Grupo Aeroportuario del Centro Norte SAB de CV (OMAB) 2014 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the OMA second quarter 2014 earnings results conference call. Today's call is being recorded. At this time, I'd like to turn the conference over to Mr. Jose Luis Guerrero, Chief Financial Officer of OMA. Please go ahead, sir.

Thank you. And good morning. Welcome to OMA's second quarter 2014 earnings conference call. My name is Jose Luis Guerrero, OMA's Chief Financial Officer. Joining me this morning is the IR team made up by Vicsaly Torres, our Investor Relations Officer [and Luis Camacho] and Diana Perez.

OMA had another excellent quarter. The airlines are in a dynamic expansion phase, and we are experiencing robust growth in passenger volumes. We are able to capture this volume and deliver strong performance from our (inaudible) commercial activities. We also continue to develop our diversification initiatives with good results.

Our cost controls [are effective]. And as a result, we have a solid increase in operating income and adjusted EBITDA. OMA also carried out two debt transactions in the quarter, improving our maturity profile, and ensuring resources for the investment program.

Finally, we are raising our outlook for the full year of 2014, based on the performance of the first six months and the outlook for the passenger trafficked through the end of the year. After making some comments on each of these points, we will open up the call to your questions.

In terms of second quarter operational developments, the number of flight operations rose 5% in the quarter to more than 84,000 operations after having remained fairly constant around 80,000 operations for the last eight quarters. This reflects the addition -- the addition of new routes and new frequencies by our airline planes, principally on domestic routes. (inaudible) traffic volumes increased 11.5%. Domestic traffic grew 12.3%. And international traffic rose 6.9%. All 13 airports registered growth in total traffic during the quarter. This marks 13 quarters in a row of increasing passenger traffic for OMA.

The increase game mostly from Volaris, VivaAerobus, Aeromexico, Interjet, and TAR. Fifteen of the 16 main scheduled airlines we serve increased passenger volumes. OMA continues to work effectively with the airlines to grow traffic in our airports. Fourteen domestic routes opened in the quarter, while nine closed.

From January through June, OMA airports had a net increase of 22 new routes. As I noted last quarter, Volaris established [a regional hub] in Monterrey. Volaris added eight new routes and increased their frequencies between Monterrey and Tijuana and Guadalajara. More new routes are expected in the second half of the year.

This second quarter, Aeromexico also established a Monterrey hub. Aeromexico now operates more than 80 daily flights to 15 domestic and four international destinations from Monterrey. It's launched a new direct flight between Monterrey and Cancun, Puerto Vallarta (inaudible) Los Cabos, and [Aguas Calientes]. The airline is planning additional route openings in the second half of the year. And its schedules will also tie in with Delta, Monterrey, Los Angeles, direct flights starting in November. In addition, Aeromexico is increasing the frequencies to -- on its Monterrey-Guadalajara and Monterrey-Mexico City routes.

The new airline TAR continues to expand its operations. TAR now has operations in five OMA airports and has opened 13 new routes. Interjet started flying the (inaudible) Mexico City route in May, with their new Sukhoi regional jet. Yesterday they announced four new Monterrey routes that would start in August, [Guana Juarto], [Delacruz], Ciudad Juarez, and [Viga Moza]. And they will also start flying [Culia Cantitijuana].

On the commercial front, we opened nine new retail, restaurant and banking services in our airports. And the list occupancy rate is 96%. The new VIP launch in Monterrey terminal A, which is part of our premium strategy, is providing a new source of revenues. The new long-term parking lot for Monterrey terminal D opened last quarter is helping to keep parking revenues grow with an additional 106 parking spaces.

Looking at our diversification activities, the NH Terminal 2 Hotel had another excellent quarter. Room rates increased 16% year over year, and the occupancy rate was 80%. Construction of Monterrey Airport Hotel and [industrial park work] continues to be on track for start-up operations early in 2015.

