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Section 1: F-1/A (AMENDMENT NO. 2 TO FORM F-1)

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As filed with the Securities and Exchange Commission on January 9, 2018
Registration No. 333-221916​
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Pre-Effective Amendment No. 2
to
FORM F-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
Corporación América Airports S.A.
(Exact name of registrant as specified in its charter)
Grand Duchy of Luxembourg
4581
Not Applicable
(State or other jurisdiction of
incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
(IRS Employer
Identification Number)
Corporación América Airports S.A.
4, rue de la Grêve
L-1643, Luxembourg
Tel: +35226258274
Fax: +35226259776
(Address, including zip code, and telephone number, including
area code, of registrant’s principal executive offices)
Puglisi & Associates
850 Library Avenue, Suite 204
Newark, Delaware 19711
302-738-6680
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
copies to:
Marc Rossell
Greenberg Traurig, LLP
200 Park Avenue
New York, NY 10166
Tel: 212-801-6416
Fax: 212-805-5516
Conrado Tenaglia
Jeffrey Cohen
Matthew Poulter
Linklaters LLP
1345 Avenue of the Americas
New York, NY 10105
Tel: 212-903-9000
Fax: 212-903-9100
Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.   ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ☐
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ☐
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933. Emerging growth company   ☐
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 7(a)(2)(B) of the Securities Act.   ☐

The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
CALCULATION OF REGISTRATION FEE
Title of each class of securities to be registered
Proposed maximum
aggregate offering price(1)
Amount of
registration fee
Common shares, nominal value U.S.$1.00 per share(2)
U.S.$ 100,000,000 U.S.$ 12,450(3)
(1)
Estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended.
(2)
Includes shares subject to the underwriters’ option to purchase additional shares. See “Underwriting (Conflicts of Interest).”
(3)
Previously paid.
The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

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The information contained in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
PRELIMINARY PROSPECTUS
Subject to completion, dated January 9, 2018
        Common Shares
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Corporación América Airports S.A.
28,571,429 Common Shares
U.S.$          per common share
This is an initial public offering of common shares of Corporación América Airports S.A. We are offering 11,904,762 common shares and the Selling Shareholder identified in this prospectus is offering 16,666,667 common shares.
We expect that the initial public offering price per common share will be between U.S.$      and U.S.$     . The market price of our common shares after the offering may be higher or lower than the offering price.
Prior to this offering, there has been no public market for our common shares. We have been authorized to list our common shares on the New York Stock Exchange under the symbol “CAAP.”
Investing in our common shares involves risks. See “Risk Factors” beginning on page 24.
Per Common Share
Total
Price to the public
U.S.$          U.S.$         
Underwriting discounts and commissions(1)(2)
Proceeds, before expenses, to us
Proceeds, before expenses, to the Selling Shareholder
(1)
We have agreed to reimburse the underwriters for certain expenses incurred in connection with this offering. See “Underwriting (Conflicts of Interest).”
(2)
See “Underwriting (Conflicts of Interest)” for a description of all compensation payable to the Underwriters.
We and the Selling Shareholder have granted an option to the underwriters. Under this option, the underwriters may elect to purchase a maximum of 4,285,714 additional common shares (1,785,714 from us and 2,500,000 from the Selling Shareholder) within 30 days following the date of this prospectus.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The underwriters expect to deliver our common shares to investors on or about            , 2018.
Joint-Bookrunners
Oppenheimer & Co.
BofA Merrill Lynch
Citigroup
Goldman Sachs & Co. LLC
Co-Manager
Santander
The date of this prospectus is           , 2018.

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3
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24
57
58
59
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65
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72
111
117
142
206
215
221
222
225
230
231
239
248
253
254
255
256
F-1
None of us, the Selling Shareholder or the underwriters (or any of our or their respective affiliates) have authorized anyone to provide any information other than that contained in this prospectus or in any free writing prospectus prepared by us or on our behalf or to which we have referred you. None of us, the Selling Shareholder or the underwriters (or any of our or their respective affiliates) takes any responsibility for, and can provide no assurance as to the reliability of any other information that others may give you. We, the Selling Shareholder and the underwriters (or any of our or their respective affiliates) are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is only accurate as of the date on the front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.
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Certain Conventions
Corporación América Airports S.A., formerly known as A.C.I. Airports International S.à r.l., was incorporated under the laws of Luxembourg on December 14, 2012, and is a subsidiary of A.C.I. Airports S.à r.l. (the “Selling Shareholder”). See “Presentation of Financial and Certain Other Information—Our Reorganization.” The Company owns no assets other than its direct and indirect ownership of the issued share capital of other intermediate holding companies for all of our operating subsidiaries. Except where the context otherwise requires or where otherwise indicated, all references to the “Company,” “we,” “us” and “our” refer to Corporación América Airports S.A. and its consolidated subsidiaries, as well as those businesses we account for using the equity method.
Currencies
In this prospectus, unless otherwise specified or the context otherwise requires:

“U.S.$” and “U.S. dollar” each refers to the United States dollar;

“AR$” refers to the Argentine peso;

“€,” “EUR” or “euro” each refers to the euro, the single currency established for members of the European Economic and Monetary Union since January 1, 1999;

“R$” or “BRL” each refers to the Brazilian real;

“$U” or “UYU” each refers to the Uruguayan peso;

“AMD” refers to the Armenian dram; and

“PEN” or “S/” refers to the Peruvian sol.
Presentation of Financial and Certain Other Information
Presentation of Financial Information
This prospectus contains our audited restated combined consolidated financial statements as of December 31, 2016, December 31, 2015 and January 1, 2015, and for our fiscal years ended December 31, 2016 and 2015, which we refer to collectively as our “Audited Restated Combined Consolidated Financial Statements.” The combined consolidated financial statements for the year ended December 31, 2016, previously issued have been restated due to discovery of an error in our accounting for dispositions of subsidiaries during 2016 and 2015, specifically in connection with the release of the cumulative translation adjustments into earnings. For a discussion of the restatement of previously issued combined consolidated financial statements, see Note 2 to our Audited Restated Combined Consolidated Financial Statements included elsewhere in this prospectus.
This prospectus also contains our unaudited condensed consolidated interim financial statements as of September 30, 2017, and for the nine-month periods ended September 30, 2017 and 2016, which we refer to collectively as our ‘‘Unaudited Condensed Consolidated Interim Financial Statements’’ and together with our Audited Restated Combined Consolidated Financial Statements, the ‘‘Consolidated Financial Statements.’’
We prepare our Audited Restated Combined Consolidated Financial Statements in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”). We have applied all IFRS issued by the IASB effective at the time of preparing our Audited Restated Combined Consolidated Financial Statements. We applied IFRS for the first time for our fiscal year ended December 31, 2016. Our opening IFRS statement of financial position was prepared as of our transition date to IFRS, which occurred on January 1, 2015.
We prepare our Unaudited Condensed Consolidated Interim Financial Statements in accordance with IAS 34 Interim Financial Reporting. The accounting principles used in the preparation of our Unaudited Condensed Consolidated Interim Financial Statements are consistent with those used in the preparation of
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our Audited Restated Combined Consolidated Financial Statements. Our Unaudited Condensed Consolidated Interim Financial Statements do not include all the information and disclosures required in our Audited Restated Combined Consolidated Financial Statements and accordingly should be read in conjunction with them.
Our Audited Restated Combined Consolidated Financial Statements have been audited by Price Waterhouse & Co. S.R.L., a member firm of the PricewaterhouseCoopers global network, an independent registered public accounting firm, whose report dated November 17, 2017, is also included in this prospectus.
Our Consolidated Financial Statements are presented in U.S. dollars. Our fiscal year ends on December 31 of each year. Accordingly, all references to a particular year are to the year ended December 31 of that year. Some percentages and amounts included in this prospectus have been rounded for ease of presentation. Accordingly, figures shown as totals in certain tables may not be an exact arithmetic aggregation of the figures that precede them.
Our Segments
We have identified seven reportable segments: Argentina, Italy, Brazil, Uruguay, Ecuador, Armenia and Peru. See Note 4 to our Audited Restated Combined Consolidated Financial Statements and “—Adjusted Segment EBITDA.”
Our Reorganization
During the fiscal year ended December 31, 2015, our ultimate controlling shareholder, Southern Cone Foundation, a foundation organized under the laws of Liechtenstein (“SCF” or our “Controlling Shareholder”), elected to complete a reorganization of A.C.I. Airports International S.à r.l. and various other entities and businesses under the common control of SCF in order to organize all of our airports business activities under A.C.I. Airports International S.à r.l., and to transfer all business activities not related to the airport business to other affiliates (the “Reorganization”). SCF’s business was historically conducted through a large number of entities with no single holding entity, and instead were separately owned by entities directly or indirectly controlled by SCF. SCF effected the Reorganization through several corporate reorganization steps under local laws. None of these transactions affected the common control structure of the entities forming the group. Also, certain other business activities of SCF’s business not related to the airport business were either sold or transferred to other companies and not contributed to us.
A.C.I. Airports International S.à r.l. was formed as a private limited liability company (société à responsabilité limitée) under the laws of the Grand Duchy of Luxembourg on December 14, 2012. In connection with this offering, on September 14, 2017, A.C.I. Airports International S.à r.l. was converted from a Luxembourg private limited liability company into a Luxembourg public limited company (société anonyme) and changed its name to Corporación América Airports S.A. (the “Conversion”). Corporación América Airports S.A. is indirectly wholly owned by SCF. In conjunction with the Conversion, all of A.C.I. Airports International S.à r.l.’s outstanding equity interests were converted into common shares of Corporación América Airports S.A. Prior to this offering, all of the outstanding equity interests of Corporación América Airports S.A. were owned by the Selling Shareholder.
The Reorganization was effected between entities which were under the common control and common management of our Controlling Shareholder for all periods for which financial statements are presented. Our Audited Restated Combined Consolidated Financial Statements are presented in accordance with IFRS as issued by IASB on a combined basis after giving effect to the Reorganization. IFRS provides no guidelines for the preparation of combined consolidated financial statements, which are therefore subject to the rules given in International Accounting Standards (IAS) 8.12. These rules require consideration of the most recent pronouncements of other standard-setting bodies, other financial reporting requirements and recognized industry practices. As described in Note 1 to our Audited Restated Combined Consolidated Financial Statements, we applied the “predecessor accounting approach” in accordance with the rules on accounting for business combinations under common control in combined consolidated financial statements to the entities under the common control of our Controlling Shareholder that were the subject
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of the Reorganization. This means that the assets and liabilities of the entities and businesses contributed as part of the Reorganization included in our Audited Restated Combined Consolidated Financial Statements correspond to the historical amounts in the individual financial statements of combined entities (i.e., predecessor values).
El Palomar Airport
This prospectus excludes historical results of El Palomar Airport, since concession of such airport was only granted to AA2000 on December 27, 2017. See “Summary—Our History” and “Regulatory and Concessions Framework—Argentina.”
Brazilian Consolidation
On December 11, 2015, we acquired from Infravix Participações S.A. (“Infravix”) its 49.95% interest in Inframérica Concessionaria do Aeroporto de São Gonçalo do Amarante S.A. (“ICASGA”). ICASGA is the operator of the Natal Airport in Brazil. As a result of this transaction, we increased our ownership interest in ICASGA from 50.00% to 99.95%.
On December 30, 2015, we acquired from Infravix its 43.05% interest in Inframerica Participações S.A. (“Inframerica”). Inframerica owns a 51.00% interest in Inframérica Concessionaria do Aeroporto do Brasilia S.A. (“ICAB”) while the remaining 49.00% is owned by the Brazilian Government’s company for airport infrastructure, Empresa Brasileira de Infraestrutura Aeroportuária (“Infraero”). ICAB is the operator of the Brasilia Airport in Brazil. As a result of this transaction, we increased our indirect ownership interest in ICAB from 29.02% to 50.98%.
The aforementioned acquisitions of a direct interest in ICASGA and an indirect interest in ICAB through Inframerica are hereinafter referred to as the “Brazilian Consolidation.”
Subsequent to the Brazilian Consolidation, we made additional capital contributions into both ICASGA and ICAB. As of the date of this prospectus, our ownership interest in ICASGA and ICAB is 99.97% and 50.98%, respectively.
We account for these acquisitions of controlling interests under the purchase method of accounting. We have included the operating results related to these acquisitions as from their respective acquisition dates.
For further information on the Brazilian Consolidation, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting Comparability—The Brazilian Consolidation” and Note 28 to our Audited Restated Combined Consolidated Financial Statements.
Separate Financial Statements of Inframerica and ICASGA
   Significant equity method investments (Rule 3-09 of Regulation S-X)
We accounted for our investments in Inframerica and ICASGA using the equity method until December 30, 2015 and December 11, 2015, respectively.
We analyzed both of these equity method investments under Rule 3-09 of Regulation S-X for significance, based on the two tests outlined in Section 1-02(w) (3) of Regulation S-X, and determined that we were required to provide separate financial statements for these investments.
We are presenting full-year audited financial statements for each of these equity method investments in lieu of the partial-year financial statements required when a registrant ceases accounting for an investment utilizing the equity method during a fiscal year.
Therefore, full-year audited financial statements for each of these equity method investments as of December 31, 2015 and 2014 and for the years ended December 31, 2015 and 2014 are included in this prospectus.
   Significant acquisitions (Rule 3-05 of Regulation S-X)
We analyzed the acquisition of the additional interests in Inframerica and ICASGA and determined that they triggered the significance test exceeding the 50% threshold under Rule 3-05 of Regulation S-X (“Rule
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3-05”), based on the three tests outlined in Rule 1-02(w) (3) of Regulation S-X. As a result, we are required to present pre-acquisition audited financial statements covering a period of 36 months.
We are using pre-acquisition and post-acquisition periods to satisfy the financial statement requirements of Rule 3-05 in lieu of the acquired companies’ pre-acquisition financial statements.
Therefore, the pre-acquisition audited financial statements as of December 31, 2015 and 2014, and for the years ended December 31, 2015 and 2014, are included in this prospectus.
Unaudited Pro Forma Financial Information
This prospectus includes unaudited pro forma condensed combined consolidated financial information in connection with the disposal of Corporación América Europa S.A. (“Corporación América Europa”), which we disposed of on December 15, 2016. Corporación América Europa owned a minority interest in Aeroporto Vincenzo Florio di Trapani Birgi, a small airport in Sicily, Italy.
The unaudited pro forma condensed combined consolidated statement of income is based on our historical statements of income as adjusted to give effect to the disposal of Corporación América Europa as if the transaction had occurred on January 1, 2016.
The disposition of Corporación América Europa triggered the significance test exceeding the 10% threshold under Article 11 of Regulation S-X, based on the tests outlined in Rule 1-02(w) (3) of Regulation S-X and has therefore triggered the requirement for the presentation of unaudited pro forma of condensed combined financial statements. See “—Unaudited Pro Forma Condensed Combined Consolidated Financial Information.”
Adjusted Segment EBITDA
Adjusted Segment EBITDA is defined, with respect to each segment, as income from continuing operations before financial income, financial loss, income tax expense, depreciation and amortization for such segment. Adjusted Segment EBITDA excludes certain items that are not considered part of our core operating results. Specifically, we do not allocate financial income, financial loss, income tax expense, depreciation and amortization to our reportable segments.
Although Adjusted Segment EBITDA is commonly viewed as a non-IFRS measure in other contexts, pursuant to IFRS 8, “Segment Information,” Adjusted Segment EBITDA is treated as an IFRS measure in the manner in which we utilize this measure. We use Adjusted Segment EBITDA for purposes of making decisions about allocating resources to our segments and to internally evaluate their financial performance because we believe it reflects current core operating performance and provides an indicator of the segment’s ability to generate cash.
Non-IFRS Information
Adjusted EBITDA
“Adjusted EBITDA” is a non-IFRS financial measure defined as net income from continuing operations before financial income, financial loss, income tax expense, depreciation and amortization.
Adjusted EBITDA is not defined under IFRS and has important limitations as an analytical tool. You should not consider it in isolation or as a substitute for analysis of our results as reported under IFRS. For example, Adjusted EBITDA:

