Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (NASDAQ:OMAB) Q3 2020 Earnings Conference Call October 21, 2020 9:30 AM ET

Company Participants

Emmanuel Camacho – Investor Relations Officer

Ricardo Dueñas – Chief Executive Officer

Ruffo Pérez Pliego – Chief Financial Officer

Conference Call Participants

Mauricio Martinez – GBM

Ruben Lopez – Santander

Alejandro Zamacona – Credit Suisse

Steve Trent – Citi

Rodolfo Ramos – Bradesco BBI

Francisco Suarez – Scotiabank

Marco Montanez – Vector

Fernando Abdalla – JPMorgan

Andressa Varotto – UBS

Pablo Monsivais – Barclays

Operator

Good morning. My name is Emma and I will be your conference operator. All lines have been placed on mute to prevent any background noise. This is OMA’s Third Quarter 2020 Conference Call. There will be a question-and-answer session after the speakers’ opening remarks and instructions will be given at that time. If you did not receive the report, please contact OMA’s IR department and they will e-mail it to you. Please note that this call is for investors and analysts only and questions from the media will not be taken, nor should the call be recorded on. I would now like to turn the call over to Emmanuel Camacho, OMA’s Investor Relations Officer.

Emmanuel Camacho

Thank you, Emma. Good morning, everyone. Thank you for standing by and welcome to OMA’s third quarter 2020 earnings conference call. Ricardo Dueñas, OMA’s Chief Executive Officer and Ruffo Pérez Pliego, Chief Financial Officer, will be joining this morning and will discuss OMA’s third quarter 2020 results.

Please be reminded that certain statements made during the course of our discussion today may constitute forward-looking statements which are based on current management expectations and beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially, including factors that maybe beyond our control, which includes the impact of COVID-19.

I will now turn the call over to Ricardo Dueñas.

Ricardo Dueñas

Thank you, Emmanuel and good morning everyone and thank you for joining us today. I hope that you, your family and your friends are safe and healthy. This morning, I will review the evolution of our business during the current challenging scenario caused by COVID-19 and its impact on our results during the third quarter.

Our third quarter continue to be challenging, but reflected a gradual recovery on our overall results as passenger traffic improved as compared to the second quarter of 2020. Total passenger traffic reached 2.3 million in the quarter, resulting in a decline of 62% versus the third quarter of 2019, but also showing a clear sign of recovery by increasing 297% versus the second quarter of 2020. The traffic evolution is a result of an increased airline capacity in the quarter and the gradual reactivation of economic activities allowed by the Mexican government. Beginning in June, the Mexican authorities established a traffic light system by region, which determines the level of health alert and the type of activities authorized to operate.

As a consequence, since June, the reactivation level and the type of economic activities allowed are different in each of the states where we operate. Currently, of the 9 states where OMA has operations, 7 states are in orange status and 9 in yellow and – sorry and 2 in yellow. We expect the passenger traffic will continue to evolve positively as more regions in Mexico decrease their epidemiological risk levels and travel restrictions are lifted, which will help the airlines continue to increase their seats offered through more frequencies in operations and the reactivation of routes that are currently temporarily suspended. At the end of September, a total of 117 origin destination routes were in operation compared to 74 at the end of June 2020 and 147 routes in operation at the end of September 2019. Today, the number is 119. As of today, Mexico has not issued any restrictions on air travel. However, if the government issued restrictions to our operations or if measures to counter the spread of COVID-19 become stricter, we may experience a significant additional decrease in our passenger traffic.

In terms of health and safety protocols, we have maintained a close and continuous communication with aeronautical and health authorities in order to adopt any additional measures to protect our passengers and our personnel working in our airports. We also have implemented a number of standards regarding safe travel for the benefit of our customers, passengers and employees in order to increase their confidence when visiting our airports. In the third quarter, all of our airports were granted the safe travel certification given by the World Travel and Tourism Council and our Monterrey airport was granted the airport health accreditation from Airport Council International.

On the cost and expense side, we continued with our efforts to maintain strict cost control. We have reduced temporarily our cleaning and security costs as well as electricity consumption based on current passenger traffic levels and we optimized operations at the airports. During the quarter, we made a difficult decision to reduce about 100 positions of headcount across various levels of the organization. At September 30, our cash position was MXN3 billion, which will allow us to meet all of our investment and operating obligations and we expect to refinance the bond maturity of 2021 during the first quarter.