Turning to our second quarter financial results, all my recorded double-digit growth in revenues, operating income, and adjusted EBITDA, and strong cash flow generation. The (inaudible) aeronautical and non-aeronautical revenue grew 11.4%. Aeronautical revenues increased 11.4%, principally because of the growth in passenger volume. Aeronautical revenue per passenger was MXN178.2.

Non-aeronautical revenues increased 11.3%. The areas with the largest contributions to growth were the NH Terminal 2 Hotel revenues, up 16%, checked baggage screening, up 33%, parking, up 11%, car rental, up 15%, and restaurants, up 13%. Non-aeronautical revenue per passenger was MXN58.6.

The cost of airport operations increased only 0.2%. OMA (inaudible) cost of services plus G&A, excluding the hotel construction costs and the major maintenance provisions. This cost performance was the result of cost control initiatives, and the stabilization of the maintenance expense for checked baggage screening after less than one year of full operations.

Minor maintenance decreased 13.9%. Payroll decreased 1.5%. Decreases in these two line items offset increases in basic services, contracted services, and insurance primarily. Total operating costs and expenses increased 4% in the quarter.

OMA second quarter adjusted EBITDA increased 12.8% to MXN457 million. The adjusted EBITDA margin was 53.9%, up 70 basis points. Taxes were MXN109 million. They increase compared to second quarter 2013 was principally as a result of higher taxable base at the Monterrey Airport and at the parent company and also as a result of higher deferred income taxes reflecting the effects of the [rebuild] of the single-rate corporate tax (inaudible) as part of last year's fiscal reform.

Consolidated net income was MXN214 million, a decrease of 0.8% as a result of the deferred tax provision. Our cash flow generation also continues to be strong. Cash flow from operating activities generated cash of MXN602 million in the first six months of 2014. Second quarter investment expenditures including master development plan and strategic investments were MXN152 million.

The most important investment expenditures for the quarter include the hotel and industrial park in Monterrey plus major maintenance on runways, taxiways, and (inaudible) in a number of airports. Cash from financing activities was MXN2,533 million, including MXN3,839 million in borrowings and payments of the first MXN400 million installment of the [capital investment] approved by the shareholders meeting.

During the quarter, OMA issued a new seven-year (inaudible) for MXN3,000 million at a fixed-rate of 6.85%, MXN1,300 million was (inaudible) for the prepayment (inaudible) due 2016, [or OMA 11]. The balance will be used to finance OMA's investments program.

OMA's cash balance was MXN4,497 million as of June 30. Some of that increase [was temporarily] because of the timing of the bond prepayment, which took place on July 11th. As a result of the growth in passenger traffic volumes during the first six months and taking into account the expansion plans of [airlines clients], OMA is increasing our outlook for the full year. OMA estimates that total passenger traffic growth for 2014 will be between 6% and 8%. Previously, we estimated 4% to 6%.

The growth in the sum of aeronautical and non-aeronautical revenues is estimated to be between 9% and 11%. Previously, we estimated 8% and 10%. The adjusted EBITDA margin is expected to be between 52% and 54%. Previously we estimated 51% to 53%.

[Master development] plan investments are expected to be in the range of MXN600 million to MXN700 million. This includes -- this is unchanged and does not include the recognition of [non-purchases] made in the prior year, in the amount of MXN178 million in 2014. In addition, the strategic investments principally for the diversification project are expected to be between MXN250 million and MXN300 million. Previously, we estimated MXN250 million to MXN450 million.

As part of our master development plan, OMA reached an agreement with the authorities to move forward with the building of a new passenger terminal for the Acapulco airport. A new state-of-the-art terminal will have an initial capacity of 1 million passengers per year and will be a hallmark of the revitalization of Acapulco. The existing terminal, which is functionally obsolete, will be demolished. The investment is approximately MXN350 million, included in our master development plan. Initial work will start before the end of the year.

OMA is providing this outlook based on internal estimates. A number of factors could have a significant effect on the estimates of traffic, revenue growth, adjusted EBITDA, and CAPEX. These include changes in the airline expansion plans, ticket prices, and other factors affecting traffic volumes, the evolution of commercial and diversification projects, and economic conditions, including oil prices, among others. OMA can provide no assurance that the company will achieve these results.