excludes certain tax payments that may represent a reduction in cash available to us;

does not reflect any cash capital expenditure requirements for the assets being depreciated and amortized that may have to be replaced in the future;

does not reflect changes in, or cash requirements for, our working capital needs; and

does not reflect the significant interest expense, or the cash requirements, necessary to service our debt.
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We believe that the presentation of Adjusted EBITDA enhances an investor’s understanding of our performance. We believe this measure is a useful metric for investors to assess our operating performance from period to period by excluding certain items that we believe are not representative of our core business. We present Adjusted EBITDA in order to provide supplemental information that we consider relevant for the readers of our Consolidated Financial Statements included elsewhere in this prospectus, and such information is not meant to replace or supersede IFRS measures.
In addition, our management believes Adjusted EBITDA is useful because it allows us to more effectively evaluate our operating performance and compare the results of our operations from period to period without regard to our financing methods, capital structure or income taxes. We exclude the items listed above from income for the year in arriving at Adjusted EBITDA because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired.
Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, consolidated net income for the year as determined in accordance with IFRS or as an indicator of our operating performance from continuing operations.
Adjusted EBITDA may not be the same as similarly titled measures used by other companies.
We have included the reconciliation of Adjusted EBITDA to consolidated net income from continuing operations for all the periods presented. For a reconciliation of Adjusted EBITDA to consolidated net income from continuing operations, see “Selected Consolidated Financial Information.”
Presentation of Industry and Market Data
In this prospectus, we rely on, and refer to, information regarding our business and the markets in which we operate and compete. The market data and certain economic and industry data and forecasts used in this prospectus were obtained from internal surveys, market research, governmental and other publicly available information and independent industry publications. Industry publications, surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. We believe that these industry publications, surveys and forecasts are reliable, but we have not independently verified them and cannot guarantee their accuracy or completeness.
Certain market share information and other statements presented herein regarding our position relative to our competitors are not based on published statistical data or information obtained from independent third parties, but reflects our best estimates. We have based these estimates upon information obtained from publicly available information from our competitors in the industry in which we operate.
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Cautionary Note Regarding Forward-Looking Statements
This prospectus contains forward-looking statements about our expectations, beliefs and intentions regarding, among other things, our product development efforts, business, financial condition, results of operations, strategies, plans and prospects. In addition, from time to time, we or our representatives have made or may make forward-looking statements, orally or in writing. Forward-looking statements can be identified by the use of forward-looking words such as “believe,” “expect,” “intend,” “plan,” “may,” “should,” “could,” “might,” “seek,” “target,” “will,” “project,” “forecast,” “continue” or “anticipate” or their negatives or variations of these words or other comparable words or by the fact that these statements do not relate strictly to historical matters. These forward-looking statements may be included in, among other things, various filings made by us with the U.S. Securities and Exchange Commission (“SEC”) or press releases or oral statements made by or with the approval of one of our authorized executive officers. Forward-looking statements relate to anticipated or expected events, activities, trends or results as of the date they are made. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements, including, but not limited to, the factors summarized below:

our business strengths and future results of operation;

delays or unexpected casualties related to construction under our investment plan and master plans;

our ability to generate or obtain the requisite capital to fully develop and operate our airports;

general economic, political, demographic and business conditions in the geographic markets we serve;

decrease in passenger traffic;

changes in the fees we may charge under our concession agreements;

inflation, depreciation and devaluation of the AR$, EUR, BRL, UYU, AMD or the PEN against the U.S. dollar;

the early termination, revocation or failure to renew or extend any of our concession agreements;

the buyout of the AA2000 Concession Agreement (as defined herein) by the Argentine Government at any time on or after February 13, 2018;

changes in our investment commitments or our ability to meet our obligations thereunder;

existing and future governmental regulations;

natural disaster-related losses which may not be fully insurable;

terrorism in the international markets we serve;

epidemics, pandemics and other public health crises; and

changes in interest rates or foreign exchange rates.
We believe these forward-looking statements are reasonable; however, these statements speak only as of the date of this prospectus and are subject to known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from those anticipated by the forward-looking statements. We discuss many of these risks in this prospectus in greater detail under the heading “Risk Factors” and elsewhere in this prospectus. Given these uncertainties, you should not rely upon forward-looking statements as predictions of future events.
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All forward-looking statements attributable to us or persons acting on our behalf speak only as of the date hereof and are expressly qualified in their entirety by the cautionary statements included in this prospectus. We undertake no obligation to update or revise forward-looking statements to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events, except as required by applicable law. In evaluating forward-looking statements, you should consider these risks and uncertainties.
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Summary
This summary highlights information contained in other parts of this prospectus. Because it is a summary, it does not contain all the information that you should consider before investing in our common shares. You should read and carefully consider this entire prospectus before making an investment decision, especially the information presented under the headings “Risk Factors,” “Cautionary Note Regarding Forward-Looking Statements,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our Consolidated Financial Statements and the accompanying notes included elsewhere in this prospectus.
Except as otherwise indicated or required by the context, all references in this prospectus to the “Company,” “we,” “us” and “our” refer to Corporación América Airports S.A., or CAAP, and its consolidated subsidiaries, as well as those entities we account for using the equity method.
Overview
We acquire, develop and operate airport concessions. We are the largest private sector airport concession operator in the world based on the number of airports under management and the tenth largest private sector airport operator in the world based on passenger traffic. Currently, we operate 52 airports globally in Latin America, Europe and Eurasia. Since 1998, when we acquired the concession rights related to the management and operation of 33 airports in Argentina, we have expanded the environments and geographies in which we operate airports by acquiring concessions in Armenia, Uruguay, Ecuador, Peru, Brazil, Italy and additional concessions in Argentina.
We operate some of the largest and most important airports in the countries where we are present, including a large international airport, such as Ezeiza Airport in Argentina, domestic airports such as Brasilia Airport in Brazil and Aeroparque Airport in Argentina, airports in tourist destinations such as Bariloche and Iguazu in Argentina, Galapagos Ecological Airport in Ecuador and Florence Airport in Italy, as well as mid-sized domestic and tourist destination airports.
In our largest and longest established market, Argentina, we operate and manage 37 of the 56 airports in the national airport system, including the country’s two largest airports, Ezeiza and Aeroparque. In each year since we acquired the rights under the concession agreement, dated February 9, 1998, by and between the Argentine Government and Aeropuertos Argentina 2000 S.A. (‘‘AA2000’’) (the ‘‘AA2000 Concession Agreement’’), our airports in Argentina handled over 90% of Argentina’s total passenger traffic.
For the nine-month period ended September 30, 2017, we had total consolidated revenue of U.S.$1.2 billion, consolidated income from continuing operations of U.S.$72.6 million and Adjusted EBITDA of U.S.$354.7 million, and our airports handled 637,288 total aircraft movements and served 57.1 million total passengers (of which approximately 35.9% were international, approximately 53.4% were domestic and approximately 10.6% were transit passengers).
For the year ended December 31, 2016, we had total combined consolidated revenue of U.S.$1.4 billion, combined consolidated income from continuing operations of U.S.$38.7 million and Adjusted EBITDA of U.S.$427.2 million, and our airports handled 836,354 total aircraft movements and served 71.8 million total passengers (of which approximately 34.2% were international, approximately 52.8% were domestic and approximately 13.0% were transit passengers).
The following map shows, by country where we are present, the number of airports we operate, our total passenger traffic in millions for 2016 and our revenue in millions of U.S.$, as well as the percentage of our total consolidated revenue that such country represents.
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(1)
We account for the results of operations of AAP and ECOGAL using the equity method in our Consolidated Financial Statements.
(2)
AA2000 operates the Termas de Rio Hondo Airport in Argentina, our 36th airport in Argentina. As of the date of this prospectus, there are certain regulatory approvals pending to include the Rio Hondo Airport within the AA2000 Concession Agreement.
Our History
We have been operating since 1998 and have become a leading global airport concession operator.