Turning to OMA’s third quarter operation results, total passenger traffic reached 2.3 million passengers in the third quarter, down 62% compared to the third quarter of 2019. However, there is a clear recovery path in air travel activity as the number of seats offered by airlines in our airports in third quarter grew 217% relative to the second quarter. The best performing airports, which had the lowest decline in passengers in percentage terms compared to third quarter of 2019, were Mazatlán, Culiacán, Ciudad Júarez, Chihuahua and Zacatecas. Conversely, on a route-by-route perspective, the routes that experienced the greatest negative impact on total passenger traffic during the quarter due to the reduction of frequencies or suspensions of flights were Monterrey on its Mexico City, Cancun and Guadalajara routes; Acapulco, Chihuahua and Culiacán under Mexico City routes. Adjusted EBITDA reached MXN432 million in the quarter, with an adjusted EBITDA margin of 52.3%, reflecting our efforts to control or optimize our cost and expense structure and the positive evolution of our passenger traffic.

On the commercial front, revenues decreased 59% with the largest impact on parking, where revenues decreased in line with passenger traffic reductions at our main airports and restaurants, car rentals and retail, which decreased as most revenues were generated from fixed or minimum rents. Occupancy rate for commercial space in our terminals was 90% at the end of the quarter. During the quarter, we implemented a support program for our tenants, through which we offer discount based on passenger traffic performance and which applies from July to December 2020. Diversification revenue decreased 43% mainly due to lower revenues from hotel services. During the quarter – during the third quarter of 2020, the occupancy rate of our Terminal 2 NH Collection Hotel was 36%, while the Hilton Garden Inn Hotel at the Monterrey Airport, which restarted operations on July 6, had an occupancy rate of 18.6% during the quarter.

Total investments in the quarter, including MDP investments, major maintenance and strategic investments, were MXN438 million. Our major projects underway include expansion and remodeling of Monterrey Airport Terminal A; expansion of Terminal C in Monterrey; expansion and remodeling of the Tampico terminal building; modernization of the Zihuatanejo terminal building; and works on runways, taxiways and aviation platforms in several airports.

I would now like to turn the call over to Ruffo Pérez Pliego who will discuss our financial highlights for the quarter.

Ruffo Pérez Pliego

Thank you, Ricardo. Good morning, everyone. I will briefly review our financial results and then we will open the call for your questions.

Turning to OMA’s third quarter financial results, Aeronautical revenues decreased 60.1% as a result of the 62% decrease in passenger traffic. Non-aero revenues decreased 50.5%, with commercial revenues having the largest impact. Commercial revenues decreased 58.7%, the categories with largest impact were parking, restaurants, car rentals and retail. Parking revenues declined 66.3%. The decrease is mostly driven by slower traffic recovery at the Monterrey Airport as compared with the average of our other airports. Restaurants, car rentals and retail decreased 72.8%, 50.9% and 68% respectively as most revenue was generated from fixed or minimum rents.

Diversification revenues decreased 43.4%, mostly driven by lower revenues from the hotel services. As a result, total aeronautical and non-aeronautical revenues were MXN825 million. Construction revenue increased 95.4%. This is a non-cash item that is required under applicable accounting standards. It is equal to construction cost of improvements to concessioned assets. So, it has no impact on earnings. The cost of airport services and G&A expense decreased 4.4%. During the quarter, our minor maintenance cost decreased 30.1% as a consequence of deferrals of nonessential works. We recorded savings on subcontracted services and electricity, mainly due to temporary reductions in operational areas in all of our terminal buildings.

Additionally, during the quarter, we recognized in the other cost and expense line item MXN28 million for severance payments related to the reduction of headcount. OMA’s third quarter adjusted EBITDA reached MXN432 million and the adjusted EBITDA margin was 52.3%. During the quarter, our financing expense was MXN158 million and the consolidated net income was MXN69 million. Cash generated from operating activities in the third quarter amounted to MXN380 million mainly due to a lower operational result. Cash at the end of the quarter stood at MXN3 billion.

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This concludes our prepared remarks. Emma, please open the call for questions.

Question-and-Answer Session

Operator

Thank you. We will now conduct a Q&A session. [Operator Instructions] Our first question comes from the line of Mauricio Martinez. Please state your company name and ask your question.

