexican peers in terms of 2009E FV/EBITDA and a 24% discount to international peers. In our view, this valuation is attractive, if we believe that the traffic figures for the company will continue outperforming the sector in Mexico. Nevertheless, we have to consider that the risk associated with the Mayan Riviera airport remains unresolved, as there have been no official comments about the future of this airport. Figure 16. ASUR FV/EBITDA Forward Multiple vs. Historical Average Source: Santander estimates. 14 U.S. investors inquiries should be directed to Santander Investment Securities Inc. at (212) / (212)

15 RISKS TO INVESTMENT THESIS Further economic slowdown and industry consolidation. We believe that a key concern for the industry is a further decline in economic activity, which would have a negative impact on traffic, both in the domestic and international routes. Furthermore, this could also accelerate or speed up industry consolidation, leading to a reduction in the number of airlines, fleets and frequencies, which would have an impact on our traffic estimates, which is the main driver for its financial performance for the industry and the group. ASUR s Master Development Plan for was expected to be revised during 2008, but there has been a 90-day delay. The plan will establish maximum aeronautical charges and mandatory capex for the above-mentioned period based on an estimated internal return rate consistent with the cost of capital in Mexico, according to ASUR s concession terms. In the last revision in 2004, aeronautical charges went up 6%, and the efficiency factor was set at 0.75% per year. On December 29, ASUR issued a press release stating that the Secreataria de Comunicaciones y Transportes (Ministry of Communications and Transportations), was extending its deadline for the approval of the new MDP for 90 days. Meanwhile tariffs will remain unchanged for ASUR. We understand that given the current economic environment and low visibility in some of the key variables that determine the maximum tariffs for each airport, the government has postpone its decision and we will have to wait 90 days for more news. Some of the key variables that affect the tariffs are outlook for passenger traffic, cost of capital, investments and exchange rates. As Cancun is located in a hurricane zone, ASUR will continue to be exposed to weather. In addition, the company could be affected by changes in tourist preferences, competition from other tourism destinations, problems in the airline industry, and terrorism, among other factors. In its infrastructure plan, the Mexican government stated its intention to build an airport in the Mayan Riviera region, south of Cancun. At this point, the project is on stand by, due to the economic environment. We do not believe that the project will be running by 2010 as previously expected, however, this could be a long-term risk. ASUR would be vulnerable to terrorist threats that could increase security measures at the airports. In 2006, ASUR had to make an extraordinary investment of approximately US$30 million to acquire baggage-screening equipment to comply with tighter international standards. Insurance costs also have increased after the impact of Hurricane Wilma in Finally, other terrorist threats could increase security measures, implying additional costs or lower revenues for ASUR. U.S. investors inquiries should be directed to Santander Investment Securities Inc. at (212) / (212)

16 Turbulence Remains - keep Your Seatbelt Fastened FINANCIAL STATEMENTS Figure 17. ASUR Income Statement, Balance Sheet, and CF Statement, E (U.S. Dollars in Millions) Income Statement 2007 % 2008E % 2009E % 2010E % Sales % % % % Cost of Sales - 0% - 0% - 0% - 0% Gross Profit % % % % Oper. and Adm. Expenses % % % % Operating Profit % (5) -2% % % Depreciation 50 19% 72 26% 47 20% 49 18% EBITDA % % % % Financing Costs 1 1% 13 5% 17 7% 17 6% Interest Paid (0) 0% (0) 0% - 0% - 0% Interest Earned 10 4% 12 4% 17 7% 17 6% Monetary Gain/Loss (9) -3% - 0% - 0% - 0% FX Gain/Loss 0 0% 1 0% (0) 0% 0 0% Other Financial Operations - 0% 1 0% 3 1% 3 1% Profit before Taxes % % % % Tax Provision 60 24% 40 14% 36 15% 40 15% Profit after Taxes 48 19% 95 34% 83 35% 92 35% Subsidiaries 0 0% (1) 0% - 0% - 0% Extraordinary Items 0 0% (1) 0% - 0% - 0% Minority Interest - 0% - 0% - 0% - 0% Net Profit 48 19% 94 34% 83 35% 92 35% Balance Sheet 2007 % 2008E % 2009E % 2010E % Assets 1, % 1, % 1, % 1, % Short-Term Assets % % % % Cash and Equivalents % % % % Accounts Receivable 26 2% 62 4% 66 4% 69 4% Inventories 1 0% - 0% - 0% - 0% Other Short-Term Assets 23 1% 48 3% 51 3% 50 3% Long-Term Assets 1,302 85% 1,134 82% 1,171 78% 1,124 74% Fixed Assets % % % % Deferred Assets % % % % Other Assets - 0% - 0% - 0% - 0% Liabilities % % % % Short-T. Liabilities 27 2% 21 2% 22 1% 22 1% Suppliers 2 0% 1 0% 1 0% 1 0% Short-Term Loans - 0% - 0% - 0% - 0% Other ST Liabilities 26 2% 20 1% 21 1% 21 1% Long-Term Loans - 0% - 0% - 0% - 0% Deferred Liabilities % % % 128 8% Other Liabilities - 0% - 0% - 0% - 0% Majority Net Worth 1,329 87% 1,217 88% 1,336 89% 1,378 90% Net Worth 1,329 87% 1,217 88% 1,336 89% 1,378 90% Minority Interest - 0% - 0% - 0% - 0% Cash Flow E 2009E 2010E Net Majority Earnings Non-Cash Items Changes in Working Capital (2) (15) (0) (4) Capital Increases/Dividends (21) (56) (36) (39) Change in Debt - (33) - - Capital Expenditures (61) (73) (30) (26) Net Cash Flow Beginning Treasury Ending Treasury Sources: Company reports and Santander estimates. 16 U.S. investors inquiries should be directed to Santander Investment Securities Inc. at (212) / (212)