In 1998, as part of the AA2000 consortium, we were awarded the national and international public bid conducted by the Argentine Government for the concession rights related to the operation of 33 airports in Argentina, including the two largest airports, the Ministro Pistarini International Airport (“Ezeiza Airport”), located at Ezeiza, Buenos Aires, and the Jorge Newbery Aeroparque Airport (“Aeroparque Airport”), located in Buenos Aires.

In 2001, as part of the Aeropuertos del Neuquén S.A. (“NQN”) consortium, we were awarded the concession to operate Aeropuerto de Neuquén (“Neuquén Airport”), our 34th airport in Argentina.

In 2002, our subsidiary Armenia International Airports CJSC (“AIA”) was awarded the concession to operate the Zvartnots International Airport (“Zvartnots Airport”), located 12 kilometers from downtown Yerevan, Armenia’s capital.

In 2003, in a public auction conducted by the Uruguayan Government, we purchased the shares of Puerta del Sur S.A. (“Puerta del Sur”), owner of the concession that operates the General Cesáreo Berisso International Airport (“Carrasco Airport”) in Carrasco, Uruguay, located 19 kilometers from downtown Montevideo, Uruguay’s capital.

In 2004, as part of the Terminal Aeroportuaria de Guayaquil S.A. (“TAGSA”) consortium, we were awarded the concession to operate the José Joaquín de Olmedo International Airport (“Guayaquil Airport”), located five kilometers from downtown Guayaquil, Ecuador.

In 2007, we executed an amendment to the Zvartnots Airport concession agreement to include Shirak Airport in Gyumri (“Shirak Airport”), the second largest civil airport in Armenia.
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In 2008, in a private transaction, we acquired all of the equity interests of Consorcio Aeropuertos Internacionales S.A. (“CAISA”), which owns the concession that operates the Carlos A. Curbelo Airport (“Punta del Este Airport”) located in Maldonado, by Punta del Este, Uruguay.

In 2008, as part of the consortium Aeropuerto de Bahía Blanca S.A. (“BBL”), we were awarded the concession to operate Aeropuerto de Bahía Blanca (“Bahía Blanca Airport”), our 35th airport in Argentina.

In 2011, as part of the consortium Aeropuertos Andinos del Perú S.A. (“AAP”), we were awarded the concession to operate six principal airports in southern Peru (the ‘‘AAP Airports’’). Currently, we operate five of the six airports that are part of the AAP concession agreement.

In 2011, as part of the consortium Aeropuertos Ecológicos de Galápagos S.A. (“ECOGAL”), we were awarded the concession to operate the Seymour Airport (“Galapagos Airport”), located in Baltra Island, Galapagos Archipelago, our second airport in Ecuador.

In 2011, as part of the consortium ICASGA, we were awarded the concession to operate the International Airport of São Gonçalo do Amarante (“Natal Airport”), located in Natal, Brazil.

In 2012, pursuant to an agreement between AA2000 and the Argentine province of Santiago del Estero, we began operating the Termas de Río Hondo Airport, our 36th airport in Argentina.

In 2012, as part of the consortium ICAB, we were awarded the concession to operate the Presidente Juscelino Kubitschek International Airport (“Brasilia Airport”), located 11 kilometers from downtown Brasilia, Brazil’s capital.

In 2012, we formed A.C.I. Airports International S.à r.l. to hold, either directly or indirectly, our interests in various companies that own our airport concessions.

In 2014, we acquired controlling interests in the companies that own the Aeroporto Galileo Galilei di Pisa (“Pisa Airport”) located in Pisa, Italy, and the Aeroporto di Firenze (“Florence Airport,” and together with Pisa Airport, the “Italian Airports”) located in Florence, Italy, through a number of private acquisitions with former shareholders as well as the consummation of two public tender offers. In 2015, we merged the two companies that operated the Italian Airports to form Toscana Aeroporti S.p.A. (“TA”), a company publicly listed on the Milan Stock Exchange (Borsa Italiana) and of which we own 51.1% of the issued and outstanding common stock. The concessions for the Pisa Airport and the Florence Airport have been transferred to TA.

In 2014, we executed an amendment to the concession agreement of the Carrasco Airport extending the term by 10 years to 2033.

In 2015, we completed the Reorganization.

In 2015, we completed the Brazilian Consolidation.

In 2015, as part of the Reorganization, we completed the dispositions of Latin Exploration S.A. (“Latin Exploration”) and its subsidiary Compañía General de Combustibles S.A., and Helport S.A.

In 2016, as additional steps in the Reorganization, we completed the dispositions of Helport do Brasil S.A. and Hidroaconcagua S.A.

In 2016, we completed the disposition of Corporación América Europa.

In 2017, we completed the Conversion and renamed our company Corporación América Airports S.A.