Mauricio Martinez

Hey, hi, good morning. Thank you for taking my question. Well, my question is regarding capacity, if I may. I would like to understand a little bit and maybe if you can give us sense on how the 119 active routes that you just mentioned should translate into the total seats for the fourth quarter and how are you seeing the recovery in terms of advanced bookings or advance capacity allocation from airlines evolves for the next months? That will be my first question if I may.

Ricardo Dueñas

Hi, Mauricio. It’s a difficult question to answer, because number of routes, are only a variable that affects seats. You also have number of frequencies in either suspended routes or existing routes that can be increased in the future. What we are seeing for the whole 2020 is that overall traffic would decline slightly above 50% versus the whole 2019 calendar year and we do expect a recovery for next year. We estimate as of now that traffic in 2021 will be about 30% lower than in 2019, so still below their 2019 levels, but the recovery is relative to what we are experiencing right now.

Mauricio Martinez

Perfect. Thank you. And if I may, for a second question, regarding the MDP renegotiation, maybe if you can give us an update on how the talks with the government has been going and if there is any expected date at this moment for an outcome of such renegotiation, if there is any change in the CapEx that you mentioned in the second – in the second quarter or in the discount rate, maybe if you can give us more color around that would be very helpful?

Ricardo Dueñas

Sure, Mauricio. This is Ricardo. Yes, as you know, we delivered our MDP program to the authorities in June this year. We are still in the process. It’s too early to say, where will we end up. What I can tell you is we – by the end of December, we should have the MDP already approved by the authorities. We did adjust our CapEx required for the next 5 years from the original MXN15 billion that we mentioned in previous calls to MXN11.8 billion. So far, we are – we have in the conversation with the authority has been very good. They have already visited 7 of our 13 airports and they have been happy with our results. We are still working on the traffic projections for the next 15 years. We are still expecting some discount rate as we mentioned previously of around 13% and the next couple of months will be key in this process.

Mauricio Martinez

Thank you. Very helpful. Thank you.

Operator

Thank you. Our next question comes from Ruben Lopez. Please state your company name and ask your question. Ruben, please go ahead.

Ruben Lopez

Can you hear me?

Emmanuel Camacho

Yes.

Ruben Lopez

Okay, perfect. Hi, good morning. I am Ruben from Santander. My first question is on commercial revenues. Commercial revenues in the quarter were pretty much in line with second Q despite much more passengers. I guess it’s related to the discounts that you mentioned, but can you give us any idea of the magnitude of the discounts and the trends going forward for the upcoming quarter?

Ruffo Pérez Pliego

Sure. During the third quarter, there are three main items that explain the decline in commercial revenues. As you saw, they declined 59%. However, the parking decline of 66% was the big component. That was mostly in line with the passenger traffic level at the Monterrey airport. Parking revenue decline accounted for 37% of the total commercial revenue decline in the quarter. We also had little revenue from percentage of sales sharing that we have in several contracts of retail and restaurants. The decline from the participation in sales accounted for another 35% of the reduction. And finally we, as mentioned, did provide some discounts in the fixed rents through some of our tenants and that accounted for about 20% of the total decline. So, if you add up these three items, parking, lower revenue participations and fixed rent discounts, they add up to about 92% of the total reduction of revenues in the quarter relative to 3Q ‘19.

Ruben Lopez

And when we think about the part of the discounts for the upcoming quarters, I mean, should we expect the same discounts for 4Q or should – or there should be an improvement in that sense?

Ruffo Pérez Pliego

I think there should be an improvement. Part of the discount has the component related to traffic decline. So, to the extent that traffic decline becomes lower in 4Q as it is the expectation, the amount of the discount would be reduced as well. So, we would expect lower discounts in fixed rents in 4Q relative to 3Q.

Ruben Lopez

Prefect. And just the last one, you mentioned that there were some severance costs in this quarter, is this just a one-off or should we expect another impact in 4Q?

Ruffo Pérez Pliego

No, they are a one-off and we have now right-sized the headcount of the organization relative to our expectations for traffic recovery in the following months. So you shouldn’t expect another charge similar to this one going forward.

Ruben Lopez

Thank you, Ruffo.

Operator

Thank you, Ruben. Our next question comes from the line of Alejandro Zamacona. Please state your company name and ask your question.