17 Figure 18. ASUR Income Statement, Balance Sheet, and CF Statement, E (Millions of Mexican Pesos) Income Statement 2007 % 2008E % 2009E % 2010E % Sales 2, % 3, % 3, % 3, % Cost of Sales - 0% - 0% - 0% - 0% Gross Profit 2, % 3, % 3, % 3, % Oper. and Adm. Expenses 1,620 58% 1,745 57% 1,796 58% 1,866 57% Operating Profit 1,166 42% 1,342 43% 1,310 42% 1,435 43% Depreciation % % % % EBITDA 1,707 61% 1,943 63% 1,915 62% 2,040 62% Financing Costs 15 1% 140 5% 220 7% 210 6% Interest Paid (4) 0% (2) 0% - 0% - 0% Interest Earned 110 4% 128 4% 221 7% 210 6% Monetary Gain/Loss (93) -3% - 0% - 0% - 0% FX Gain/Loss 2 0% 14 0% (1) 0% 0 0% Other Financial Operations - 0% 9 0% 38 1% 38 1% Profit before Taxes 1,179 42% 1,472 48% 1,539 50% 1,646 50% Tax Provision % % % % Profit after Taxes % 1,031 33% 1,077 35% 1,152 35% Subsidiaries 2 0% (10) 0% - 0% - 0% Extraordinary Items 2 0% (10) 0% - 0% - 0% Minority Interest - 0% - 0% - 0% - 0% Net Profit % 1,031 33% 1,077 35% 1,152 35% Balance Sheet 2007 % 2008E % 2009E % 2010E % Assets 16, % 18, % 18, % 19, % Short-Term Assets 2,462 15% 3,290 18% 4,105 22% 5,059 26% Cash and Equivalents 1,926 12% 1,861 10% 2,671 14% 3,574 19% Accounts Receivable 279 2% 803 4% 808 4% 859 4% Inventories 7 0% - 0% - 0% - 0% Other Short-Term Assets 250 1% 626 3% 626 3% 626 3% Long-Term Assets 14,214 85% 14,747 82% 14,405 78% 14,071 74% Fixed Assets 5,860 35% 6,710 37% 6,973 38% 7,243 38% Deferred Assets 8,354 50% 8,037 45% 7,432 40% 6,827 36% Other Assets - 0% - 0% - 0% - 0% Liabilities 2,171 13% 2,210 12% 2,083 11% 1,876 10% Short-T. Liabilities 299 2% 273 2% 273 1% 274 1% Suppliers 17 0% 14 0% 14 0% 15 0% Short-Term Loans - 0% - 0% - 0% - 0% Other ST Liabilities 282 2% 258 1% 258 1% 258 1% Long-Term Loans - 0% - 0% - 0% - 0% Deferred Liabilities 3,743 22% 1,937 11% 1,810 10% 1,603 8% Other Liabilities - 0% - 0% - 0% - 0% Majority Net Worth 14,506 87% 15,827 88% 16,428 89% 17,254 90% Net Worth 14,506 87% 15,827 88% 16,428 89% 17,254 90% Minority Interest - 0% - 0% - 0% - 0% Cash Flow E 2009E 2010E Net Majority Earnings 522 1,031 1,077 1,152 Non-Cash Items 1, Changes in Working Capital (19) 168 (5) (50) Capital Increases/Dividends (231) (600) (480) (480) Change in Debt Capital Expenditures (665) (435) (386) (324) Net Cash Flow Beginning Treasury 1,766 1,926 1,861 2,671 Ending Treasury 1,926 1,861 2,671 3,574 Sources: Company reports and Santander estimates. U.S. investors inquiries should be directed to Santander Investment Securities Inc. at (212) / (212)

18 Turbulence Remains - keep Your Seatbelt Fastened NOTES 18 U.S. investors inquiries should be directed to Santander Investment Securities Inc. at (212) / (212)

19 GAP Suffering from the LCC Blues; Downgrading to Hold Luis Miranda*, CFA (5255) HOLD (12/31/08) CURRENT PRICE: US$23.02/M$31.46 TARGET PRICE: US$26.00/M$32.00 What s Changed Rating: To Hold from Buy Price Target (US$): YE09 TP to from EBITDA Estimates 08 From 236 to 199 Mn (US$): 09 From 257 to 165 Mn 10 From 276 to 188 Mn Company Statistics Bloomberg PAC 52-Week Range (US$) E P/E Rel to the IPC Index (x) E P/E Rel to the A&T Sector (x) 1.7 Mexbol (US$) 1,618 3-Yr EBITDA CAGR ( E) -4.3% Market Capitalization (US$ Mn) 1,291 Float (%) 85 3-Mth Avg Daily Vol (US$000) 7,046 Shares Outst - Mn (ADR 10:1) 561 Net Debt/Equity (x) Book Value per ADR (US$) Estimates and Valuation Ratios E 2009E 2010E Net Earn (M$ Mn) 1, , ,194.0 Current EPS Net Earn (US$ Mn) Current EPADR P/E (x) P/Sales (x) P/CE (x) FV/EBITDA (x) FV/Sales (x) FCF Yield (%) Div per ADR (US$) Div Yield (%) Sources: Bloomberg, Company reports, and Santander estimates. Investment Thesis: We are downgrading our rating on GAP to Hold from Buy, after lowering our 2009 estimates, which now encompass a YoY total traffic decline of 1.5%. Although the stock suffered a decline of 48% in U.S. dollar terms during the year versus the IPC decline of 40%, we believe that in the short term, the company could continue reporting weak numbers in total traffic, which would hinder any appreciation of the stock despite the expected recovery in total traffic in 2010 (+6%). Our new target price of US$26.00 per ADR (M$32.00 per local share) implies a total upside potential of 17%, versus our threshold of 21.90%, justifying our downgrade. Reasons for Change to Price Target/Estimates: The reduction in the number of airlines in Mexico, coupled with the rationalization in the routes and number of frequencies has led to a weaker outlook in the number of passengers in 2009, which is already evident in weaker passenger figures during the second half of GAP s exposure to the Tijuana airport makes this group more vulnerable to the U.S. economic slowdown, in our opinion. Furthermore, the depreciation of the peso has a strong negative effect in our U.S. dollar estimates. We estimate an EBITDA decline of 3.3% in 2009 in nominal terms and 10.2% growth in 2010, with total PAX decline of 1.5% in 2009 and 6.0% growth in Although the stock has been an underperformer, we believe that there is room for further weakness due to tough YoY comparison in traffic figures during the first months of Valuation and Risks: Our YE09 target price is based on a discounted free cash flow (DCF) valuation with a 12.1% discount rate and a 2.5% terminal growth rate, which implies a target trailing FV/EBITDA of 8.1 times for 2009E and 7.1 times forward. Risks include: weaker-than-expected economic growth, lower-thanexpected passenger traffic at GAP s airports; changes in regulations that imply lower tariffs or higher capital expenditure; changes in travel preferences; industry consolidation; terrorist or natural disasters that could affect airline traffic; and volatility in oil prices that could negatively affect the airline s operations in general. U.S. investors inquiries should be directed to Santander Investment Securities Inc. at (212) / (212)