In 2017, as part of the AA2000 consortium, we were awarded the concession rights related to the operation of the El Palomar Airport (“El Palomar Airport”), located in the province of Buenos Aires, our 37th airport in Argentina.
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The following table lists our concessions by country, together with their commencement date and extension details (if any):
Country
Concession
CAAP
Effective
Ownership
Number of
Airports
Concession
Start Date
Current
Concession
End Date
Extension Details
Argentina
AA2000
81.3% 35(1)
1998
2028
Extendable for 10 years(2)
NQN
74.1% 1
2001
2021
Extendable for 5 years(2)
BBL
81.1% 1
2008
2033
Extendable for 10 years(2)
Italy
TA (SAT)(3)
51.1% 1
2006 (2014)(4)
2046
TA (ADF)(3)
51.1% 1
2003 (2014)(5)
2043
Brazil
ICASGA
99.9%(6) 1
2012(7)
2040
5 years
ICAB
51.0% 1
2012(8)
2037
5 years
Uruguay
Puerta del Sur
100.0% 1
2003
2033(9)
CAISA
100.0% 1
1993 (2008)(10)
2019(11)
Ecuador
TAGSA
50.0% 1
2004
2024
ECOGAL
99.9% 1
2011
2026
Armenia
AIA
100.0% 2
2002
2032
Option to renew every
5 years(12)
Peru
AAP(13)
50.0% 5
2011
2036
Extendable to 2071
Total 52
(1)
Includes Termas de Rio Hondo Airport, which is operated by AA2000 but is pending certain regulatory approvals to be included in the AA2000 Concession Agreement.
(2)
Subject to certain terms and conditions, including governmental approval.
(3)
Both SAT and ADF have been merged into TA, of which we own a 51.1% equity interest.
(4)
We began operating the Pisa Airport in 2014.
(5)
We began operating the Florence Airport in 2014.
(6)
Our effective ownership is 99.97%.
(7)
The concession for the Natal Airport was awarded in August 2011, which became effective in January 2012. The Natal Airport began operating in June 2014.
(8)
We began operating the Brasilia Airport in December 2012.
(9)
Renegotiated extension in 2014.
(10)
We acquired the shares of CAISA in 2008.
(11)
We are currently in negotiations with the Uruguayan Government to extend the term of this concession.
(12)
Renewable at our sole discretion for an indefinite number of 5-year extension periods.
(13)
AAP’s concession comprises six airports; however, we currently only operate five.
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The following table provides summary data on passenger traffic and total air traffic movements for our airports by segment for the nine-month period ended September 30, 2017, and the year ended December 31, 2016.
Nine-Month Period Ended
September 30, 2017
Year Ended
December 31, 2016
Country
Passenger
Traffic
Passenger
Traffic
Total Air
Traffic
Movements
Total Air
Traffic
Movements
Passenger
Traffic
Passenger
Traffic
Total Air
Traffic
Movements
Total Air
Traffic
Movements
(in millions)
(% of total)
(in thousands)
(% of total)
(in millions)
(% of total)
(in thousands)
(% of total)
Argentina
27.5 48.1% 314.1 49.3% 32.6 45.4% 393.1 47.0%
Italy
6.3 11.0% 61.2 9.6% 7.5 10.5% 76.2 9.1%
Brazil
14.3 25.1% 138.1 21.7% 20.4 28.3% 198.8 23.8%
Uruguay
1.7 3.1% 27.0 4.2% 2.0 2.8% 32.4 3.9%
Ecuador(1) 3.1 5.5% 60.1 9.4% 4.2 5.9% 87.6 10.5%
Armenia
1.9 3.4% 16.0 2.5% 2.1 2.9% 18.7 2.2%
Peru(2) 2.3 4.0% 20.9 3.3% 3.0 4.2% 29.6 3.5%
Total
57.1 100.0% 637.3 100.0% 71.8 100.0% 836.4 100.0%
(1)
We do not consolidate the operations of our associate ECOGAL; however, we have included 100% of the operational information of ECOGAL with respect to passenger traffic and aircraft movements in this table.
(2)
We do not consolidate the operations of our associate AAP; however, we have included 100% of the operational information of AAP with respect to passenger traffic and aircraft movements in this table.
Sources of Revenue
We charge fees to departing passengers and landing and parking fees to aircraft operators for the use of our premises and for certain aeronautical services. These fees for aeronautical services are typically regulated under each airport’s concession agreement. We also earn revenue from commercial services, including warehouse usage, duty free, retail and food and beverage shops, advertising and parking fees, as well as other sources. Fees for commercial services are typically not regulated under our concession agreements. Under the International Financial Reporting Interpretation Committee 12 Service Concession Arrangements (“IFRIC 12”), our construction activities (including development of new infrastructure and improvements to existing infrastructure) require that we recognize construction service revenue and costs during the construction period by stage of completion method. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Our Revenue from Continuing Operations—Construction Service Revenue.”
The following table summarizes our sources of revenue on a consolidated basis for the nine-month periods ended September 30, 2017 and 2016, and for the years ended December 31, 2016 and 2015:
For the Nine-Month Period Ended September 30,
For the Year Ended December 31,
2017
(Unaudited)
2016
(Unaudited)
2016
2015
(in millions
of U.S.$)
(% of Total
Revenue)
(in millions
of U.S.$)
(% of Total
Revenue)
(in millions
of U.S.$)
(% of Total
Revenue)
(in millions
of U.S.$)
(% of Total
Revenue)
Aeronautical revenue
575.1 49.6% 495.6 50.5% 673.5 49.3% 543.2 45.8%
Non-aeronautical revenue
Commercial revenue
409.7 35.4% 383.7 39.1% 522.2 38.2% 459.7 38.7%
Construction service revenue
172.3 14.9% 99.4 10.1% 165.1 12.1% 178.4 15.0%
Other revenue
1.3 0.1% 3.2 0.3% 5.6 0.4% 5.7 0.5%
Total consolidated revenue
1,158.5 100.0% 981.9 100.0% 1,366.3 100.0% 1,187.1 100.0%
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The following chart summarizes total revenues by segment for the nine-month periods ended September 30, 2017 and 2016, and for the years ended December 31, 2016 and 2015.
For the Nine-Month Period Ended
September 30,
For the Year Ended
December 31,
2017
(Unaudited)
2016
(Unaudited)
2016
2015
(in millions of U.S.$)
(in millions of U.S.$)
Argentina
Aeronautical revenue
318.8 262.4 366.1 309.9
Non-aeronautical revenue
Commercial revenue
249.4 238.0 320.8 323.0
Construction service revenue
161.6 93.2 153.9 151.0
Other revenue
Total revenue
729.7 593.7 840.9 783.9
Italy
Aeronautical revenue
82.2 77.7 99.2 96.5
Non-aeronautical revenue
Commercial revenue
24.2 22.3 29.5 29.0
Construction service revenue
8.9 4.3 8.0 21.4
Other revenue
1.3 3.1 4.7 5.7
Total revenue
116.6 107.5 141.3 152.7
Brazil(1)
Aeronautical revenue
49.4 44.2 60.6 0.4
Non-aeronautical revenue
Commercial revenue
46.7 46.2 65.6 0.4
Construction service revenue
Other revenue
0.9
Total revenue
96.1 90.4 127.0 0.8
Uruguay
Aeronautical revenue
42.3 36.4 47.7 43.5
Non-aeronautical revenue
Commercial revenue
39.9 35.7 47.2 47.0
Construction service revenue
1.8 1.7 2.9 2.6
Other revenue
Total revenue
84.0 73.9 97.8 93.1
Ecuador(2)
Aeronautical revenue
47.8 46.5 61.9 57.3
Non-aeronautical revenue
Commercial revenue
16.6 17.5 23.4 21.8
Construction service revenue
Other revenue
Total revenue
64.5 64.0 85.3 79.0
Armenia
Aeronautical revenue
34.6 28.4 38.1 35.6
Non-aeronautical revenue
Commercial revenue
32.3 23.9 34.9 35.7
Construction service revenue
0.1 0.1 0.2 3.4
Other revenue
Total revenue
67.0 52.4 73.2 74.7
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For the Nine-Month Period
Ended
September 30,
For the Year Ended
December 31,
2017
(Unaudited)
2016
(Unaudited)
2016
2015
(in millions of U.S.$)
(in millions of U.S.$)
Unallocated
Aeronautical revenue
Non-aeronautical revenue
Commercial revenue
0.6 0.1 0.8 2.9
Construction service revenue
Other revenue
Total revenue
0.6 0.1 0.8 2.9
Total consolidated revenue for all segments(3)
1,158.5 981.9 1,366.3 1,187.1
(1)
For the year ended December 31, 2015, our revenue in Brazil includes consolidated revenue as from the dates of the acquisitions of ICASGA and Inframerica. See “Brazilian Consolidation.”
(2)
We account for the results of operations of ECOGAL using the equity method.
(3)
We account for the results of operations of AAP using the equity method.
Main Customers
Main Aeronautical Customers
The following table sets forth our main aeronautical customers for the nine-month periods ended September 30, 2017, and 2016, and for the years ended December 31, 2016 and 2015, based on total combined consolidated aeronautical revenue.
For the Nine-Month Period Ended
September 30,
For the Year Ended
December 31,
2017
(Unaudited)
2016
(Unaudited)
2016
2015
Main Aeronautical Customers
(in
millions
of U.S.$)
% of Total
Aeronautical
Revenue
(in
millions
of U.S.$)
% of Total
Aeronautical
Revenue
(in
millions
of U.S.$)
% of Total
Aeronautical
Revenue
(in
millions
of U.S.$)
% of Total
Aeronautical
Revenue
LATAM Airlines Group
133.8 23.3% 111.1 22.4% 153.2 22.8% 105.1 19.3%
Grupo Aerolíneas Argentinas
94.5 16.4% 73.0 14.7% 102.3 15.2% 93.1 17.1%
Gol Transportes Aéreos
42.1 7.3% 36.4 7.4% 49.9 7.4% 27.9 5.1%
American Airlines
25.9 4.5% 24.3 4.9% 33.8 5.0% 28.0 5.2%
Avianca
30.9 5.4% 23.7 4.8% 33.2 5.0% 22.8 4.2%
Ryanair Ltd
25.7 4.5% 25.1 5.1% 32.0 4.8% 32.1 5.9%
Copa
18.6 3.2% 17.5 3.5% 23.1 3.4% 19.8 3.6%
Air France
12.0 2.1% 11.7 2.4% 20.9 3.1% 20.5 3.8%
Lufthansa Group
15.4 2.7% 14.6 2.9% 19.4 2.9% 21.4 3.9%
Others
176.3 30.7% 158.3 31.9% 205.5 30.5% 172.5 31.8%
Total
575.1 100.0% 495.6 100.0% 673.5 100.0% 543.2 100.0%
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Main Commercial Customers
The following table sets forth our main commercial customers based on total consolidated commercial revenue at our airports for the nine-month periods ended September 30, 2017 and 2016, and the years ended December 31, 2016 and 2015.
For the Nine-Month Period Ended
September 30,
For the Year Ended
Decmeber 31,
2017
(Unaudited)
2016
(Unaudited)
2016
2015
Main Commercial Customers
(in
millions
of U.S.$)
% of Total
Commercial
Revenue(1)
(in
millions
of U.S.$)
% of Total
Commercial
Revenue(1)
(in
millions
of U.S.$)
% of Total
Commercial
Revenue(1)
(in
millions
of U.S.$)
% of Total
Commercial
Revenue(1)
Dufry
50.9 12.4% 49.9 13.0% 71.2 13.6% 70.5 15.3%
Grupo Aerolíneas Argentinas
7.5 1.8% 8.0 2.1% 10.6 2.0% 13.1 2.8%
Gate Gourmet
7.3 1.8% 5.8 1.5% 8.1 1.6% 9.1 2.0%
Aerofuels Overseas
7.7 1.9% 3.7 1.0% 5.7 1.1% 7.6 1.7%
JCDecaux do Brasil S.A.
4.1 1.0% 3.7 1.0% 5.4 1.0%
Intercargo S.A.C.
4.3 1.1% 3.8 1.0% 5.2 1.0% 5.1 1.1%
International Meal Company Alimenta
1.0 0.2% 3.5 0.9% 4.5 0.9%
Sita Information Networking
3.6 0.9% 3.0 0.8% 4.1 0.8% 3.9 0.9%
Petrobras
3.0 0.7% 2.7 0.7% 3.9 0.8% 0.4 0.1%
Others
320.3 78.2% 299.6 78.1% 403.4 77.3% 350.0 76.1%
Total
409.7 100.0% 383.7 100.0% 522.2 100.0% 459.7 100.0%
(1)
Based on the percentage of total commercial revenue invoiced by us (net of value added tax).
Our Strengths
Largest private sector airport operator by number of airports with an extensive track record of acquiring and developing airports.
Today, we operate 52 airports in seven countries. Since commencing operations in 1998, we have acquired more than 10 different concessions through public tender processes or through negotiated private acquisition transactions.
We acquired many of our airport concessions through a public tender process and, in most cases, we significantly improved the infrastructure through large capital expenditure programs once we acquired the concessions. We believe our extensive track record and operating experience will be a key advantage when competing for future concessions.
When bidding on new concessions, we create multi-functional teams with experience across many disciplines: corporate development, airport design, aeronautical and commercial services, governmental affairs, legal and finance. These in-house capabilities allow us to quickly analyze and prepare concession bids and negotiate agreements that are highly responsive to the particular needs and desires of the entities offering the concessions while also extracting the maximum value from concession terms.
Our flexible and disciplined approach to acquiring new concessions provides a competitive advantage when evaluating new concession opportunities. We begin by forecasting passenger growth through an evaluation of the demographics and traveling and spending habits of the passengers in a given region. We only proceed with a bid submission once all aspects of a concession have been analyzed (regulatory, legal, financial, etc.) and have cleared our internal investment committee and return benchmarks. Once we acquire a concession,
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our deep operational know-how allows us to maximize passenger flow and determine the optimal mix of retail and food and beverage stores in the airport, while also identifying operating inefficiencies in an effort to reduce costs. We also evaluate the capital structure of each concession on an ongoing basis.
Deep know-how in the operation of airports and the development and design of state-of-the-art infrastructure.
We are experienced airport operators, which enables us to undertake detailed analysis of terminal capacity and expansion, and attract new routes to underserved markets. We also maintain a very active dialogue with airlines to promote new routes or increase frequencies. We seek to optimize our aircraft movements to minimize time on the ground, reduce connection times and minimize delays. Additionally, we have the experience and personnel to undertake operations such as handling, cargo and fueling. With our experience in airport design and operations, we formulate a plan around optimizing passenger flow to maximize customer satisfaction and revenue per passenger. We then use our operational benchmarks and financial experience to determine future costs and potential returns. We always integrate the regulatory dynamics and requirements into our analysis.