Alejandro Zamacona

Hi, everyone. Thank you. This is Alejandro Zamacona from Credit Suisse. Just a follow-up question on the MDP, I was wondering if you can comment about the outcome, maybe expected outcome for the negotiation in terms of the airport fees? I know that you already mentioned the expected CapEx and discount rate, but what’s the expected outcome in terms of airport fees?

Ricardo Dueñas

Thank you, Alejandro. Our expectation hasn’t changed. It has remained pretty much the same we would believe something – a slight increase in tariffs is reasonable to expect. As you know this will be the result of CapEx, projections of OpEx, traffic projections. We are still in the process and it’s too early to confirm where we would land, but our expectation remains the same, somewhere around there and slightly positive.

Alejandro Zamacona

Okay, thank you. And if I may make up second question, just in terms of the M&A, I recall that you were participating in the Barbados airport. So, if you could please give some color on the current status of this bid and also if it’s fair to say that going forward we expect further potential bids for international airports. Thank you.

Ricardo Dueñas

Thank you, Alejandro. So, yes, we are currently part of the pre-qualified bidders for the concession process in Barbados airport. We are one of the many. The due diligence phase is expected to start in January and submission of bids is expected toward June of next year. That’s – so far, that’s what we know and yes, we are always currently evaluating options internationally.

Alejandro Zamacona

Thank you, Ricardo.

Operator

Thank you, Alejandro. Our next question comes from the telephone line ending 519. Please state your full name and company name before asking your question. Please remember to unmute yourselves in order to ask your question.

Steve Trent

Hello. Hello, can you hear me?

Ricardo Dueñas

Yes.

Steve Trent

Hi. Sorry about the confusion. This is Steve Trent from Citi. Thank you very much for taking my questions. Just really quickly, thinking about the MDP, kind of a side issue and forgive me if I missed your answer on this. But could you just kind of refresh my memory, to what degree the current MDP has some kind of force majeure protections? Could you receive some sort of rebalancing, given what’s happened this year with COVID-19?

Ricardo Dueñas

Sure, Steve. Thanks for the question. Yes, there is a clause that if GDP decreases by 5%, you are subject to a rebalancing with the authorities. In our particular case, it really doesn’t apply as much as we are already seated at the table negotiating the MDP for the next 5 years. So we are already sitting at – seated at the table anyways.

Steve Trent

Okay, perfect. And just one other quick question, given the state of some of the airlines, has OMA had to do anything special with respect to deposits from any carriers or any structures on receivables or requirements to pay in advance for any of your host airlines?

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Ruffo Pérez Pliego

Managing our receivable portfolio is certainly one of the main areas of focus today. We typically only provide days of credits to airlines that have adequate collateral and guarantees posted with us. To the extent that airlines do not have these adequate collaterals, they are under prepayment mechanisms. So we minimize our exposure to those airlines that aren’t creditworthy. So that’s how we manage our receivables with airlines.

Steve Trent

Okay, very helpful. That’s all I had. Thanks very much guys and stay healthy.

Ruffo Pérez Pliego

Thank you. You too.

Operator

Thank you. Our next question comes from Rodolfo Ramos. Please state your company name before asking your question. Please remember to unmute yourself before asking your question.

Rodolfo Ramos

Sorry, can you hear me now?

Ricardo Dueñas

Yes.

Rodolfo Ramos

Perfect. Yes, this is Rodolfo Ramos from Bradesco BBI. Just – and I am sorry here for staying on the MDP, but just a quick follow-up here. Can you tell us about what kind of OpEx levels are you contemplating for the next 5 years? If it’s something in line with what we have seen this year or could we see a, let’s say, a reset to a higher level? That’s my first question.

Ruffo Pérez Pliego

I would say, Rodolfo this is Ruffo, that OpEx this year is not reflective of the long-term situation. We have made significant efforts to reduce certain operational areas and we negotiated the [indiscernible] of our subcontracted services contract. But certainly, as demand picks up, the level of OpEx will be closer to that that you saw in 2019. So there would be a pick-up in OpEx in our expectations, going forward.

Rodolfo Ramos

Perfect, thank you. And my next question is, I don’t know if you have any visibility as far as bookings go for the December period or the holiday. I don’t know if there is anything encouraging that you are seeing with the conversation with airlines or anything that can give us a little bit of a preview there?