In conclusion, the second quarter was another period of (inaudible) and consistent results. Traffic and revenue growth are strong. Aeronautical activities, commercial activities, and diversification initiatives are all performing well. Cost controls are keeping expenses in line and strengthening EBITDA and cash flow generation. Our capital markets transactions improve our debt structure and ensure the resources for our investment program.

This concludes our prepared remarks. We will now be happy to answer your questions. Operator, please open the call to questions.

Yes, we have a first question from [Mr. Bernardo Deles] from [GBM].

Good morning, Jose Luis. Thanks for taking my call. Just a couple of questions here. First, I would like to understand what did OMA do differently during this quarter in order to attract a larger share in passenger traffic? And keeping up with -- with the trend witnessed with its peers, mainly in terms of the number of operations within your airports?

Sure, absolutely, thank you for your question. So there were a couple of things that we have been doing. And also, there have been many external factors, as you know, that are really helping OMA grow at those levels. So I will start with the external factors.

As you know, the airlines have very interesting ticket prices, so this is generating more demand. We're also seeing -- there is already people traveling (inaudible) Monterrey and also Reynosa to see what's going on in terms of the energy reform and see they're starting to see how they can -- they could probably do business in the future. So we're seeing some also growth there.

Cities like Ciudad Juarez have also been doing great. The manufacturing facilities there are returning. So that's -- those are some of the external factors that have been helping us. You know, the airlines adding more capacity is also great for us, because that is providing us with more planes and more people and more routes to new destinations that either had pretty much no competition or were nonexistent for our clients, also.

The fact that the Mexico City airport is at its full capacity, well, we're seeing some airlines not wanting to go to the Toluca airport and preferring to move to more regional routes. That's is [open], as well.

So those are the external factors. Internally, as you know, we have a strong team that is looking for new opportunities every day, and so we have a great relationship with the airlines. And we have been suggesting new routes that have been successful, and we have been able, as you know, for many years, I would say, for more than four years, we have been working with Aeromexico to start operations of a hub in Monterrey. Finally, we have reached that agreement. And the -- and this also talks about the economic perspective of Mexico and of the Monterrey and (inaudible) region. So this is also a great timing for those things to be taking place.

Volaris is also opening more operations in Monterrey. Previously, they were probably more focused in Mexico City and in Guadalajara. And now they're also starting to have more operations in Monterrey, which is fantastic for us. So I would say it's a combination of both internal efforts that we're doing and also external factors that are [really helping us].

Okay, that's perfect. (inaudible) I'd like to ask you, regarding -- what can we expect in terms of dividends or (inaudible) for next year and going forward?

Absolutely. So as you know, we still have about MXN1.5 billion of equity in our balance that we could continue to reimburse to our shareholders next year. So this is -- this is, as you know, something that has to be approved by the shareholders meeting, and that will probably take place in April of next year.

So there is an opportunity to do something similar to what we did this year. And then maybe our [COFINA] in the next three years will be large enough to do something in that scale. But that's something that the board has to propose to the shareholders meeting and the shareholders should vote on this -- so we should wait until April of next year to see that.

Okay, so what you're saying is that OMA is thinking about operating with zero equity?

I'm sorry. I didn't get the question.

So you mentioned MXN1.5 million in equity still on OMA's balance sheet. So -- and you're seeing that this could go to further equity reimbursement. So what you're saying is that OMA should be operating with zero equity in the next few years and financing all of its -- all of its investments with debt?

Okay, sorry for the misunderstanding. So the capital reimbursements have been coming from capital stock. And in that precise account, that's where the reimbursements have been coming from. So that precise account is the one that's at about MXN1.5 billion today. And therefore, it means that there is room for another -- maybe another or more capital reimbursement. The total shareholders equity today in OMA is MXN5.6 billion.