We also work closely with our retail operators to determine the optimal composition of stores and brands that best suits the passenger profile of a given airport. The layout of our retail concessions and passenger flow is designed to increase revenue opportunities throughout our airports. We also have experience in growing other sources of revenues such as advertising, VIP lounges and vehicle parking. Additionally, we have developed our own set of key performance indicators (‘‘KPIs’’), that we use to monitor our operations for cost reductions and opportunities to increase commercial revenues. The airports we operate service many of the largest airlines in the world including Delta Air Lines, American Airlines, Lufthansa, Iberia, Air France, LATAM Airlines and GOL Transportes Aéreos, as well as low cost carriers such as Ryanair, among others.
We continuously invest in developing and improving our airports’ infrastructure. We have developed and constructed state-of-the-art airports such as the Carrasco Airport, the Guayaquil Airport, the Natal Airport and the Zvartnots Airport, and added state-of-the art infrastructure to already existing airports such as Ezeiza Airport, where we added a new 66,000 square meter terminal, and Brasilia Airport, where we added 53,000 square meters in terminal space.
Our CEO, Martín Eurnekian, has overseen our growth since 1998 when we managed 33 airports in Argentina to today’s portfolio of 52 airports across seven countries. We have country-level CEOs serving in each country in which we operate and have devised systems to ensure best practices are shared across our operations. We believe our management’s extensive operating experience will allow us to continue to grow the business both organically and through acquisitions.
Diversified airport portfolio positioned in key geographic markets with compelling fundamentals and growing passenger traffic.
We have experience operating a diverse airport portfolio across a wide range of geographies. We operate international, regional, mid-size, domestic and tourist airports in major cities across seven countries in Latin America, Europe and Eurasia. In Argentina, we oversee the operation of 37 airports. In Italy, we operate the Florence and Pisa Airports in Tuscany, one of the top tourist regions in the country. In Brazil, we operate the capital city airport, Brasilia Airport, which is one of the main domestic airports for three of the four largest Brazilian airlines. In Uruguay, we operate the Carrasco Airport nearby the country’s capital, Montevideo. In Ecuador, we operate the second largest airport in the country in the most populous city in Ecuador, Guayaquil. In Armenia, we operate the Zvartnots Airport, located in the country’s capital, Yerevan, which serves as the only access gateway point in the country for international air travel. We operate five regional airports in southern Peru.
The airports we operate are situated in countries with compelling macroeconomic trends and in key cities within those countries. GDP is an important driver of air passenger traffic. In the countries in which we operate, the average projected real GDP growth rate from 2017E–2021E is 2.2% according to each country’s official public data and other public data sources. According to the Airbus Global Market Forecast 2016– 2035, Sabre Corporation and IHS, the average trips per capita for passengers in the seven countries in which we operate in 2016 was 0.51. As compared to 1.82 trips per capita in the United States in 2016, this
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represents an opportunity to further penetrate the markets in which we operate by increasing per capita travel frequency. Additionally, a country’s rising middle class creates the opportunity for increased passenger traffic. Throughout our portfolio, we have exposure to countries with growing middle classes and increasing income per capita. According to The Brookings Institution, the middle class as a percentage of total population from 2005 to 2025 is expected to increase in all of the Latin American countries in which we operate as well as in Armenia.
Leading airport operator and concessionaire in Argentina, Uruguay and Armenia, which are markets with significant de facto barriers to entry.
We are the primary airport concessionaire in Argentina and have served over 90.0% of Argentina’s passenger air traffic in each year since we acquired the AA2000 Concession Agreement. The airports we operate serve major metropolitan areas in 22 of the 23 Argentine provinces. We operate the two largest airports in Argentina, Ezeiza Airport and Aeroparque Airport. Ezeiza Airport, a large international airport in Buenos Aires, handled 7.4 million passengers in the nine-month period ended September 30, 2017 (9.8 million passengers in the year ended December 31, 2016). Aeroparque Airport, a large domestic airport, handled 10.2 million passengers in the nine-month period ended September 30, 2017 (11.7 million passengers in the year ended December 31, 2016). We also operate key domestic airports such as Cordoba, Bariloche and Mendoza. We have invested over U.S.$1.5 billion in construction, expansion and remodeling of terminals, platform construction, and construction and repaving of runways and taxiways at our airports in Argentina.
Our operations in Uruguay consist of the two main airports receiving commercial flights: Carrasco Airport and Punta del Este Airport. Carrasco Airport is Uruguay’s largest airport in terms of passenger traffic and serves as the country’s primary gateway for international travel. We completed the development of a new 45,000 square meter terminal at Carrasco Airport in 2009 with 44 check-in positions, 8 gates for simultaneous boarding and capacity for 4.5 million passengers per year. During the nine-month period ended September 30, 2017, our operations in Uruguay served a total of 1.7 million passengers (2.0 million passengers in the year ended December 31, 2016).
In Armenia, we own the concession to operate the only two operating airports for scheduled commercial flights in the country: Zvartnots Airport and Shirak Airport. Zvartnots Airport is the primary point in the country for international aeronautical travel. Since we were awarded the concession in 2002, we have modernized Zvartnots Airport including a renovation of the runway and the development of a new 50,000 square meter terminal. During the nine-month period ended September 30, 2017, our operations in Armenia served a total of 1.9 million passengers (2.1 million passengers in the year ended December 31, 2016).
In Argentina, Uruguay and Armenia, we handle the majority of all scheduled commercial flights. Additionally, we believe there are significant barriers to entry for competitors in these markets based upon the size of capital expenditures we have made to date and, in some cases, exclusivity rights granted to us in the relevant concession agreements.
Scalable, diverse and adaptable platform with predictable cash flows and potential to support organic growth.
Our scalable platform has the resources, personnel and experience to grow our current concessions.
Many of the airports we currently operate have ample capacity available to accommodate incremental traffic with limited required capital expenditures. In certain airports, we are in the process of transformative growth opportunities such as the new runway and terminal at Florence Airport, a new departure and arrival lounge at Ezeiza Airport and an expanded commercial area at the Brasilia Airport that will be fully integrated with the existing terminal.
Some of our concession agreements provide for a specified rate of return, which is typically achieved via adjustments of aeronautical fees throughout the concession period. These established concession terms provide us with visibility into our required expenditures. In each country where we operate, either the Chief Executive Officer or our local (or regional) government affairs director is responsible for managing the relationship with the government and other relevant agencies, and maintains local contact and dialogue
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with the local regulatory authorities. Our concession agreements are long-term agreements, typically at least 25 years. As of September 30, 2017, we have an average remaining life weighted by 2016 annual passenger traffic and ownership stake of 14.5 years under our concession agreements with several concessions offering potential for extensions such as AA2000 in Argentina, ICAB and ICASGA in Brazil, AIA in Armenia, CAISA in Uruguay and AAP in Peru.
Our Strategy
Leverage our scalable platform to support our organic growth as well as our global expansion strategy.
We have created a global platform with operational expertise and resources to support our organic growth plan and our global expansion strategy. To manage our existing assets, we employ teams across architecture, aeronautical activities, commercial activities, corporate and project finance and accounting, legal and government affairs. These professionals possess the operational skills to manage all of our airport concessions as well as design and develop infrastructure for expansions at our airports. When bidding on new concessions, we create multi-functional teams of experts that include corporate development, aeronautical, commercial, finance, legal and design personnel. Our size and scale allows us to maintain all these resources in-house, thereby allowing us to address opportunities quickly and efficiently. We believe that having access to all of these in-house resources and expertise, across both geography and functional areas, provides us with a competitive advantage as we pursue our global expansion strategy. We will continue to seek additional attractive airport concessions both in our current markets and new markets where we can leverage our experience and local market knowledge. We also look for opportunities globally where we see markets that are underserved and where we can leverage our competitive operational strengths. Since 2009, we have analyzed and prequalified concession opportunities in Brazil, Chile, Greece, India, Italy, Jamaica, Mexico, Paraguay, Poland and Portugal, among others. Our substantial in-house resources allow us to quickly develop airport infrastructure expansion plans and business plans best suited to each unique location. We have the flexibility to adopt the most advantageous structure when bidding for a particular concession and have structured our prior concessions as outright owners as well as majority and minority partners. In addition, we may look for opportunities to enter into relationships with strategic partners in some of our existing concessions if we determine that such relationships would add value to our platform and enhance our growth prospects.
Increase our revenues through improving our mix of airline customers and routes to increase passenger traffic.
We undertake continuous and detailed analysis of our aviation markets in order to attract new routes or new airport strategies. We have long-standing relationships with all major airlines and airline alliances operating at our airports and maintain an active dialogue with them. We also analyze developments in aviation technology as new generations of airplanes with greater ranges that allow for new routes are introduced to the market. As we monitor the next generation of airplanes entering the market, we incorporate this analysis into our capital expenditure planning to create efficiencies and ensure we meet airlines’ demands.
Maximize revenue growth in existing concessions through capital expenditure programs.
We continuously look for opportunities to increase our revenue in strategic locations by developing new infrastructure, by increasing and optimizing passenger traffic and by expanding the commercial space at our concessions. We have the ability to increase air traffic demand through the construction, expansion and remodeling of terminals, the construction of platforms, new runways and taxiways, as well as attracting new routes to our existing facilities. For example, in Argentina, we completed an 88,000 square meter terminal and parking expansion at Aeroparque Airport and built a new 66,000 square meter passenger terminal at Ezeiza Airport. At the Brasilia Airport, we added 53,000 square meters in terminal space and 308,000 square meters in runway, platform and taxiway, which added 28 airport positions, 16 boarding gates and 24 check-in desks. At the Guayaquil Airport, we completed a 50,000 square meter terminal in 2006, which was expanded by 10,000 square meters in 2014.
We believe that we have identified transformative growth opportunities at our Brasilia, Ezeiza and Florence Airports. At our Brasilia Airport, we are in the final development planning stages of a significant expansion of the terminal to accommodate additional commercial area, which will include retail stores, entertainment,
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a food court, upscale restaurants and services. In addition, at Ezeiza Airport, we are developing a project for the terminal area that includes new passenger buildings, apron expansions, new ground access and parking. The arrivals terminal and the departures terminals will accommodate extensive commercial areas, including duty free shops, retail stores, entertainment, restaurants, coffee shops and several other services. The development will significantly increase our ability to generate commercial revenues at the airport, as well as expand the capacity to accommodate future passenger growth.
In partnership with the Italian Government, we have developed an investment plan for Florence Airport to invest U.S.$351.1 million in capital expenditures for intangible assets during the period from 2017 until 2022. The funds will be used to build a new 48,500 square meter terminal and 2,400 square meter runway to unlock Florence Airport’s potential growth and accommodate greater passenger flow. In addition, the new terminal will offer 7,300 square meters of commercial space. We estimate these improvements will result in an increase in passenger flows and commercial spending per passenger as the new infrastructure will offer significantly larger commercial space and improved retail layout. In addition, we estimate Florence Airport will likely gain passengers from nearby airports such as Pisa and Bologna as well as from other main airports that function as an entryway to Italy (e.g., Rome and Venice).