Ruffo Pérez Pliego

We don’t have specific data on bookings. We are in talks with some of the largest airlines, domestic largest airlines and they do intend to open several routes in the December holiday season. So I mean, so far it is positive, the expectation that we have and that we are seeing from these domestic airlines. But obviously you – there is the risk of COVID and as we mentioned the traffic light system. So at the end of the day, we will see how economic activity and people mobility is reactivated based on that traffic light system form – by the government.

Rodolfo Ramos

Perfect. Thank you. And just one last if I may, the FX expense that you booked in the quarter, is that related to your dollar balances?

Ruffo Pérez Pliego

That is correct. We have about $75 million in cash. So changes in the value of the FX to the rate that either a gain or a loss in our P&L.

Rodolfo Ramos

Okay, thank you. Those were my questions.

Operator

Thank you, Rodolfo. Our next question comes from the line of Francisco [indiscernible]. Please state your company name before asking your question. Please remember to unmute yourself before asking your question. Francisco, please go ahead, if you are ready.

Francisco Suarez

Sorry for that. It’s Francisco Suarez from Scotiabank and thank you for hosting this call Ricardo, Emmanuel, Ruffo. I have two quick questions. One, a follow-up on account receivables, can you break down the amount that you have on the current receivables between carriers and tenants in your terminals? And the second question relates to you liability management. Currently, the overall yield curve has go to levels of – to the [indiscernible] below the 10% mark. I think that is great news for you considering a potential tap to the debt markets, what can you tell us on that? Thank you so much.

Ruffo Pérez Pliego

Hi, Francisco. This is Ruffo. Starting with your second question, we have intention to refinance our maturing debts in the first quarter of this year. Once the MDP tariffs and committed CapEx is known. So we believe that that will be the best timing to refinance that. And we will see what the market levels at that time are and based on question inside whether it’s a term or short-term financing, but our current expectation is to have it refinanced with another [indiscernible]. And regarding the receivables, I would say that around 90% are related to airlines and 10% is related to [indiscernible] and other type of customers such as [indiscernible] or diversification in customers.

Francisco Suarez

Fantastic. Thanks so much. Take care, guys.

Operator

Thank you, Francisco. Our next question comes from the telephone line ending 330. Please state your full name and company name before asking your question. Please remember to unmute yourself if you have placed yourself on mute before asking your question. Please go ahead with your question after unmuting yourself. We will return later for the question from the line ending 330. The next question comes from the line of Marco Montanez. Please state your company name before asking your question. Please remember to unmute yourself if you have placed yourself on mute before asking your question.

Marco Montanez

Hi, can you hear me now?

Ricardo Dueñas

Yes.

Ruffo Pérez Pliego

Yes.

Marco Montanez

Thank you. Good morning. This is Marco Montanez from Vector. Please accept my apologies. I have a problem with the equipment. Hi everybody. Thank you for the call and I hope you are safe and healthy. If you allow me to make a follow-up about the non-aeronautical revenues per passenger, we saw a significant decrease in absolute terms compared to the second quarter from almost MXN600 to around MXN100 during the third quarter. I understand there is an effect for the fixed component of the revenues. But if you can give more color about it. And for the next quarters what we should expect for this number? That will be great. Thank you.

Ruffo Pérez Pliego

I think at this time, looking on a per pax basis is not reflective of the situation, given that you had a very low passenger base in 2Q, and 3Q is starting to recover. I think our goal is to trend back to the levels that we had in 4Q or first Q of last quarter as soon as possible, and that would be reflective of the true revenue, commercial revenue generation per pax. But in terms of overall commercial revenues, what we would expect in 4Q is definitely a lower level of absolute discounts. We would expect to see some profit, some revenue sharing by some of our larger tenants and parking revenue line item that mirrors the performance of Monterrey traffic performance.

Marco Montanez

Okay, thank you very much, Ruffo.

Operator

Thank you, Marco. Our next question comes from the line of Fernando Abdalla. Please go ahead with your question after stating your company name. Thank you.