20 Turbulence Remains - keep Your Seatbelt Fastened Grupo Aeroportuario del Pacífico (GAP) has a 50-year renewable concession to operate 12 airports in Northwestern Mexico. GAP operates airports in two large metropolitan cities (Guadalajara and Tijuana), four tourist destinations (Puerto Vallarta, Los Cabos, La Paz, and Manzanillo), and six medium-sized cities (Hermosillo, Bajio region, Morelia, Mexicali, Aguascalientes, and Los Mochis). Six of GAP s airports are among the top-ten busiest airports in Mexico in terms of passenger traffic, with Guadalajara being the third-largest (5.6 million passengers in 2007) and Tijuana the fifth-largest (3.5 million). For 2008, we estimate that GAP will have handled 22.4 million passengers and generated revenues of approximately M$3.4 billion, and EBITDA of M$2.2 billion. INVESTMENT THESIS Highest EBITDA margin among the airport groups in Mexico, but high exposure to LCCs. GAP has the strongest EBITDA margin among its peers in Mexico, driven by a leaner SG&A structure. However, in our view, the company s high exposure to LCCs will lead to a deterioration of this margin in 2008 and In fact, we estimate that the company is the airport group that has the highest exposure to LCCs among its peers, with approximately 23% exposure (excluding Aeromexico Connect and Click). This figure is similar to OMA s estimated exposure of 24%. However, when we consider the airlines that have suspended operations, especially, Aerocalifornia, Avolar and Alma, GAP has a higher exposure, which we believe will continue affecting PAX monthly traffic figures during the first half of We estimate that GAP had a 17% exposure in 2007 to these airlines, higher than OMA and ASUR. GAP s exposure to the Tijuana airport makes this group more vulnerable to the U.S. economic slowdown, in our opinion. NEW ESTIMATES Figure 19 summarizes our new estimates for GAP. Figure 19. GAP Operating Summary (Thousand of Passengers and Million Pesos) E 2009E 2010E Domestic Pax 15,737 14,714 14,415 15,352 Growth 26.1% -6.5% -2.0% 6.5% International Pax 7,828 7,652 7,614 7,995 Growth -2.6% -2.3% -0.5% 5.0% Total Pax 23,566 22,366 22,029 23,347 Growth 14.9% -5.1% -1.5% 6.0% Regulated Revenues 2,762 2,725 2,697 2,922 Real Growth 15.6% -1.3% -1.0% 8.3% Regulated Rev per Pax Real Growth 0.6% 3.9% 0.5% 2.2% Commercial Revenues Real Growth 19.6% 8.2% 5.9% 15.3% Comm Rev per Pax Real Growth 4.1% 14.0% 7.5% 8.8% US$ per Pax Growth 4.5% 11.1% -6.3% 12.5% Total Revenues 3,415 3,431 3,445 3,783 Real Growth 16.3% 0.5% 0.4% 9.8% Sources: Company reports and Santander estimates. 20 U.S. investors inquiries should be directed to Santander Investment Securities Inc. at (212) / (212)

21 Figure 20. GAP Income Statement (Million Pesos), E E 2009E 2010E Total Revenues 3,415 3,431 3,445 3,783 Real Growth 16.3% 0.5% 0.4% 9.8% Operating Costs Cost of Service ,040 1,135 Technical Assistance Fee 14.9% 12.9% 9.5% 9.1% Concession Fees Depreciation & Amortization Total Costs Operating Profit 1,876 2,031 2,139 2,273 Operating Margin 1,583 1,401 1,306 1,510 EBITDA 46.4% 40.8% 37.9% 39.9% EBITDA Margin 2,337 2,185 2,122 2,338 CIF 68.4% 63.7% 61.6% 61.8% Other Financial Expense Tax Provision (1.57) (2.32) (1.74) (1.74) Tax Rate Net Income 16.5% 11.0% 28.0% 28.0% Sources: Company reports and Santander estimates. VALUATION Our YE2009 target price is based on a discounted free cash flow valuation using a 12.1% discount rate and a 2.5% terminal growth rate. Figure 21 summarizes our DCF model. Figure 21. GAP Free Cash Flow, 2010E-2019E (U.S. Dollars in Millions) 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E Terminal Sales EBITDA Taxes (Cash) Capex Chg in Wk Cap FCF ,869 Present Value Firm Value 1,357 Net Debt (101) Equity Value 1,458 Curr Price TP/ADR Upside 12.9% Div. Yield 09E 4.3% Total Return 17.2% Source: Santander estimates. We believe that a large part of the bad news is already priced into the stock. However, we believe we could see some downside risk in the beginning of the year, due to the expected weak YoY monthly traffic figures. This is despite the stock s valuation level, which has declined from 13.0 times in October 2007 to the current 2009 FV/EBITDA estimate of 7.2 times, which compares to the company s two-year average of 8.1 times. Relative to international peers, the stock trades at an 11% discount to 2009E FV/EBITDA multiple and a 24% discount to 2009E P/E. Although this figure might not be a steep discount, we believe that the company s strong EBITDA margin supports this valuation level. U.S. investors inquiries should be directed to Santander Investment Securities Inc. at (212) / (212)

22 Turbulence Remains - keep Your Seatbelt Fastened Figure 22. GAP FV/EBITDA Forward Multiple vs. Historical Average F-06 A-06 F-07 A-07 J-08 J-08 D-08 Source: Santander estimates. 22 RISKS TO INVESTMENT THESIS Further economic slowdown and industry consolidation. We believe that a key concern for the industry is a further decline in economic activity, which would have a negative impact on traffic, both in the domestic and international routes. Furthermore, this could also accelerate industry consolidation, leading to a reduction in the number of airlines, fleets and frequencies, which would have an impact on our traffic estimates, which is the main driver of its financial performance for the industry and the group. Exposure to LCCs. Until the first half of 2008, the airports in Mexico benefited from new supply to new market segments from low-cost carriers. This explained a large part of the growth in the industry since However, as we have explained, the industry is suffering from consolidation, driven by excess capacity and company-specific financial problems, which has led to a reduction in the number of airlines and flights. We believe that the negative effect of lower PAX, which was evident for the industry during the last months of 2008, will continue during the first half of Among the three airport groups we cover, GAP and OMA are the ones that have the highest exposure to LCCs and troubled airlines. Furthermore, considering the weak economic growth, we could expect further consolidation in the industry, which could negatively affect the industry. As GAP operates under a concession granted by the Mexican government, its business is regulated. The government sets the maximum tariffs that GAP can charge, as well as a minimum capital expenditure program under a five-year master development plan. A negative revision of GAP s tariffs and capex could impact its financial results and FCF generation going forward. At the end of 2003, the government approved GAP s master development plan for the period, setting what we believe are favorable terms for GAP. The next revision is scheduled for the end of 2009 and the Mexican Antitrust Commission could put some pressure on Mexican airports to lower their tariffs. A negative outcome in the revision of ASUR s MDP in early 2009 (after the process was delayed 90 days) could set a negative precedent for GAP. U.S. investors inquiries should be directed to Santander Investment Securities Inc. at (212) / (212)