Optimize commercial revenue in our existing concessions without material amounts of capital expenditures.
We derive revenue from a mix of both aeronautical and commercial services. For the nine-month period ended September 30, 2017, and the year ended December 31, 2016, 50.2% and 49.3%, respectively, of our total consolidated revenue were derived from aeronautical services and 35.0% and 38.2%, respectively, were derived from commercial services. The key driver of revenue is passenger traffic, as increased passenger traffic allows us to generate both aeronautical and commercial revenue. There are various initiatives we can implement to maximize revenues. At all of our concessions, we continuously look for ways to optimize commercial revenue from duty-free, retail and food and beverage vendors. We focus on increasing our commercial revenues at each airport by expanding our commercial space, optimizing the ideal mix and layout of retail, food and beverage operations, seeking additional advertising contracts, VIP lounges and car parking. Using our in-depth experience, we seek ways to optimize passenger flow throughout the airport. This includes creating increased exposure to commercial vendors and minimizing wait times throughout the airport. We work with all of our airport vendors to implement operational improvements such as technology-enabled ordering while waiting in line and improved product and design layout in order to maximize revenue. In some of our airports, we are also seeking to develop hotels and other real estate projects. Our scale and size allows us to attract high-quality subconcessions such as Hudson News, Starbucks Coffee, Hard Rock Café and McDonald’s.
Improve operating efficiency and reduce costs by leveraging our experience and sharing innovations and improvements across our airports.
We work closely with the airlines using our airports to maximize operational efficiency, minimize time on the ground and avoid flight delays. Also, as a result of our extensive experience operating airports of different types in diverse locations, we have developed a set of best practices and KPIs which can be shared across our current portfolio of airport concessions. In addition, we implement techniques such as zero-based budgeting practices and KPIs in order to continuously monitor costs to identify reduction opportunities. We ensure that these best practices are spread across our airports by regularly rotating our key management personnel into positions managing airports in different locations and by having them attend global management conferences. Our KPIs and expertise have allowed us to reduce operating costs while maintaining the same, high level of service to our passengers.
Recent Developments
We are in the process of finalizing our operational and financial results for the fourth quarter and for the year ended December 31, 2017.
Based on preliminary information currently available to management, our preliminary estimate of total passengers for the year ended December 31, 2017 is approximately 37.3 million in Argentina, an increase of 14.3% from the 32.6 million recorded for the year ended December 31, 2016; 7.9 million in Italy, an increase
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of 5.2% from the 7.5 million recorded for the year ended December 31, 2016; 19.3 million in Brazil, a decrease of 5.1% from the 20.4 million recorded for the year ended December 31, 2016; 2.3 million in Uruguay, an increase of 11.9% from the 2.0 million recorded for the year ended December 31, 2016; 4.2 million in Ecuador, the same number of passengers as recorded for the year ended December 31, 2016; 2.4 million in Armenia, an increase of 15.0% from the 2.1 million recorded for the year ended December 31, 2016; and 3.1 million in Peru, an increase of 3.5% from the 3.0 million recorded for the year ended December 31, 2016. Based on these preliminary estimates, we expect our total passengers, in the aggregate, for the year ended December 31, 2017 to increase relative to the total passengers, in the aggregate, for the year ended December 31, 2016.
Based on preliminary information currently available to management, we expect our total consolidated revenue for the year ended December 31, 2017 to increase relative to our total consolidated revenue for the year ended December 31, 2016, principally resulting from the increase in our consolidated total passengers.
We have not completed the process of reviewing our operational and financial results for the year ended December 31, 2017 and thus, once completed, we may report financial results and/or operational results that could differ, and the differences could be material.
Prior to the closing of this offering, the Selling Shareholder intends to approve a 1-to-10.12709504 reverse stock split of its common shares, consequently decreasing the outstanding common shares from 1,500,000,000 common shares to 148,117,500 common shares (the “Reverse Stock Split”). The Reverse Stock Split will be implemented through a share capital reduction and a concurrent allocation of the reduced share capital amount to a non-distributable reserve account. The nominal value of U.S.$1.00 of each common share will not change as a result of the Reverse Stock Split.
Our Corporate Information
We are a public limited liability company (société anonyme) incorporated under, and governed by, the laws of Luxembourg. We are registered with the Trade and Companies Register in Luxembourg under the number 174.140. We were incorporated on December 14, 2012, under the name A.C.I. Airports International S.à r.l. The name changed to Corporación América Airports S.A. on September 14, 2017, upon conversion from a private limited liability company (société à responsabilité limitée) to a public limited company (société anonyme). Our registered office is located at 4, rue de la Grêve, L-1643, Luxembourg. Our phone number is +35226258274. Our corporate website is http://www.corporacionamericaairports.com. The information on our website is not part of, and is not incorporated into, this prospectus or the registration statement of which it forms a part. We have appointed Puglisi & Associates as our agent for service of process in the United States, located at 850 Library Avenue, Suite 204, Newark, Delaware 19711.
Our Corporate and Ownership Structure
Prior to this offering, we are 100% controlled by ACI Airports S.à r.l., a holding company incorporated in Luxembourg, which is 100% owned by ACI Holding S.à r.l., a holding company also incorporated in Luxembourg (“ACI Holding”).
ACI Holding is a holding company that is 85.0% owned by Corporación América International S.à r.l. (“CAI”) and 15.0% owned by A.C.I. Investment S.à r.l., both of which are holding companies incorporated in Luxembourg. CAI and A.C.I. Investment S.à r.l. are both wholly-owned subsidiaries of Liska Investments Corp., a corporation incorporated under the laws of the British Virgin Islands (“Liska”).
Liska is wholly-owned by SCF, a foundation created under the laws of Liechtenstein, which manages assets for the benefit of the foundation’s beneficiaries. The potential beneficiaries of this foundation are certain members of the Eurnekian family as well as religious, charitable and educational institutions designated by the foundation’s board of directors. The board of directors of the foundation is currently composed of six individuals and decisions are taken by majority vote. The board of directors has broad authority to manage the affairs of the foundation and to designate its beneficiaries and additional board members.
We account for the results of operations of AAP and ECOGAL using the equity method in our Consolidated Financial Statements.
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Most of our operating subsidiaries have non-controlling interests, some of which are significant.
The following diagram reflects a simplified summary of our organizational structure immediately following this offering:
[MISSING IMAGE: 391713193_tv482030_org-structure.jpg]
Risk Factors
Investing in our common shares involves substantial risks. You should carefully consider all the information in this prospectus, including the information set forth under “Risk Factors.” If any of such risks occurs, our business, financial condition or results of operations could be materially and adversely affected. The market price of our common shares could decline if one or more of such risks or uncertainties actually occur, causing you to lose all or part of your investment in our common shares.
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The Offering
Issuer
Corporación América Airports S.A.
Common shares offered by us
11,904,762 common shares with a nominal value of U.S.$1.00 per share (or 13,690,476 common shares if the underwriters exercise their option to purchase additional shares in full).
Common shares offered by the Selling Shareholder
16,666,667 common shares (or 19,166,667 common shares if the underwriters exercise their option to purchase additional common shares in full).
Total Offering
28,571,429 common shares (or 32,857,143 common shares if the underwriters exercise their option to purchase additional common shares in full).
Shares to be Outstanding Immediately After the Offering
160,022,262 common shares (or 161,807,976 common shares if the underwriters exercise their option to purchase additional common shares in full).
Offering price
We expect that the initial public offering price per common share will be between U.S.$      and U.S.$     .
Option to purchase additional shares
The underwriters have an option to subscribe and/or purchase up to a total of 15.0% of the offered common shares from us and the Selling Shareholder. The underwriters can exercise this option at any time within 30 days from the date of this prospectus.
Use of Proceeds
We estimate that the net proceeds to us from this offering will be approximately U.S.$      million, or approximately U.S.$      million if the underwriters exercise their option to purchase the common shares in full, after deducting estimated underwriting discounts and commissions and estimated offering expenses. Each U.S.$1.00 increase (decrease) in the public offering price per common share would increase (decrease) our net proceeds, after deducting estimated underwriting discounts and commissions and estimated offering expenses, by U.S.$      million (assuming no exercise of the underwriters’ option to purchase additional shares).
We intend to use the net proceeds we receive from this offering for (i) the repayment of approximately U.S.$131.7 million of indebtedness (including indebtedness of U.S.$66.7 million owed to related parties) plus accrued interest as of the payment date and (ii) general corporate purposes, including funding the equity portion of our capital expenditure programs in existing concessions and acquiring new or existing concessions. See “Use of Proceeds.”
A significant portion of the proceeds from this offering will be received by the Selling Shareholder and we will not receive any of the proceeds from the sale of common shares by the Selling Shareholder.
Conflicts
Because an affiliate of Goldman Sachs & Co. LLC is the lender under the GS Credit Agreement (as defined herein) and will receive 5% or more of the net proceeds of this offering
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due to the repayment of borrowings under such credit agreement, Goldman Sachs & Co. LLC is deemed to have a conflict of interest within the meaning of Rule 5121 of the Financial Industry Regulatory Authority, Inc. (“FINRA”). Accordingly, this offering will be conducted in accordance with Rule 5121, which requires, among other things, that a “qualified independent underwriter” participate in the preparation of, and exercise the usual standards of “due diligence” with respect to, the registration statement and this prospectus. Oppenheimer & Co. Inc. has agreed to act as a qualified independent underwriter for this offering. Oppenheimer & Co. Inc. will not receive any additional fees for serving as a qualified independent underwriter in connection with this offering. We and the Selling Shareholder have agreed to indemnify Oppenheimer & Co. Inc. against liabilities incurred in connection with acting as a qualified independent underwriter, including liabilities under the Securities Act. See “Underwriting (Conflicts of Interest).”
Dividend policy
The declaration and payment of future dividends to holders of our common shares will be at the discretion of the annual shareholder meeting, but the decision to declare annual dividends will depend upon many factors. See “Dividend Policy.”
Voting rights
Holders of our common shares are entitled to one vote per common share on all matters. See “Description of Share Capital.”
NYSE symbol
“CAAP.” Our common shares will not be listed on any exchange in Luxembourg or otherwise quoted for trading in Luxembourg.
Risk Factors
See “Risk Factors” beginning on page 24 of this prospectus for a discussion of factors you should carefully consider before deciding to invest in our common shares.
Lock-up
Each of our officers and directors and the Selling Shareholder have agreed, subject to certain exceptions, not to sell, offer or otherwise dispose of or transfer, directly or indirectly, any of our common shares or any securities convertible into or exchangeable for our common shares, during a period commencing on the date of this prospectus supplement and ending 180 days after execution of the underwriting agreement for the offering without the prior approval of the underwriters. For more information, see “Underwriting (Conflicts of Interest).”
Selling Shareholder
ACI Airports S.à r.l.
Unless we indicate otherwise or the context requires, all information in this prospectus assumes:

