Mexico’s Action on Concession Tariffs May be Negative for Airports

Fitch Ratings-New York/Monterrey/Sao Paulo-11 October 2023: The terms of Mexican government’s unilateral change in the tariff regime for the private concessionaires of Mexican airports may reduce airport and concessionaire revenues, although the ultimate effects will depend on amendment details, which have not yet been disclosed, Fitch Ratings says.

The Federal Civil Aviation Agency (or AFAC, its Spanish acronym) has amended the terms of the private concessionaires’ tariff base regulation set forth in their concession agreements with Mexican airports. The contracts were signed in 1998 and 1999 and establish that terms may be amended only by mutual agreement between the grantor and the concessionaires, in accordance with applicable law.

The airport tariff announcement is the latest in a series of actions taken by the Mexican government in the last few years with the objective of benefitting government finances or reducing the cost of services to end users related to various infrastructure assets, such as gas pipelines, prisons, toll roads and railroads. These measures, which have reduced project revenue, have been perceived as arbitrary and have stakeholders questioning the country’s commitment to the rule of law, the robustness of its legal framework and its willingness to protect private investments. This has resulted in negative ratings actions for affected prison and toll road projects in the past. Although concession contracts typically present mechanisms that protect concessionaire rights and interests, these have not always been executed by the sponsors.

Our credit rating analysis for infrastructure assets considers the legal and contractual framework of transaction structures, including expectations around the application of regulatory discretion and the enforceability of contractual relationships and security interests, together with the reliability and creditor orientation of their legal systems. Fitch views actions that undermine legal frameworks, including government interventionist tendencies and unilateral contract changes as observed in the announced amendment to Mexican airport concessions, as a negative factor that could constrain a project’s rating.

Fitch rates Grupo Aeroportuario del Centro Norte, S.A.B. de C.V.’s (OMA) obligations at ‘AAA(mex)’ with a Stable Rating Outlook. OMA has important strengths such as a diversified portfolio of 13 airports, low leverage at around 2x, and wide and proven market access to refinance its debts. While the new concession terms are unclear, Fitch believes OMA should have sufficient financial cushion to absorb significant revenue reduction and still maintain its current rating, considering that indicative metric guidance under Fitch’s applicable criteria allows for leverage to up to 4x. Fitch continues to monitor developments to determine if there will be any credit impact on ratings.