Okay, that's perfect. And lastly, you mentioned a new terminal in Acapulco. I think it was MXN350 million, this investment. I would like to know where -- or when will these investments take place? And if there -- they have been already included in this year's MDP?

That is correct. They are included in the -- in this five-year master development plan. And so these are -- this should not affect the outlook of the amount that -- of CAPEX that we are doing. So we are planning to start works by the end of this year and continue works throughout next year, as well.

Okay, perfect. Appreciate it so much.

(Operator Instructions) The next call is from Ana Reynal from Santander.

Hi, Jose Luis (inaudible) thank you for the call. Could you please elaborate in the weak advertising revenue, not only in the second quarter of the year, but also year-to-date?

Could you repeat the -- in the weak -- I didn't get the words.

The weak advertising revenue.

Absolutely. So advertising, we have seen a declining in some of the advertising clients that we have. First, we saw a slow activity during the election period a couple of quarters ago. And then somehow that continued on, so we have seen one of the most important clients that usually advertise (inaudible) federal initiatives. And so these have been slower than in other years. So that's part of the decline.

And we have been able to do other initiatives that are different in advertising and (inaudible) alternative advertising, like, for example, we have very large screens, new screens at the entrance of the airport. These are huge, like, cinema screens that are showing advertisings and TV commercials.

So we've been able to find new ways to increase our non-commercial revenues, despite the fact that some of the advertising revenue has decreased a little bit. For example, we added more parking lots, and we are -- we started with the new launch in the Terminal A of Monterrey that has had a very strong interest from our passengers. So we're looking for new initiatives to continue to grow, and we hope that the advertising revenues recovers.

Okay, thank you. And with the other commercial initiatives performing well, if we see (inaudible) in advertising stemming from the expected improvement in the Mexican economy and improved also government spending, do you believe there's upside risk to your new operating revenue guidance growth?

No. The -- so we are at the moment confident with the guidance that we gave. We believe that despite the fact that advertising is not as strong as we probably had expected before, our guidance includes this expectation of how the advertising revenue should behave, and so we don't see a risk in that guidance that we gave.

Okay, thank you.

Mr. Stephen Trent from Citi, please ask your question.

Hi, Jose Luis. Thanks very much. It's Steve Trent here. And one or two questions from me, if I may. One, you mentioned your conversations with the airlines. Would you say you're also having, you know, some dialogue with some of the international airlines, one? And, two, as you have these conversations, do you envision any possibility of reaching specific agreements? I want to say 2007 or 2008 or so. You guys had kind of a passenger volume agreement with -- if my memory serves me correctly, VivaAerobus, where they could possibly get a tariff discount by generating some minimum passenger flow at some of your airports. I was just wondering if you could elaborate on those items.

Absolutely. So with regard with international -- the promotion of international routes, we absolutely -- so internally at OMA, the team that focuses on traffic development is divided into domestic traffic and into international traffic. So we have a team that is entirely focused in developing the international traffic, so that team is the one that has the direct contact with international airlines and is trying to promote new routes.

In a lot of cases, this promotion includes working with different state government agencies to promote tourism in the -- in our touristic destinations and also with -- sometimes with hotel chains to also help attract these new airlines or these new routes. So this is -- we work at OMA and we also do a joint effort to promote international traffic.

And with regards with the -- with the incentives plan that we have with the -- with all the airlines, yes, in the past -- in the case of VivaAerobus, we did have a long-term incentive plan. In most cases today, our incentive plans are punctual of the year upon we are working on. And so for -- and it's more focused on opening new destinations or new frequencies.

So let's say we say whoever wants to open a new route, Monterrey-Mazatlan, for example, will get a 50% discount on the aeronautical services for the first six months. And so in that sense, it is open for all the airlines to participate. And whoever is willing to take the opportunity will be the one that has the incentive.