Fernando Abdalla

Hi, good morning guys. It’s Fernando Abdalla with JPMorgan. I actually have two questions. The first is, to discuss a little bit more this concept of the clause of the 5% GDP reduction and the reset that you can probably have. Usually we hear the word rebalance, but rebalance in my view, gives the idea that all the losses that the companies are incurring these last months due to COVID will be between brackets given back, right. So rebalance would mean net present value zero. And the way I understand, I just want to make sure if you guys see this way and if this is how the mechanism work, these clause or eventually the MDP that you guys have now will kind of stop the bleeding, right. So all the losses that you have incurred in the last months with the pandemic will not be recovered, is that how you see it?

Ruffo Pérez Pliego

The clause is very broadly drafted, as Ricardo mentioned earlier, it just states that after a 5% GDP decline and the resulting significant passenger traffic reduction, that the parties will get back to the table. But there is no specificities of how that clause would look like. In our particular case, since our committed CapEx program, includes tariff regime, not an agreement – tariffs ends at the end of this year, the MDP that we are negotiating right now with the authorities reflects obviously a lower traffic backlog going forward and the situation and the recovery that we expect going forward from the COVID-19. But we do not expect that there would be a compensation for the bad performance that we will have this year.

Ricardo Dueñas

And just to add up to that point, Fernando, as – I mean expressed in your terms, it does not stop the bleeding going backwards. It actually stops the bleeding going forward. So it’s not exactly that the mechanism works so that the government compensates you what you lost in the past, once you negotiate the MDP any positive or negative, it’s up to the concessionaire. That’s why for us being at this point already seated at the table, it is a good news. It’s good news for us because we already adjust the new reality into our projections for the next coming years.

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Fernando Abdalla

Yes, no, I agree a 100%. That’s what I want to make sure because sometimes we hear rebalancing and rebalancing means zero impact, right. And as you said, it is pretty much sets new terms forward but not backwards and that is how I thought as well. Just wanted to make sure

Ricardo Dueñas

That’s correct.

Fernando Abdalla

Okay, thanks. Ricardo. And second question is very simple, we all talk about business and leisure, international, domestic, our expectations about traffic recovery obviously in the case of Monterrey. I would imagine correct me if I am wrong, that you have a greater exposure to business. I was just wondering if you could give us a sense if you have this idea of what is the traffic breakdown between leisure, between business between VFR if you could give some information to us on that front would be helpful?

Ricardo Dueñas

Sure. Just to give some background on that. We expect that the first traffic that we will be recovering will be the VFR, Visiting Friends and Relative, and we are already seeing that in some of our airports. Then, you will start seeing domestic recovering much faster than international, I think that’s good news for OMA since most of – actually for this quarter, almost 92%, 93% of our traffic is domestic. And then in the mixture of business with leisure, it’s most likely you would start seeing leisure pickup faster than business. And we can see that already in some of our airports. We have airports like, for example, Mazatlan which are already operating around an 80% capacity compared to some other airports like Tampico which are in the mid-30s.

Fernando Abdalla

Okay, perfect. And if I may, one last quick one, if this airport in Tulum becomes a reality, would you guys consider to look at it?

Ricardo Dueñas

There is few – very little information regarding that airport. What we know it’s what we actually we’ve been seeing in the press that it’s intended to be constructed by the military and operated by the military. From our understanding, there is no intention from the government to higher private operators in that airport.

Fernando Abdalla

Okay, thanks. Have a good day.

Operator

Thank you, Fernando. [Operator Instructions] We will now return to the question from the line ending 330. Please state your full name and company name before asking your question. If you have placed yourself on mute, please remember to un-mute yourself before asking your question. We can now hear you.

Andressa Varotto

Can you hear me?

Operator

Correct, we can hear you.

Andressa Varotto

Okay, good. Hi, this is Andressa from UBS. I just have a quick follow-up on the previous question regarding traffic. As you mentioned that Monterrey has been kind of underperforming some of the rest of your airports and we are still seeing OMA’s underperforming some peers on the domestic traffic ground. So, I mean do you attribute this to the traffic mix, for example, more business or it could be our exposure to airlines. So what is your view on this and what you expect going forward?

Ricardo Dueñas

I think it is a mix of various things. Certainly Monterrey is the heartland of industrial build. So that segment is recovering at lower pace than VFR for example. And the other factor that I think has had a big incidence is the traffic light system. The state of Nuevo Leon has basically been in orange code for quite a few months now as opposed to other states that have gone down to a lower risk level of yellow. So I think that to the extent that more economic activities are allowed by having a yellow code or eventually a Green code that would be the catalyst for Monterrey traffic to recover.