an initial public offering price of U.S.$      per common share, the mid-point of the offering range set forth on the cover page of this prospectus;

the 1-for-10.12709504 Reverse Stock Split to be completed prior to the closing of this offering; and

the underwriters do not exercise their option to purchase additional common shares.
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Summary Consolidated Financial and Other Information
You should read the summary historical consolidated financial data presented below in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operation,” “Selected Consolidated Financial Information” and our Consolidated Financial Statements and the related notes included elsewhere in this prospectus. See “Our Reorganization.”
The summary historical consolidated financial information presented below under the captions “Consolidated Statement of Income Data,” “Consolidated Statement of Comprehensive Income Data” and “Consolidated Statement of Cash Flow Data” for the years ended December 31, 2016 and 2015 and for the nine-month periods ended September 30, 2017 and 2016 and the summary historical consolidated financial information presented below under the caption “Consolidated Statement of Financial Position Data” as of December 31, 2016, December 31, 2015, January 1, 2015 and September 30, 2017, have been derived from our Consolidated Financial Statements included elsewhere in this prospectus.
We prepare our Audited Restated Combined Consolidated Financial Statements in accordance with IFRS as issued by the IASB. We have applied all IFRS issued by the IASB effective at the time of preparing our Audited Restated Combined Consolidated Financial Statements. We applied IFRS for the first time for our fiscal year ended December 31, 2016, which included comparative information for the fiscal year ended December 31, 2015. The opening IFRS statement of financial position was prepared as of our transition date of January 1, 2015. See Note 2 to our Audited Restated Combined Consolidated Financial Statements for details of our transition to IFRS and application of IFRS 1.
We prepare our Unaudited Condensed Consolidated Interim Financial Statements in accordance with IAS 34 Interim Financial Reporting. The accounting principles used in the preparation of our Unaudited Condensed Consolidated Interim Financial Statements are consistent with those used in the preparation of our Audited Restated Combined Consolidated Financial Statements. Our Unaudited Condensed Consolidated Interim Financial Statements do not include all the information and disclosures required in our Audited Restated Combined Consolidated Financial Statements and, accordingly, should be read in conjunction with them.
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Consolidated Statement of Income
For the Nine-Month Period Ended
September 30,
For the Year Ended
December 31,
2017
(Unaudited)
2016
(Unaudited)
2016
(Restated)(1)
2015
(Restated)(1)
(in millions of U.S.$ except
for share and per share amounts)
Continuing Operations
Revenue
1,158.5 981.9 1,366.3 1,187.1
Cost of services
(749.8) (595.7) (859.1) (759.2)
Gross Profit
408.7 386.2 507.3 427.9
Selling, general and administrative expenses
(140.1) (128.8) (170.9) (167.2)
Impairment loss
(16.6)
Other operating income
14.3 12.4 16.9 15.6
Other operating expense
(3.5) (3.2) (4.9) (2.7)
Operating Income
279.4 266.6 331.8 273.6
Share of loss in associates
(5.8) (0.4) (1.3) (69.3)
Income before financial results and income tax
273.6 266.2 330.5 204.3
Financial income
42.6 26.3 37.5 46.8
Financial loss
(203.8) (204.0) (273.0) (199.8)
Income before income tax expense
112.4 88.5 95.1 51.3
Income tax expense
(39.8) (38.6) (56.4) (45.0)
Income from continuing operations
72.6 49.9 38.7 6.3
(Loss)/Income from discontinued operations
(8.7) (9.5) 109.0
Net Income
72.6 41.2 29.2 115.3
Attributable to:
Owners of the parent
67.1 40.9 33.8 105.5
Non-controlling interest
5.5 0.3 (4.5) 9.8
72.6 41.2 29.2 115.3
Earnings per share attributable to the parent
Weighted average number of common shares
(in thousands)(2)
1,500,000 1,500,000 1,500,000 1,500,000
Continuing Operations
Basic and diluted earnings per share
0.04 0.03 0.03 (0.01)
Discontinued Operations
Basic and diluted earnings per share
(0.01) (0.01) 0.08
Continuing and Discontinued Operations
Basic and diluted earnings per share
0.04 0.03 0.02 0.07
Pro-forma earnings per share attributable to the parent (unaudited)(3)
Pro-forma weighted average number of common shares (in thousands)
148,118 148,118 148,118 148,118
Continuing Operations
Basic and diluted earnings per share . . . . . . . . . . . .
0.45 0.33 0.29 (0.07)
Discontinued Operations
Basic and diluted earnings per share . . . . . . . . . . . .
(0.06) (0.06) 0.79
Continuing and Discontinued Operations
Basic and diluted earnings per share . . . . . . . . . . . .
0.45 0.28 0.23 0.71
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(1)
Certain amounts as of and for the years ended December 31, 2016 and 2015 have been restated. In addition, the weighted average number of shares was re-casted in comparative periods to give effect to the Conversion. For more information see Notes 1 and 2 to our Audited Restated Combined Consolidated Financial Statements included in this prospectus.
(2)
Does not reflect the Reverse Stock Split of 1-to-10.12709504.
(3)
On a pro-forma basis to reflect the Reverse Stock Split of 1-to-10.12709504.
Consolidated Statement of Comprehensive Income
For the Nine-Month Period Ended
September 30,
For the Year Ended
December 31,
2017
(Unaudited)
2016
(Unaudited)
2016
(Restated)(1)
2015
(Restated)(1)
(in millions of U.S.$)
Net Income
72.6 41.2 29.2 115.3
Items that will not be reclassified subsequently to profit or loss
Remeasurement of defined benefit obligation
0.3 (0.7) (0.3) 0.3
Items that may be subsequently reclassified to profit or loss
Shares of other comprehensive income from associates
0.2 (0.1) (2) (40.0)
Currency translation adjustment
(2.7) (24.0) (48.6) (166.6)
Other comprehensive loss from continuing operations for the year, net of income tax
(2.2) (24.7) (48.9) (206.3)
Currency translation adjustment from discontinued operations
3.6 4.3 (4.3)
Other comprehensive income of discontinued operations for the year, net of income tax
3.6 4.3 (4.3)
Total other comprehensive loss for the year
(2.2) (21.1) (44.6) (210.5)
Total comprehensive loss for the year
70.4 20.1 (15.4) (95.2)
Attributable to:
Owners of the parent
56.6 18.2 1.5 (50.9)
Non-controlling interest
13.8 1.9 (16.9) (44.4)
70.4 20.1 (15.4) (95.2)
(1)
Certain amounts as of and for the years ended December 31, 2016 and 2015 have been restated. In addition, the weighted average number of shares was re-casted in comparative periods to give effect to the Conversion. For more information see Notes 1 and 2 to our Audited Restated Combined Consolidated Financial Statements included in this prospectus.
(2)
Amount not shown due to rounding.
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Consolidated Statement of Financial Position
As of September 30,
2017
(Unaudited)
As of December 31,
As of January 1,
2015
2016
(Restated)(1)
2015
(Restated)(1)
(in millions of U.S.$)
Assets
Non-current assets
3,314.4 3,120.2 2,876.9 2,015.2
Current assets
638.6 507.1 394.7 817.5
Total assets
3,953.0 3,627.3 3,271.6 2,832.8
Total equity
839.4 803.3 834.1 1,466.6
Liabilities
Non-current liabilities
2,439.0 2,161.2 1,955.5 688.0
Current liabilities
674.6 662.8 482.0 678.2
Total liabilities
3,113.6 2,824.0 2,437.5 1,366.2
Total equity and liabilities
3,953.0 3,627.3 3,271.6 2,832.8
Equity
Weighted average number of common shares (in thousands)(2)
1,500,000 1,500,000 1,500,000 1,500,000
Declared dividends per share
(1)
Certain amounts as of and for the years ended December 31, 2016 and 2015 have been restated. In addition, the weighted average number of shares was re-casted in comparative periods to give effect to the Conversion. For more information see Notes 1 and 2 to our Audited Restated Combined Consolidated Financial Statements included in this prospectus.
(2)
Does not reflect the Reverse Stock Split of 1-to-10.12709504.
Consolidated Statement of Cash Flows
For the Nine-Month
Period Ended
September 30,
For the Year Ended
December 31,
2017
(Unaudited)
2016
(Unaudited)
2016
(Restated)(1)
2015
(Restated)(1)
(in millions of U.S.$)
Net cash provided by operating activities
59.6 141.7 172.8 43.6
Net cash used in discontinued operating activities
(8.9) (8.2) (42.0)
Net cash provided by/(used in) investing activities
(9.1) (1.7) 35.8 (86.4)
Net cash used in discontinued investing activities
(8.1) (8.1) (183.6)
Net cash (used in)/provided by financing activities
97.0 (102.0) (159.4) 22.8
Net cash provided by discontinued financing activities
196.7
Increase/(Decrease) in cash and cash equivalents from continuing operations
147.5 37.9 49.2 (20.0)
Decrease in cash and cash equivalents from discontinued operations
(16.9) (16.2) (28.8)
(1)
Certain amounts as of and for the years ended December 31, 2016 and 2015 have been restated. In addition, the weighted average number of shares was re-casted in comparative periods to give effect to the Conversion. For more information see Notes 1 and 2 to our Audited Restated Combined Consolidated Financial Statements included in this prospectus.
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Other Information
For the Nine-Month Period Ended
September 30,
For the Year Ended
December 31,
2017
% change against
prior year
2016
2016
% change against
prior year
2015
Domestic Passengers (in millions)
30.5 9.8% 27.8 37.9 (0.9)% 38.2
International Passengers (in millions)
20.5 10.3% 18.6 24.6 7.4% 22.9
Transit passengers (in millions)
6.1 (16.8)% 7.3 9.3 (6.0)% 9.9
Total passengers (in millions)
57.1 6.4% 53.7 71.8 1.1% 71.0
Cargo volume (in thousands of tons)
268.8 8.2% 248.5 360.6 2.6% 351.4
Total aircraft movements
(in thousands)
637.3 2.0% 624.8 836.4 (4.0)% 871.1
Adjusted EBITDA (unaudited)(1)
(in millions of U.S.$)
354.7 5.5% 336.4 427.2 54.5% 276.6
(1)
Adjusted EBITDA is used as a measure of performance by our management. We calculate Adjusted EBITDA as income from continuing operations before financial income, financial loss, income tax expense, depreciation and amortization. There is no standard definition of Adjusted EBITDA, and our definition of Adjusted EBITDA may not be comparable to Adjusted EBITDA as used by other companies. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, consolidated net income from continuing operations as determined in accordance with IFRS or as an indicator of our operating performance. For more information about the limitations of Adjusted EBITDA, see “Presentation of Financial and Other Information—Non-IFRS Information—Adjusted EBITDA.”
Adjusted EBITDA is reconciled to consolidated income from continuing operations below:
For the Nine-Month Period Ended
September 30,
For the Year Ended
December 31,
2017
(Unaudited)
2016
(Unaudited)
2016
2015
(in millions of U.S.$)
Income from continuing operations
72.6 49.9 38.7 6.3
Financial income
(42.6) (26.3) (37.5) (46.8)
Financial loss
203.8 204.0 273.0 199.8
Income tax expense
39.8 38.6 56.4 45.0
Amortization and depreciation
81.1 70.2 96.7 72.2
Adjusted EBITDA (unaudited)
354.7 336.4 427.2 276.6
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Risk Factors
Investing in our common shares involves substantial risks. In addition to the other information in this prospectus, you should carefully consider the following risk factors before investing in our common shares. If any of the risks we describe below occurs, our business, financial condition or results of operations could be materially and adversely affected. The market price of our common shares could decline if one or more of these risks or uncertainties actually occur, causing you to lose all or part of your investment in our common shares. Certain statements in “Risk Factors” are forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements” included elsewhere in this prospectus.
Risks Related to Our Business and Industry
Our concessions may be terminated under various circumstances, some of which are beyond our control.
Our business consists of acquiring, developing and operating airport concessions. These concessions are granted by governmental authorities for a limited period of time and subject to several conditions and obligations.
Our concessions may be terminated under various circumstances, some of which are beyond our control. In general, our concession agreements may be terminated at any time by the relevant governments or agencies for public interest reasons. For example, in 2017 the Peruvian Government unilaterally terminated the concession it had awarded to us for the construction and operation of the new Chinchero Cusco International Airport. Concession agreements may also be terminated due to our material and repeated breach of the concession terms. The termination of one or more of our concessions could have a material adverse effect on our business, financial condition, and results of operations.
If an applicable governmental authority terminates any of our concessions, with or without cause, we may be entitled to seek claims for compensation from such terminating governmental authority. Although termination payments vary by concession, they usually include a claim for indemnification equal to the value of the non-amortized investments made by us for purposes of operating the airports and rendering the services agreed under the concession agreements. If the applicable governmental authority terminates one of our concessions due to our material and repeated breach or failure to make the committed investments, we may assert claims for indemnification equal to those non-amortized investments we made for purposes of operating the relevant airports and rendering of the services agreed under the relevant concession agreements. If the concession is terminated by the relevant government or agency for public interest reasons or without cause, we may assert claims for indemnification equal to the non-amortized investments plus loss of profits. Collecting on such claims may be difficult and time-consuming, and any amounts collected in respect of such claims may not provide us with the expected level of returns, which could have a material adverse effect on our business, financial condition and results of operations.
In addition, as of February 2018, the Argentine Government will have the right to buy out the AA2000 Concession Agreement upon prior notification to us and indemnify us for certain investments we incurred for purposes of operating the airports and rendering the services agreed thereunder. See “—Risks Related to Argentina and the AA2000 Concession Agreement—Pursuant to the AA2000 Concession Agreement, as of February 2018 and thereafter, the Argentine Government may buy out our concession, which would significantly affect our revenues and operations.”
We may be subject to monetary penalties or early termination if we fail to comply with the terms of our concession agreements.
We may be subject to monetary penalties if we violate or otherwise fail to comply with the terms of our concessions. Some violations of a concession agreement may provide for cure periods or other remedial action, while other violations, whenever they are substantial and repeated, can result in the immediate termination of the relevant concession. If we experience difficulties, we may encounter problems in satisfying our obligations under our concession agreements and the relevant governmental authorities may impose sanctions on us. For a description of the consequences that may result from the violation of various terms of our concessions, or local laws and regulations related to such concessions, see “Regulatory and Concessions Framework.” Monetary penalties could negatively affect our results of operations.
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In addition, under all of our concession agreements, we are required to establish and comply with an investment plan for the airports covered under such concession agreements. If we do not fulfill our investment commitments on a timely basis or obtain financing necessary to complete such projects, such failures could lead to a breach of the relevant concession agreement.