23 FINANCIAL STATEMENTS Figure 23. GAP Income Statement, Balance Sheet, and CF Statement, E (U.S. Dollars in Millions) Income Statement 2007 % 2008E % 2009E % 2010E % Sales % % % % Cost of Sales - 0% - 0% - 0% - 0% Gross Profit % % % % Oper. and Adm. Expenses % % % % Operating Profit % % % % Depreciation 69 22% 70 23% 63 24% 66 22% EBITDA % % % % Financing Costs 9 3% 7 2% 6 2% 12 4% Interest Paid (2) -1% (5) -2% (7) -3% (7) -2% Interest Earned 16 5% 14 4% 10 4% 19 6% Monetary Gain/Loss (5) -2% - 0% - 0% - 0% FX Gain/Loss (0) 0% (1) 0% 4 1% (0) 0% Other Financial Operations (0) 0% (0) 0% (0) 0% (0) 0% Profit before Taxes % % % % Tax Provision 25 8% 14 5% 30 11% 37 12% Profit after Taxes % % 78 29% 96 32% Subsidiaries - 0% 1 0% - 0% - 0% Extraordinary Items - 0% 1 0% - 0% - 0% Minority Interest - 0% - 0% - 0% - 0% Net Profit % % 78 29% 96 32% Balance Sheet 2007E % 2008E % 2009E % 2010E % Assets 2, % 2, % 2, % 2, % Short-Term Assets 212 8% 184 9% % % Cash and Equivalents 149 6% 119 6% 192 8% % Accounts Receivable 62 2% 65 3% 69 3% 75 3% Inventories - 0% - 0% - 0% - 0% Other Short-Term Assets - 0% - 0% - 0% - 0% Long-Term Assets 2,310 92% 1,959 91% 2,046 89% 1,977 85% Fixed Assets % 65 3% 110 5% 142 6% Deferred Assets 2,018 80% 1,894 88% 1,936 84% 1,835 79% Other Assets - 0% - 0% - 0% - 0% Liabilities 107 4% 96 4% 125 5% 146 6% Short-T. Liabilities 55 2% 37 2% 40 2% 42 2% Suppliers 33 1% 17 1% 19 1% 21 1% Short-Term Loans 8 0% 12 1% 12 1% 12 1% Other ST Liabilities 14 1% 9 0% 9 0% 9 0% Long-Term Loans 45 2% 54 3% 79 3% 99 4% Deferred Liabilities 7 0% 5 0% 5 0% 5 0% Other Liabilities - 0% - 0% - 0% - 0% Majority Net Worth 2,415 96% 2,047 96% 2,183 95% 2,170 94% Net Worth 2,415 96% 2,047 96% 2,183 95% 2,170 94% Minority Interest - 0% - 0% - 0% - 0% Cash Flow 2007E 2008E 2009E 2010E Net Majority Earnings Non-Cash Items Changes in Working Capital 15 (56) 1 (5) Capital Increases/Dividends (107) (102) (56) (64) Change in Debt Capital Expenditures (85) (73) (47) (40) Net Cash Flow 52 (22) Beginning Treasury Ending Treasury Sources: Company reports and Santander estimates. U.S. investors inquiries should be directed to Santander Investment Securities Inc. at (212) / (212)

24 Turbulence Remains - keep Your Seatbelt Fastened Figure 24. GAP Income Statement, Balance Sheet, and CF Statement, E (Millions of Mexican Pesos) Income Statement 2007 % 2008E % 2009E % 2010E % Sales 3, % 3, % 3, % 3, % Cost of Sales - 0% - 0% - 0% - 0% Gross Profit 3, % 3, % 3, % 3, % Oper. and Adm. Expenses 1,894 54% 2,024 59% 2,139 62% 2,273 60% Operating Profit 1,583 46% 1,408 41% 1,306 38% 1,510 40% Depreciation % % % % EBITDA 2,337 67% 2,195 64% 2,122 62% 2,338 62% Financing Costs 97 3% 150 4% 81 2% 150 4% Interest Paid (20) -1% 21 1% (95) -3% (88) -2% Interest Earned 179 5% 147 4% 130 4% 238 6% Monetary Gain/Loss (59) -2% - 0% - 0% - 0% FX Gain/Loss (2) 0% (18) -1% 47 1% (1) 0% Other Financial Operations (2) 0% (2) 0% (2) 0% (2) 0% Profit before Taxes 1,680 48% 1,489 43% 1,385 40% 1,658 44% Tax Provision 278 8% 164 5% % % Profit after Taxes 1,403 40% 1,325 39% % 1,194 32% Subsidiaries - 0% 10 0% - 0% - 0% Extraordinary Items - 0% 10 0% - 0% - 0% Minority Interest - 0% - 0% - 0% - 0% Net Profit 1,403 40% 1,325 39% % 1,194 32% Balance Sheet 2007 % 2008E % 2009E % 2010E % Assets 27, % 27, % 28, % 28, % Short-Term Assets 2,313 8% 2,395 9% 3,213 11% 4,242 15% Cash and Equivalents 1,632 6% 1,549 6% 2,363 8% 3,309 11% Accounts Receivable 682 2% 846 3% 849 3% 933 3% Inventories - 0% - 0% - 0% - 0% Other Short-Term Assets - 0% - 0% - 0% - 0% Long-Term Assets 25,213 92% 25,469 91% 25,164 89% 24,756 85% Fixed Assets 3,181 12% 845 3% 1,357 5% 1,777 6% Deferred Assets 22,032 80% 24,623 88% 23,807 84% 22,979 79% Other Assets - 0% - 0% - 0% - 0% Liabilities 1,165 4% 1,253 4% 1,532 5% 1,827 6% Short-T. Liabilities 597 2% 487 2% 496 2% 522 2% Suppliers 363 1% 219 1% 236 1% 259 1% Short-Term Loans 86 0% 157 1% 150 1% 152 1% Other ST Liabilities 149 1% 111 0% 111 0% 111 0% Long-Term Loans 493 2% 699 3% 969 3% 1,239 4% Deferred Liabilities 75 0% 67 0% 67 0% 67 0% Other Liabilities - 0% - 0% - 0% - 0% Majority Net Worth 26,362 96% 26,611 96% 26,845 95% 27,170 94% Net Worth 26,362 96% 26,611 96% 26,845 95% 27,170 94% Minority Interest - 0% - 0% - 0% - 0% Cash Flow E 2009E 2010E Net Majority Earnings 1,403 1, ,194 Non-Cash Items Changes in Working Capital (60) Capital Increases/Dividends (1,172) (258) (729) (785) Change in Debt Capital Expenditures (932) (550) (600) (500) Net Cash Flow 571 (296) Beginning Treasury 1,022 1,632 1,549 2,363 Ending Treasury 1,632 1,549 2,363 3,309 Sources: Company reports and Santander estimates. 24 U.S. investors inquiries should be directed to Santander Investment Securities Inc. at (212) / (212)