So we tried to -- we provided these incentives to reduce the level of risk that the airlines have when they're taking away one of the [exiting planes from an exiting route] and changing that strategy and putting it in one of OMA destinations. And so we have the information that -- and we will present that information to the airlines that the route could be successful and -- so when the airlines are reluctant, that's when we -- the incentives can really help to share the risk.

Great, great. Very helpful. And just one last question. I recall seeing a couple of days ago that there was some discussion about granting some foreign carriers (inaudible) freedom traffic rights through Toluca Airport. You know, is this something that you see as the [SET] might approach you and others in terms of looking to increase flow your airport installations? Or is the Toluca thing more specific to, you know, zero slack at Benito Juarez?

So this is a very interesting project that we're seeing in Mexico, so the [fifth freedom] in Mexico, the fifth liberty in aviation, means that an international airline can have a connecting flight in Mexico and then fly out again to another international...

Foreign destination.

(inaudible) right. And this is a pilot project that the government is starting in the Toluca Airport. So before or in any other airports, the international airlines have to reach that airport, and then they will have to fly back. It's more of a point-to-point destination. Or they can have (inaudible) programs with other airlines so that the passengers can connect to other destinations.

So this is a very interesting project that the government is running as a pilot project in the Toluca Airport. And it's very interesting, because if it works, then we probably might be able to see this opening up for other destinations, which I think could be very interesting in the case of our airports, because that will mean that passengers will have maybe two hours to be walking around an airport and shopping and using the services that we can provide at our airports.

And also helps with the connectivity and the service that the airlines are providing to the airport -- to the passengers. So I think this is a great initiative. I think the reason why the government chose Toluca is primarily, as you mentioned, the fact that the Mexico City airport is constrained and it should help alleviate a little bit of the number of operations that the Mexico City airport has.

Okay, great color. I'll let someone else ask a question. Thanks very much.

We have a question for [Neil Yora] for Morningstar.

Hey, good morning. Thank you for taking the question. Just a clarification on your reduction in capital spending for diversification. Was that all due to timing or did you just change plans, the MXN250 million to MXN300 million from the MXN250 million to MXN450 million? Thanks.

Thank you. So the -- that is -- the most important diversification projects that we're investing in right now are the hotel in Monterrey and the industrial park in Monterrey. So the amount that I am communicating (inaudible) that will take place in 2014. So the reduction of it is, you know, a little bit of what will the construction investments that will take place in the first quarter of next year to complete those works. Both of the industrial park and the hotel should be open for operations in the first quarter of next year.

The industrial park, it's -- right now we're working on the first phase of the industrial park, which is basically -- the basic infrastructure that is needed and one for speculative warehouse, or 5,000 square meters. And then the rest of the warehouses will be built in the future, as [built to suit] as we find clients that are interested in the industrial park. But this is -- this is the first phase in the industrial park to attract clients.

We also have many other projects in the pipeline for diversification initiatives, that we're talking to different possible joint investors, maybe a large retail center or commercial shopping center in other airports or another hotel, et cetera. And so the guidance that we gave, as well, at the beginning of the year was maybe with the possibility that we land another project.

But for the moment, we're focusing these two projects in the Monterrey, the hotel, and the industrial park. And so that's why there was a slight reduction in the investment that we see for this year.

Very clear. Just one more detail. When you start operating the Monterrey hotel and industrial park, will you put them in your diversification activities line by line item, just like you do with the hotel services and [Carga]?

Yes. So that's -- that is the plan. We have -- so we have a company that is called [Alma Logistica], and that is the one that will be getting the revenue, so we will probably [fund this] running up next year. We will probably show that line item of [Alma Logistica] and its revenues or we could also mention specifically each one of those projects, what they're making like we're doing right now with the NH Hotel. So, yes, the idea is to communicate how well they're doing individually.

Okay, thanks a lot.

We have a question from Karla Pena from Scotiabank.

Hi, good morning, everybody. And thanks for the call. Just a quick question for me. I know you just (inaudible) in the external and internal sectors that we're driving target in your airports, but I would like to see your view of such [strong traffic] in the whole sector, also with your competitors, and with the weak economic and consumer weakness that we're living, I mean, the traffic seems to be pretty much immune to a slowdown. So do you believe this slowdown will eventually catch up traffic? Or how should we feel about this strong growth? Thank you very much.