Andressa Varotto

That’s very helpful. Thank you.

Operator

We will take our next question from the line of Pablo Monsivais. Please state your company name before asking your question.

Pablo Monsivais

Hi, good morning. Can you hear me?

Ricardo Dueñas

Yes.

Pablo Monsivais

Hi, Pablo Monsivais from Barclays. I have a quick follow-up on the previous traffic questions for you. What percentage of your Monterrey traffic is coming from Mexico City? That would be my first question. And my second question is, from that Mexico City-Monterrey route, what percentage do you think or estimate that is coming from purely domestic, leisure and potentially VFR market. I don’t know if you can provide that breakdown. Thank you.

Ricardo Dueñas

I think – Thank you, Pablo, for your questions. I think the specifics we would have to come back to you in what is the specific breakdown of each one of those – of those segments. What I can tell you is that the Mexico City-Monterrey route probably represents currently around 15% of the total traffic. It’s one of the routes that we have seen we have seen this quarter around 60%, 69% decrease in that route. The composition of our traffic is, as you know it’s 92%, 93% domestic, 7% international. It’s mostly focused on business traveler specific, especially Monterrey. but the specific number of the breakdown we have to get back to you on that.

Pablo Monsivais

Prefect. Thank you.

Operator

Thank you, Pablo. We will pause once more for any further questions. [Operator Instructions] Our next question comes from the line of Fernando Abdalla. Please go ahead with your question Fernando.

Fernando Abdalla

Thank you. Just two follow-up questions if I may. The first one is related to the exposure to the airlines, right. If I’m not mistaken, based on 2019 data, Aeromexico and Interjet represented roughly 40% of your revenues. We know Aeromexico today is on Chapter 11. We keep hearing all the time about Interjet. I was just wondering what could be the strategy here because in theory these airlines are the ones that should be more impacted in terms of growth or returning seats going forward. So how do you see this regarding the traffic outlook and the situation for the coming quarters?

Ricardo Dueñas

Sure, Fernando. What we have seen, percentage wise, Aeromexico still represents around a 20% of the current capacity, slightly lower from last year. But what we have been seeing is that most of the capacity that has been lost by either Aeromexico or Interjet has been captured by the low cost carriers. So we have seen an increase in percentage terms by Viva and Volaris. Just to put in perspective, last year, low cost carriers represented around 50%, 55% of the traffic of OMA. And if you look at this quarter, you will see somewhere around the 70%s, in the low 70%.

Fernando Abdalla

Okay, perfect. So the mix will naturally change?

Ricardo Dueñas

Sorry.

Ruffo Pérez Pliego

Yes.

Fernando Abdalla

The second question is more, I would say, theoretical because we still keep seeing OMA trading at relative discount – sorry relevant discounts to peers. I keep asking myself what could be the reasons, if you look to multiples, whatever EBITDA, P/E, we still see a reasonable discount that in my view, at least is not fare. From your conversations with the clients, with the investors, I imagine you guys naturally speak to them regularly or eventually on your mind, what could be the reasons driving the discount, I mean, trying to understand a little bit on how you see this? Thanks.

Ricardo Dueñas

So I mean it’s hard to say Fernando and I believe some of that could be attributed of the composition of the portfolio of our airports, the specific locations where we have them, and also the composition of our traffic. We’re mostly focused – centered in Mexico City, in Mexico operations. So that could be used for some explanation. I don’t know Ruff, if you have something else.

Ruffo Pérez Pliego

Well, certainly the commercial revenues per passenger when we compare to other airports might not be as high, but obviously there is the clear explanation, given the mix of airports that we have without that much international traffic exposure. So I think those would be – but certainly we agree with you Fernando that perhaps the discount is not fair at all.

Fernando Abdalla

Okay, guys. Thanks a lot.

Operator

Thank you, Fernando. We have not received any further questions at this point. So that concludes our question-and-answer session. Thank you. I would now like to hand the call back over to Ricardo Dueñas for some closing remarks.

Ricardo Dueñas

Not much. I just wanted to thank all of you again for participating in this call. Ruffo, Emmanuel and I are always available to answer your questions and we hope to see you soon. Thank you very much and have a good day.

Operator

That concludes the conference call. You may now disconnect.



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