25 OMA HOLD Downgrading to Hold after a Recent Rally and Lack of Catalyst Luis Miranda, CFA* (5255) lmiranda@santander.com.mx (12/31/08) CURRENT PRICE: US$11.10/M$19.25 TARGET PRICE: US$13.00/M$20.00 What s Changed Rating: Price Target YE09 : EBITDA Estimates (US$): Company Statistics Downgrade to Hold from Buy To US$13.00 from US$ From 106 to 92 Mn 09 From 121 to 72 Mn 10 From 123 to 83 Mn Bloomberg OMA 52-Week Range (US$) E P/E Rel to the IPC Index (x) E P/E Rel to the A&T Sector (x) 1.8 IPC (US$) 1,618 3-Yr EBITDA CAGR ( E) -5.1% Market Capitalization (US$ Mn) 549 Float (%) 44 3-Mth Avg Daily Vol (US$000) 4,428 Shares Outst - Mn (ADR 8:1) 396 Net Debt/Equity (x) -.12 Book Value per ADR (US$) Estimates and Valuation Ratios E 2009E 2010E Net Earn (M$ Mn) Current EPS Net Earn (US$ Mn) Current EPADR P/E (x) P/Sales (x) P/CE (x) NM FV/EBITDA (x) FV/Sales (x) FCF Yield (%) Div per ADR (US$) Div Yield (%) NM not meaningful. Sources: Bloomberg, Company reports, and Santander estimates. Investment Thesis: We are downgrading the stock to Hold from Buy, after factoring in our new estimates and the recent rally of the stock of 56% in U.S. dollar terms from October 27 to date. Although we lowered our estimates, we increased our target price for YE09 to US$13.00 from US$12.20, mainly due to a reduction in the cost of capital in our DCF model. Our 2009 year-end target price implies a total upside of almost 21%, which compares to benchmark threshold of 22%. We are lowering our estimates for 2009 and 2010 to account for weaker economic growth, which will negatively affect the traffic growth for the company, as well as the company s recent venture in the Mexico City International Airport, where OMA will have a JV in a hotel in Terminal 2, which is expected to be operating in 2009, and an increase in commercial area in These projects should support the company s growth in the medium term, but will also have a negative effect on margins at the consolidated level. Reasons for Change to Rating/Price Target/Estimates: We lowered our traffic estimates for OMA, based on the ongoing pressures faced by the Mexican airline industry and economic slowdown. We now estimate a total PAX decline of 2% in 2009 and a 3% growth in We also adjusted our EBITDA margin for the company. We now estimate an EBITDA margin of 48.4% in 2009 and a modest recovery of 50 bps in 2010 to 48.9%. This would represent an EBITDA decline of 7.9% in nominal pesos in 2009 and a growth of 7.5% in Valuation: OMA s stock trades at 6.5 times our 2009 FV/EBITDA estimate and 5.3 times our 2010 estimate. This is in line with its local peers and a 14% discount to international peers. Our YE2009 target price is based on a DCF valuation, using a 12.0% discount rate and a 2.5% terminal growth rate, and implies a target forward FV/EBITDA multiple of 8.0 times for 2009 and 7.0 times forward multiple. Main risks include: steeper-than-expected economic slowdown, which could negatively affect air traffic at OMA s airports, industry consolidation (reduction in flights and frequencies), natural disasters or terrorist acts; and volatility in the price of oil that could negatively affect airline operations. In addition, aeronautical tariffs and mandatory capex are set by the Mexican government and revised every five years. Unexpected changes in these variables could affect our estimates and valuation. U.S. investors inquiries should be directed to Santander Investment Securities Inc. at (212) / (212)

26 Turbulence Remains - keep Your Seatbelt Fastened Grupo Aeroportuario Centro Norte (OMA) has a 50-year renewable concession from the Mexican government which allows it to operate 13 airports. This concession started in The airports are located in the Central and Northern regions of Mexico. OMA classifies its airports into four categories: (1) those serving large metropolitan cities (Monterrey), which accounted for 46% of total traffic in 2007; (2) three tourist destinations on the Pacific coast (Acapulco, Mazatlan and Zihuatanejo), which accounted for 18% of total traffic; (3) seven medium-sized cities in Northern Mexico (Chihuahua, Culiacán, Durango, San Luis Potosí, Tampico, Torreón, and Zacatecas), with 28% of total traffic; and (4) two cities on the border with the U.S. (Ciudad Juarez and Reynosa), with 8.0% of total traffic. INVESTMENT THESIS We are downgrading our rating on OMA to Hold from Buy, because we believe that after the recent rally in the stock (56% in U.S. dollar terms in two months), it offers only modest upside from current levels. This is because we expect that 2009 will be a challenging year, mainly driven by the economic slowdown and consolidation in the industry, which is likely to negatively affect its traffic figures in 2009, as well as pressure on margins due to its new venture, which will include a hotel in Mexico City International Airport (AICM) and commercial areas. Exposure to LCCs and troubled airlines. We estimate that OMA s exposure to Aerocalifornia, Alma and Avolar during 2007 was approximately 6.5% of total PAX. During 2008, this figure has declined as these airlines reduced frequencies and cancelled routes. However, after they stopped operations, the effect on traffic figures has been evident, with YoY decline in total PAX of 10.5% and 13.3% in October and November 2008, respectively. We believe that the negative comparisons will continue, at least for the first half of Although OMA has what we could characterize as a moderate exposure to troubled LCCs in Mexico, we believe its YoY comparisons will continue to be negative, hindering further appreciation of the stock. AICM Project. On November 19, the company announced a diversification project. This included the acquisition of a 90% stake in Consorcio Grupo Hotelero T2, in order to develop and operate a new NH-brand hotel and commercial areas inside the new Terminal 2 of the Mexico City International Airport (AICM). Spain s NH Hoteles owns the remaining 10% of the company. OMA will operate the commercial areas and NH Hoteles will operate the 287-room hotel. The hotel is expected to open by the end of 1Q09, and the commercial area (currently undergoing a feasibility study) and are expected to start operations in The project will require an investment of M$300 million and OMA expects that the project will be financed 70% with debt and 30% with internally generated fund. The investment for the commercial area has not been disclosed, as studies are still underway. The operation could generate and EBITDA margin of 27% to 30%, which compares to OMA s EBITDA margin for 9M08 of 54.1%. On the positive side, OMA has a highest exposure to metropolitan airports, especially Monterrey, which represents 47% of total PAX for the group during the first eleven months of the year. We believe that once the economic recovery starts to materialize (potentially during the second half of 2009), this could be one of the best-performing airports, as it a key businesses destination in the country. This airport has posted a strong YTD growth in total PAX, with 38.5% YoY growth. However, during November, the airport posted a decline of 14.8% YoY, which reflects the economic slowdown and troubled airline industry. 26 U.S. investors inquiries should be directed to Santander Investment Securities Inc. at (212) / (212)