You're welcome, [Carla]. So if you look at this historic traffic for [three] airport groups, you will see that 2007 and 2008 were the best years of the airport groups. In the case of OMA, we are not yet at the levels of 2007-2008. So as you -- as you know, in 2009 and '10, we lost two very important airlines. One of them was [Viaxa] and the other one was Mexicana. That really affected OMA.

And so the -- also, the economic slowdown, pretty much it has taken us about five years to be able to recover to the levels -- to our maximum levels. Today, we have several airports that have already broken the historic 2007 record, but in the average, we're still a little bit (inaudible) we might be able to reach -- to break that record again at the end of this year.

But that is -- so what I'm trying to say here is, there was -- there was a market that was proven to exist and to fly in the Mexican airports and in OMA, particularly, as long as there were obviously the -- their route in place at an interesting price.

So today, despite the fact that the consumer -- the consumption in Mexico is weak and the car manufacturers are not selling as expected, in the case of traffic and passenger volumes, it's great, because we're seeing more -- more planes entering into our airports. So as you have seen, the growth plans of the -- all of the Mexican carriers, most of them are very aggressive and with very large plane numbers.

You also see the demographics. Why are they buying so many planes and (inaudible) arriving? Well, the primary reason is because the -- there is (inaudible) Mexico, the demographics -- 50% of the population is under 24 years of ago. So -- and hopefully, at the economic -- the economic growth in the future, there is an enormous potential for passenger traffic in our country.

So only about 2% of total travel in Mexico is done by plane. And 25% of the total travel in Mexico is done by luxury buses. So the low-cost carriers, like VivaAerobus, Volaris, and Interjet have been able to -- have been able to capture that market that would be traveling by bus, and they're offering very interesting prices and they're converting these passengers into plane passengers.

So the -- the economic -- the demographics and the economic outlooks look very favorable for the airline industry. And the airlines are -- most of them did very well in 2012 and '13, and that's why they have very strong growth plans, and that's why we're seeing such a strong growth today at OMA and at the other airport groups, despite the -- this quarter's economic growth.

Okay. That's very clear. Thank you very much.

(Operator Instructions) Our next question is from [Mr. Santiago Peres Tufor] from Credit Suisse.

Hi, good morning (inaudible) Jose Luis (inaudible) I have two questions, if I may. The first one is related to the [minor maintenance]. What drove the decrease for this quarter? And how sustainable is it?

Thank you, [Santiago]. Yes, so the maintenance -- if you look at the amount, is -- I mean, the percentage is an interesting percentage, but the amount is only about MXN6 million. So it's not necessarily a significant number in terms of maintenance work. It could be the scheduling, et cetera.

But in the first -- in the first quarter, as you know, the -- as we mentioned in the last quarter, the contracts for the maintenance of the baggage screening machines have [not really been] taken place, because we still have the guarantee period for those machines. So once they kicked in, in the second quarter, that's why the comparison to last year in terms of -- of the -- of those costs is quite similar. In the overall, what we saw last year in terms of total [minor maintenance] in our airports, we'll be at a very -- very similar level at the end of this year compared to last year.

Okay, perfect. And then the second one is related to cargo volumes. How do you expect this to evolve on the next, let's say, two or three years?

Cargo volumes, we have been -- we have been seeing -- we saw (inaudible) couple of quarters of declining cargo volumes and (inaudible) airline operations. Nevertheless, we were able to grow our cargo business, [OMA Carga], because there we were able to attract land cargo. So this means that the trucks that were crossing the border were able to go directly into our facilities in Monterrey and go through customs there and go through the entire process of entering the country at our site in Monterrey. And, therefore, they were renting the space in our warehouses, et cetera. So that's something that we were able to do to increase revenues.