27 NEW ESTIMATES Despite the expected decline in traffic figures for 2009, we expect flat revenue growth, as we expect that the company can offset the decline in regulated revenues with increase in commercial activities, via higher productivity of the areas that the company has and the addition of new business, like retail space in Monterrey and Mazatlan, among others. Figure 24 summarizes our new estimates. Figure 25. OMA Operating Summary (Million Mexican Pesos), E E 2009E 2010E Domestic Pax 11,740 11,766 11,530 11,876 Growth 26.8% 0.2% -2.0% 3.0% International Pax 2,472 2,379 2,332 2,397 Growth -2.1% -3.7% -2.0% 2.8% Total Pax 14,212 14,145 13,862 14,273 Growth 20.6% -0.5% -2.0% 3.0% Aeronautical Revenue 1,520 1,557 1,537 1,619 Real Growth 13.9% 2.5% -1.3% 5.3% Aeronautical Rev per Pax Real Growth -5.6% 2.9% 0.7% 2.3% Non Aeronautical Revenue Real Growth 10.6% 5.6% 6.0% 11.7% Non Aero Rev per Pax Real Growth -8.3% 6.1% 8.2% 8.5% US$ per Pax Growth -7.0% 3.4% -5.6% 12.4% Total Revenue 1,861 1,917 1,919 2,045 Real Growth 13.3% 3.0% 0.1% 6.6% Operating Costs Cost of Service General & Administrative Technical Assistance Fee Concession Fee to Gov't (5%) Depreciation & Amortization Total Operating Costs 1,148 1,261 1,374 1,445 Operating Profit Operating Margin 39.1% 32.9% 28.4% 29.3% EBITDA 1,064 1, ,000 EBITDA Margin 57.2% 52.6% 48.4% 48.9% CIF Other Financial Expense (8) 101 (10) (10) Tax Provision Tax Rate 96.2% 28.4% 28.3% 27.4% Net Income Sources: Company reports and Santander estimates. VALUATION Our YE2009 target price is based on a discounted free cash flow valuation using an 11.8% discount rate and a 2.5% terminal growth rate. Figure 25 summarizes our DCF model. Our target price implies that the stock would be trading at a trailing FV/EBITDA multiple of 7.8 time by year-end 2009 and a forward multiple of 6.8 times, which would imply a 19% discount to its two-year average of 8.4 times. U.S. investors inquiries should be directed to Santander Investment Securities Inc. at (212) / (212)

28 Turbulence Remains - keep Your Seatbelt Fastened Figure 26. OMA Free Cash Flow, 2010E-2019E (U.S. Dollars in Millions) 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E Terminal Sales EBITDA Taxes (Cash) Capex Chg in Wk Cap FCF Present Value Firm Value 565 Net Debt (78) Equity Value 643 Curr Price TP/ADR Upside 17.0% Div. Yield 09E 4.2% Total Return 21.2% Source: Santander estimates. FV/EBITDA multiple. The stock is currently trading at 6.5 times our 2009 FV/EBITDA estimate and 5.3 times our 2010 estimate. This figure compares favorably to the two-year average of 8.4 times. Relative to its domestic peers, the stock trades at a marginal discount to the average, although at a 20% discount to its international peers. Figure 27. OMA FV/EBITDA Forward Multiple vs. Historical Average Source: Santander estimates J-07 A-07 J-07 O-07 J-08 A-08 J-08 O-08 J-09 RISKS TO INVESTMENT THESIS Further economic slowdown and industry consolidation. We believe that a key concern for the industry is a further decline in economic activity, which would have a negative impact on traffic, both in the domestic and international routes. Furthermore, this could also accelerate industry consolidation, leading to a reduction in the number of airlines, fleets and frequencies, which would have an impact on our traffic estimates which is the main driver 28 U.S. investors inquiries should be directed to Santander Investment Securities Inc. at (212) / (212)

29 for its financial performance for the industry and the group. This could also affect changes in leisure travel preferences, consumer spending, exchange rates, and comparative costs of international tourism. Diversification into AICM. As we mentioned, at the end of 2008 the company announced a diversification project, which will include a hotel in the Mexico City International Airport (AICM), and commercial areas, both in the new Terminal 2 building. These operations usually yield a lower margin than OMA s traditional margins. Although the start-up of these operations, which will include higher operating cost during the ramp-up, is already reflected in our estimates, we must underscore that this is a new venture in an airport that it is not controlled by the company, which poses an additional risk, in our view. Exposure to LCCs. Until the first half of 2008, the airports in Mexico benefited from new supply to new market segments from low-cost carriers. This explained a large part of the growth in the industry since However, as we have explained, the industry is suffering from consolidation, driven by excess capacity and company-specific financial problems, which has led to a reduction in the number of airlines and flights. We believe that the negative effect of lower PAX, which was evident for the industry during the last months of 2008, will continue during the first half of Among the three airport groups we cover, GAP and OMA are the ones that have the highest exposure to LCCs and troubled airlines. Furthermore, considering the weak economic growth, we could expect further consolidation in the industry, which could negatively affect the industry. Due to the high participation of domestic travelers in its traffic mix, OMA is highly dependent on the two major Mexican airlines (Aeromexico and Mexicana) and some regional airlines. The Mexican government privatized Mexicana in late 2005 and Aeromexico in October Although three years have passed, the industry is undergoing a consolidation process, which, coupled with a lack of information, as none of the airlines is a public company any more, but both are pressured by stronger competition and higher costs relatively to the new airlines, especially the one s competing in the so call LCC segment. OMA could face competition from an alternative airport in Monterrey. In its IPO prospectus, OMA disclosed that Aeropuerto del Norte, a concession granted to a private company, operates close to Monterrey managing private aviation only. However, the State of Nuevo Leon is currently discussing with the aeronautical authorities the possibility of modifying the concession specifications to allow the operation of commercial flights from this airport. If this airport is allowed to operate commercial flights, it could have a negative impact on traffic at OMA s most important airport. The initial response of the Communications Ministry to this requirement was that the two airports are too close together to operate commercial flights and comply with security regulations. As OMA operates under a concession granted by the Mexican government, its business is regulated. The government sets the maximum tariffs that OMA can charge, and set a minimum capital expense program in the form of a five-year master development plan. A negative revision of OMA s tariffs and capex could impact both its financial results and FCF generation. The government approved the master development plan for the period at the end of 2005, setting favorable terms for OMA, in our view. The next revision is scheduled to be set at the end of 2010, however, a negative tariff revision for ASUR in (early 2009 after delays announced by the Ministry of Communications) could set a negative precedent for OMA. U.S. investors inquiries should be directed to Santander Investment Securities Inc. at (212) / (212)

30 Turbulence Remains - keep Your Seatbelt Fastened FINANCIAL STATEMENTS Figure 28. OMA Income Statement, Balance Sheet, and CF Statement, E (U.S. Dollars in Millions) Income Statement 2007 % 2008E % 2009E % 2010E % Sales % % % % Cost of Sales - 0% - 0% - 0% - 0% Gross Profit % % % % Oper. and Adm. Expenses % % % % Operating Profit 67 38% 58 33% 42 28% 50 29% Depreciation 31 18% 34 19% 30 20% 33 20% EBITDA 97 56% 92 53% 72 48% 83 49% Financing Costs 9 5% 4 2% 4 2% 6 4% Interest Paid (0) 0% (0) 0% (2) -1% (2) -1% Interest Earned 12 7% 7 4% 4 3% 8 5% Monetary Gain/Loss (4) -2% - 0% - 0% - 0% FX Gain/Loss 1 1% (2) -1% 1 1% 0 0% Other Financial Operations (1) 0% 9 5% (1) -1% (1) 0% Profit before Taxes 75 43% 72 41% 45 30% 55 33% Tax Provision 72 41% 20 12% 13 9% 15 9% Profit after Taxes 3 2% 51 30% 32 22% 40 24% Subsidiaries - 0% - 0% - 0% - 0% Extraordinary Items - 0% - 0% - 0% - 0% Minority Interest - 0% - 0% - 0% - 0% Net Profit 3 2% 51 30% 32 22% 40 24% Balance Sheet 2007E % 2008E % 2009E % 2010E % Assets % % % % Short-Term Assets % % % % Cash and Equivalents % 56 8% % % Accounts Receivable 24 3% 36 5% 47 6% 49 6% Inventories - 0% - 0% - 0% - 0% Other Short-Term Assets 6 1% 9 1% 9 1% 9 1% Long-Term Assets % % % % Fixed Assets 29 3% % % % Deferred Assets % % % % Other Assets - 0% - 0% - 0% - 0% Liabilities % % % % Short-T. Liabilities 37 4% 46 6% 40 5% 42 5% Suppliers 8 1% 44 6% 38 5% 40 5% Short-Term Loans - 0% - 0% - 0% - 0% Other ST Liabilities 29 3% 2 0% 2 0% 2 0% Long-Term Loans - 0% - 0% 25 3% 25 3% Deferred Liabilities % 91 12% 84 10% 68 8% Other Liabilities - 0% - 0% - 0% - 0% Majority Net Worth % % % % Net Worth % % % % Minority Interest - 0% - 0% - 0% - 0% Cash Flow 2007E 2008E 2009E 2010E Net Majority Earnings Non-Cash Items Changes in Working Capital Capital Increases/Dividends (50) (11) (24) (25) Change in Debt - (30) 27 - Capital Expenditures (60) (209) (23) (21) Net Cash Flow 8 (267) Beginning Treasury Ending Treasury Sources: Company reports and Santander estimates. 30 U.S. investors inquiries should be directed to Santander Investment Securities Inc. at (212) / (212)

31 Figure 29. OMA Income Statement, Balance Sheet, and CF Statement, E (Millions of Mexican Pesos) Income Statement 2007 % 2008E % 2009E % 2010E % Sales 1, % 1, % 1, % 2, % Cost of Sales - 0% - 0% - 0% - 0% Gross Profit 1, % 1, % 1, % 2, % Oper. and Adm. Expenses 1,169 62% 1,287 67% 1,374 72% 1,445 71% Operating Profit % % % % Depreciation % % % % EBITDA 1,064 56% 1,009 53% % 1,000 49% Financing Costs 96 5% 45 2% 46 2% 77 4% Interest Paid (2) 0% (1) 0% (22) -1% (25) -1% Interest Earned 129 7% 74 4% 52 3% 97 5% Monetary Gain/Loss (42) -2% - 0% - 0% - 0% FX Gain/Loss 12 1% (28) -1% 15 1% 5 0% Other Financial Operations (8) 0% 101 5% (10) -1% (10) 0% Profit before Taxes % % % % Tax Provision % % 164 9% 183 9% Profit after Taxes 31 2% % % % Subsidiaries - 0% - 0% - 0% - 0% Extraordinary Items - 0% - 0% - 0% - 0% Minority Interest - 0% - 0% - 0% - 0% Net Profit 31 2% % % % Balance Sheet 2007 % 2008E % 2009E % 2010E % Assets 9, % 9, % 10, % 10, % Short-Term Assets 2,084 23% 1,315 14% 1,956 19% 2,388 23% Cash and Equivalents 1,757 19% 730 8% 1,266 13% 1,660 16% Accounts Receivable 261 3% 473 5% 578 6% 616 6% Inventories - 0% - 0% - 0% - 0% Other Short-Term Assets 67 1% 112 1% 112 1% 112 1% Long-Term Assets 7,050 77% 8,277 86% 8,130 81% 7,957 77% Fixed Assets 317 3% 1,493 16% 1,732 17% 1,958 19% Deferred Assets 6,733 74% 6,784 71% 6,399 63% 5,999 58% Other Assets - 0% - 0% - 0% - 0% Liabilities 1,660 18% 1,783 19% 1,831 18% 1,688 16% Short-T. Liabilities 407 4% 598 6% 494 5% 525 5% Suppliers 91 1% 578 6% 473 5% 504 5% Short-Term Loans - 0% - 0% - 0% - 0% Other ST Liabilities 316 3% 21 0% 21 0% 21 0% Long-Term Loans - 0% - 0% 308 3% 313 3% Deferred Liabilities 2,506 27% 1,184 12% 1,030 10% 850 8% Other Liabilities - 0% - 0% - 0% - 0% Majority Net Worth 7,474 82% 7,809 81% 8,256 82% 8,657 84% Net Worth 7,474 82% 7,809 81% 8,256 82% 8,657 84% Minority Interest - 0% - 0% - 0% - 0% Cash Flow E 2009E 2010E Net Majority Earnings Non-Cash Items ,734 2,734 Changes in Working Capital Capital Increases/Dividends (544) (138) (297) (317) Change in Debt - (396) Capital Expenditures (658) (2,722) (280) (260) Net Cash Flow 84 (3,466) Beginning TreASURy 1,673 1, ,266 Ending TreASURy 1, ,266 1,660 Sources: Company reports and Santander estimates. U.S. investors inquiries should be directed to Santander Investment Securities Inc. at (212) / (212)