Going forward, I'm not sure how cargo could behave in the future. I think -- but I think that as the -- we see the economy grow in the next years, [this should definitely increase]. So if you look at how many packages are delivered in the U.S. compared to Mexico, there was a huge amount of space for growth in all of the shipping that is done in Mexico, also.

So the Internet commerce, all the Internet online shop, new online shopping spaces that are opening online in Mexico, this could also increase the delivery of goods through this -- through cargo, and some of them will be airline cargo.

Okay, this is very helpful. Thanks, Jose Luis.

We have a question from Ricardo Alves from Morgan Stanley.

Hi, everyone. Good morning. Thanks for taking my questions. I have a couple of questions only. The first on, on the non-aeronautical side, looking at a total number, even with the strong growth in the hotel, we didn't see as much growth on a per passenger basis of total non-aeronautical revenue. We actually saw a small decline year over year this quarter versus growth last quarter and our forecast of more growth in third Q and fourth Q.

So given the small decline this year on total non-aeronautical per passenger. I was wondering, what could we expect going forward? And maybe just an update on that front. Thank you. That's the first question.

Absolutely. So in terms of the non-aeronautical revenues per passengers, so we will -- we're definitely adding more services and understanding our passengers better, and this will help us. Even though we are already at 96% occupancy in our commercial spaces, we can still have room to offer new services, like, for example, the lounge in the Terminal A of Monterrey. And so this will help increase the revenues and the revenue per -- the non-aeronautical revenue per passenger.

The -- also the fact that we're at 96% occupancy in our commercial spaces helps us to renegotiate our contracts as they come to -- some of them come to an end in different periods. So there is an average strong demand for space in most of our airports, so this should help us increase the conditions of our contracts and help us increase our non-aeronautical revenue for the passenger.

Okay, thanks. That's helpful. Second one, I was looking for some more color specifically on traffic at Monterrey. We saw very strong traffic, very positive surprise. And given that the comparison base is relatively weak going forward the next couple of quarters, and also considering the number of routes you opened this quarter or last quarter, on a net basis, right, you opened several new routes, while you close just a few, so just wondering what's the strategy there, continuing to open new routes, and what is the traffic outlook that you have? Is it going to continue to be as strong as we saw?

Absolutely. So, yes, as you mentioned, Monterrey came quite strong this quarter. I mean, it grew in total passengers 8.6%. In the domestic passenger side, we grew 9.1% in Monterrey. And in the international front in Monterrey, we grew by 5.6%. So as you know, Monterrey is a very important city in Mexico in terms of business and manufacturing as a city, so we have last year new plans announced, like the [Lego] facility in Monterrey, also Caterpillar also expanding in Monterrey.

Nuevo Leon [reached broke their] foreign direct investment record in 2012 and 2013. So those were great news for the state of Nuevo Leon, and in particular for the city of Monterrey. So the security issues, also, have improved a lot in Monterrey, in particular.

So this is helping also traffic recover in Monterrey. We have particular projects in Monterrey, like the both hubs from Volaris and from Aeromexico. All of the new routes that Volaris opened last quarter are really helping us to see that growth in this quarter. And also with the new Aeromexico opening more routes from Monterrey and international destinations, this will continue to allow us to grow in Monterrey. So it's both what the -- we're being able to achieve with the airlines and what's going on in the -- as Monterrey as an industrial hub of the country.

That's helpful. Thank you.

Thank you. With no additional questions in the queue, I'll go ahead and turn things back over to our speakers for any additional or closing remarks.

Thank you. On behalf of OMA, I want to thank all of you again for your participation in this call. I also want to take this opportunity to note that we will hold our management event on September 29th of this year. The event will take place in our NH Terminal 2 Hotel in Mexico City International Airport. We will send a save the date soon. And you will also be notified when the registration is available. And (inaudible) are always available to answer any of your questions, and we hope to see you soon at our offices or in our mid-management. Thank you, and have a good day.

Thank you. And, again, ladies and gentlemen, that does conclude today's conference. Thank you all for your participation.