32 Turbulence Remains - keep Your Seatbelt Fastened IMPORTANT DISCLOSURES ASUR 12-Month Relative Performance (U.S. Dollars) IPC ASUR J-08 M-08 M-08 J-08 S-08 N-08 J-09 Sources: Bloomberg and Santander. ASUR Three-Year Stock Performance (U.S. Dollars) B $ /1/06 B $ /26/06 3,500 3,000 2, B $ /13/07 2, B $ /4/07 B $ /28/08 1, , D-05 M-06 J-06 S-06 D-06 M-07 J-07 S-07 D-07 M-08 J-08 S-08 D-08 Asur ( L Axis) IPC (R Axis) 500 Source: Santander. 32 U.S. investors inquiries should be directed to Santander Investment Securities Inc. at (212) / (212)

33 GAP 12-Month Relative Performance (U.S. Dollars) IPC GAP J-08 M-08 M-08 J-08 S-08 N-08 J-09 Sources: Bloomberg and Santander. GAP Three-Year Stock Performance (U.S. Dollars) *Initiation of Coverage 3, B $ /16/06* 3,000 2, H $ /1/06 B $ /27/07 B $ /13/07 B $ /28/08 2,000 1,500 1, F-06 M-06 A-06 N-06 F-07 M-07 A-07 N-07 F-08 M-08 A-08 D GAP ( L Axis) IPC (R Axis) *Please note: Stock begain trading in February of 2006 Source: Santander. U.S. investors inquiries should be directed to Santander Investment Securities Inc. at (212) / (212)

34 Turbulence Remains - keep Your Seatbelt Fastened IMPORTANT DISCLOSURES (CONTINUED) OMA 12-Month Relative Performance (U.S. Dollars) IPC OMA J-08 M-08 M-08 J-08 S-08 N-08 J-09 Sources: Bloomberg and Santander. OMA Three-Year Stock Performance (U.S. Dollars) B $ /23/07* B $ /30/ H $ /21/08 Initiation of Coverage* 0.5 B $ /1/ N-06 M-07 D-07 J-08 D-08 3,500 3,000 2,500 2,000 1,500 1, Source: Santander. OMA (L Axis) IPC (R Axis) 34 U.S. investors inquiries should be directed to Santander Investment Securities Inc. at (212) / (212)

35 Key to Investment Codes IMPORTANT DISCLOSURES (CONTINUED) Rating Definition % of Companies Covered with This Rating % of Companies Provided Investment Banking Services in the Past 12 Months Buy Expected to outperform the local market benchmark by more than 10% % 80.00% Hold Expected to perform within a range of 0% to 10% above the local market benchmark % 15.00% Underperform/Sell Expected to underperform the local market benchmark. 7.53% 5.00% Under Review 0.54% The numbers above reflect our Latin American universe as of Monday, December 22, For a discussion, if applicable, of the valuation methods used to determine the price targets included in this report and the risks to achieving these targets, please refer to the latest published research on these stocks. Research is available through your sales representative and other electronic systems. Target prices are 2009 year-end unless otherwise specified. Recommendations are based on a total return basis (expected share price appreciation + prospective dividend yield) unless otherwise specified. Stock price charts and rating histories for companies discussed in this report are also available by written request to Santander Investment Securities Inc., 45 East 53 rd Street, 17 th Floor (Attn: Research Disclosures), New York, NY USA. Ratings are established when the firm sets a target price and/or when maintaining or reiterating the rating. Ratings may not coincide with the above methodology due to price volatility. Management reserves the right to maintain or to modify ratings on any specific stock and will disclose this in the report when it occurs. Valuation methodologies vary from stock to stock, analyst to analyst, and country to country. Any investment in Latin American equities is, by its nature, risky. A full discussion of valuation methodology and risks related to achieving the target price of the subject security is included in the body of this report. The benchmark used for local market performance is the country risk of each country plus the 1-year U.S. Treasury yield plus 6.5% of equity risk premium, unless otherwise specified. The benchmark plus the 10.0% differential used to determine the rating is time adjusted to make it comparable with the total return of the stock over the same period. For additional information about our rating methodology, please call (212) This report has been prepared by Santander Investment Securities Inc. ( SIS ) (a subsidiary of Santander Investment I S.A which is wholly owned by Banco Santander, S.A. ("Santander"), on behalf of itself and its affiliates (collectively, Grupo Santander) and is provided for information purposes only. This document must not be considered as an offer to sell or a solicitation of an offer to buy any relevant securities (i.e., securities mentioned herein or of the same issuer and/or options, warrants, or rights with respect to or interests in any such securities). Any decision by the recipient to buy or to sell should be based on publicly available information on the related security and, where appropriate, should take into account the content of the related prospectus filed with and available from the entity governing the related market and the company issuing the security. This report is issued in Spain by Santander Central Hispano Bolsa, Sociedad de Valores, S.A. (SCH Bolsa), and in the United Kingdom by Banco Santander, S.A., London Branch (Santander London), which is regulated by the Financial Services Authority in the conduct of investment business in the UK. This report is not being issued to private customers. SIS, Santander London, and SCH Bolsa are members of Grupo Santander. The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed, that their recommendations reflect solely and exclusively their personal opinions, and that such opinions were prepared in an independent and autonomous manner, including as regards the institution to which they are linked, and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report, since their compensation and the compensation system applying to Grupo Santander and any of its affiliates is not pegged to the pricing of any of the securities issued by the companies evaluated in the report, or to the income arising from the businesses and financial transactions carried out by Grupo Santander and any of its affiliates: Luis Miranda.* *Employed by a non-us affiliate of Santander Investment Securities Inc. and is not registered/qualified as a research analyst under FINRA rules. Grupo Santander receives non-investment banking revenue from the subject companies, with the exception of ASUR. Within the past 12 months, Grupo Santander has received compensation for investment banking services from GAP. The information contained herein has been compiled from sources believed to be reliable, but, although all reasonable care has been taken to ensure that the information contained herein is not untrue or misleading, we make no representation that it is accurate or complete and it should not be relied upon as such. All opinions and estimates included herein constitute our judgment as at the date of this report and are subject to change without notice. Any U.S. recipient of this report (other than a registered broker-dealer or a bank acting in a broker-dealer capacity) that would like to effect any transaction in any security discussed herein should contact and place orders in the United States with SIS, which, without in any way limiting the foregoing, accepts responsibility (solely for purposes of and within the meaning of Rule 15a-6 under the U.S. Securities Exchange Act of 1934) for this report and its dissemination in the United States by Santander Investment Securities Inc. All Rights Reserved. 2009