Our revenue and profitability may be affected if we fail to win new concession agreements, acquire companies with existing concession agreements, or otherwise improve or expand our current operations.
Our growth strategy relies upon identifying and winning new concession agreements, acquiring companies with existing concession agreements or improving and expanding our current operations. Our future growth may also depend on new (greenfield) development projects, which may require significant time and upfront financial commitments for construction and development. While we anticipate having opportunities to bid for concession agreements or purchase existing concessionaires in the future, we cannot predict the frequency of such opportunities. We must also strategically identify which concession agreements and existing concessionaires to target based on numerous factors such as number of passengers, size of the relevant airport(s), type, location and quality of the available airports and subconcession space, rental structure, financial return, regulatory requirements and the competitive landscape within such market. We may not be able to successfully expand, as we may not correctly analyze the suitability of airport locations, anticipate all of the challenges imposed by expanding our operations or succeed in executing our growth plan efficiently. We also may fail to expand within budget or on a timely basis, or expand at all. In addition, to win a particular concession contract, we may be required to make investments or incur other expenses that would render such concession less economically attractive.
Our growth strategy and the substantial investment associated with the acquisition of each new concession agreement, existing concessions or expansion of existing concessions may cause our operating results to fluctuate and be unpredictable.
The loss or impairment of our relationship with governments and their agencies in the markets in which we operate could adversely affect our business, future revenues and growth prospects.
Our principal assets are concession rights granted by governments in the countries in which we operate. Our business depends to a large extent on our ability to manage relationships with such governments and their agencies. During the term of our concessions, we are in continuous communications with the relevant governments and their agencies regarding, among other things, the terms and conditions of the concession, compliance with the concession agreement, the applicable master plan and works to be performed at the airports, including works not specifically required by the terms of the relevant concession, and the establishment of tariffs. Our business, prospects, financial condition or operating results could be materially harmed if we were suspended or debarred from contracting with any such government or government agency or if our reputation or relationship with any such government or agency is impaired.
Our revenue is highly dependent on levels of air traffic, which depend in part on factors beyond our control, including economic and political conditions in the countries where we operate our airports.
Our revenue is closely linked to passenger and cargo traffic volumes and the number of air traffic movements at our airports. These factors directly determine our aeronautical revenue and indirectly determine our commercial revenue. Passenger and cargo traffic volumes and air traffic movements depend, in part, on many factors beyond our control. Such factors include economic conditions and the political situation in the countries where we operate our airports, epidemics, pandemics and other public health crises, terrorism, fluctuations in petroleum prices (which can have a negative impact on traffic as a result of fuel surcharges or other measures adopted by airlines in response to increased fuel costs), currency exchange rate fluctuations and changes in regulatory policies applicable to the aviation industry. The occurrence of any of these risks may result in a reduction of passenger air traffic levels and air traffic movements globally and in the regions in which we operate. A significant decline in passenger and cargo traffic volumes and the number of air traffic movements at our airports would have a material adverse effect on our business, financial condition and results of operations.
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We face risks related to our dependence on the revenue from Ezeiza Airport.
During the nine-month period ended on September 30, 2017, and the year ended December 31, 2016, Ezeiza Airport generated U.S.$396.6 million in revenue, or 34.2%, and U.S.$522.1 million in revenue, or 38.2%, respectively, of our consolidated revenue for such period. As a result of the substantial contribution to our revenue from the Ezeiza Airport, any event or condition affecting this airport (in addition to any potential termination or buyout of the AA2000 Concession Agreement) could materially adversely affect our business, financial condition and results of operations. For example, an economic recession in Argentina, a reduction in the operations of Ezeiza Airport, competition from other airports or a decrease in the number of passengers traveling to Buenos Aires as tourists could cause a decrease in our revenue at this airport which, in turn, could materially adversely affect our business, financial condition and results of operations.
Increases in international fuel prices could reduce demand for air travel.
International prices of fuel have experienced significant volatility in recent years. The price of fuel may be subject to further fluctuations resulting from a reduction or increase in output of petroleum, voluntary or otherwise, by oil producing countries, other market forces, a general increase in international hostilities, or any future terrorist attacks. Although international fuel prices have decreased recently, in the past, increased costs were among the factors leading to cancellations of routes, decreases in frequencies of flights and, in some cases, even contributed to filings for bankruptcy by some airlines. Although fuel is a widely-traded global commodity, in the event of a significant increase in fuel prices in one or more of the countries in which we operate, or in one or more countries that provide significant numbers of international air passengers to the countries in which we operate, the effects of a localized price increase may be more significant than a general, worldwide increase in fuel prices. Significant fluctuations may result in higher airline ticket prices and in a decrease in demand for air travel generally, both of which could have an adverse effect on our revenues and results of operations.
Extended interruptions or disruptions at the airports where we operate due to natural disasters, prolonged weather conditions and other adverse incidents could affect our business and results of operations.
A significant extended interruption or disruption in service at the airports where we operate could have a material adverse impact on our business, financial condition and results of operations. Our results of operations could be impacted by flight cancellations and airport closures caused by weather and natural disasters. Severe weather conditions, particularly heavy snowfall, increases in the frequency, severity and duration of natural disasters such as hurricanes, tornadoes, volcanic activity, earthquakes and tsunamis, including from changes in the global climate, can significantly disrupt service, cause cancellation of flights and negatively affect passenger traffic at airports, which may result in decreased revenues and increased costs.
The disaster recovery and business continuity plans we have in place may prove inadequate in the event of a serious disaster or similar event. We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which could have a material adverse effect on our business.
Outbreaks of disease and health epidemics could have a negative impact on international air travel.
Public health crises such as the outbreak of Severe Acute Respiratory Syndrome (known as SARS) between 2002 and 2003, the outbreak of the A/H1N1 virus of 2009 and the Ebola pandemic in 2014–2015 have disrupted the frequency and pattern of air travel worldwide in recent years. Most recently, travel to the Caribbean and Latin American countries has been affected as a result of the Zika virus. Because our revenue is largely dependent on the level of passenger traffic in our airports, any outbreaks of health epidemics, such as the H1N1 virus and the Zika virus, could result in decreased passenger traffic and increased costs to the air travel industry and, as a result, could have a material adverse effect on our business revenues and results of operations.
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We could be subject to acts of terrorism or war, which could have a negative impact on air travel and result in increased security requirements.
Our airports operate within a stringent and complex security regime, as required by the relevant governmental authorities, which may impose additional security measures from time to time, including as a result of a terrorist attack. The consequences of any future terrorist action or threat may include the cancellation or delay of flights, fewer airlines and passengers using our airports, liability for damage or loss and the costs of repairing damage. If a terrorist attack affected one of the airports we operate, the airport in question would be closed, in whole or in part, for the time needed to care for victims, investigate the circumstances of the attack, rebuild any damaged areas or otherwise, with a subsequent decrease in the revenue and increase in costs for the reconstruction of the affected areas (to the extent these are not covered by insurance policies).
Moreover, if an act of terrorism or threat thereof were to occur in a country in which we operate, even if not at our airports, the perception of safety by airport users could decrease, and, consequently, there could be a reduction in passenger air traffic for an indefinite period of time, which could adversely affect our business, financial condition and results of operations.
Furthermore, the implementation of additional security measures at our airports in the future could lead to additional limitations on airport capacity or retail space, overcrowding, increases in operating costs and delays to passenger movement through the airport, any of which could have a material adverse effect on our business, financial condition and results of operations.
Our business may also be affected by the outbreak of wars or armed conflicts in any region of the world. Among other things, wars can lead to increased prices of fuel, supplies and interest rates for aircraft leases, which could, in turn, lead to increased prices of airline tickets and a decline in demand for air transportation in general. Likewise, the occurrence of armed conflicts could result in increased security measures, thereby increasing security costs.
Any event that affects the safety standard perception of any of our aeronautical customers could result in a loss of significant passenger traffic volume.
Any accident, incident or other event that affects the safety standard perception of any of our aeronautical customers may affect its image and generate a public perception that it is less safe or reliable than other airlines. These events could harm consumer demand and the number of passengers serviced by such airline, which could in turn adversely affect the number of passengers using our airports, thereby having an adverse effect on our revenues.
Competition from other destinations could adversely affect our business.
The principal factor affecting our business is the number of passengers that use our airports. Our passenger traffic volume may be adversely affected by the attractiveness, affordability and accessibility of competing destinations. In addition, our passenger traffic volume may be adversely affected by the level of business activity in each destination or the likelihood of airlines using any of those destinations as a hub or base for their operations. If business activity and tourism levels, and therefore, the number of passengers using our airports, is negatively impacted by competing airports and hubs in the geographic regions in which we operate, such development could have an adverse effect on our business, financial condition or results of operations.
We are subject to the risk of union disputes and work stoppages at our locations, which could have a material adverse effect on our business.
Some of our employees are members of labor unions. For example, as of September 30, 2017, approximately 55.5% and 50.1% (54.0% and 49.7%, respectively, as of December 31, 2016) of our employees in Argentina and Italy, respectively, are members of labor unions. Negotiating labor contracts, either for new locations or to replace expiring contracts, is time consuming or may not be accomplished on a timely basis. In addition, we negotiate some of our collective bargaining agreements on an annual basis. If we are unable to satisfactorily negotiate those labor contracts with the labor unions on terms acceptable to
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us or without a strike or work stoppage, the effects on our business could be materially adverse. Any strike or work stoppage could disrupt our business, adversely affecting our results of operations and our public image could be materially adversely affected by such labor disputes. In addition, existing labor contracts may not prevent a strike or work stoppage, and any such work stoppage could have a material adverse effect on our business.
The operations of our airports may be affected by actions or inactions of third parties that are beyond our control.
In most of our airports, our operations are largely dependent on the services provided by governments and other third parties who render services to passengers and airlines, such as meteorology, air traffic control, security, electricity, and immigration and customs services. In addition, in some of our airports we are dependent on third-party providers of certain complementary services such as baggage handling, fuel services, catering and aircraft maintenance and repair. While we are responsible for adopting security measures at some of our airports, we do not control the management or operation of security, which is controlled by government agencies or third parties. We are not responsible for, and cannot control, any of these services. Any disruption in, or adverse consequence resulting from, such services, including work strikes or other similar events, could cause the cancellation of flights and negatively affect passenger traffic at our airports, which may ultimately result in decreased revenues and have an adverse effect on our business, financial condition or results of operations.
The loss of one or more of our aeronautical customers or the interruption of their operations could result in a loss of a significant amount of our passenger traffic.
None of our agreements with our aeronautical customers obligates them to provide service at to our airports. If any of our aeronautical customers were to reduce their use of our airports or cease to operate at them for any reason, including merger, bankruptcy or due to regulatory restrictions, the remaining airlines may not increase their flight frequency to replace the flights that our aeronautical customers were no longer operating. Our business and revenue could be adversely affected if we are unable to replace the business of our main aeronautical customers.
Our main aeronautical customers are LATAM Airlines Group and Grupo Aerolíneas Argentinas. For the nine-month period ended September 30, 2017, LATAM Airlines Group and Grupo Aerolíneas Argentinas accounted for 23.3% and 16.4% of our consolidated aeronautical revenue, respectively. For the year ended December 31, 2016, LATAM Airlines Group and Grupo Aerolíneas Argentinas accounted for 22.8% and 15.2% of our consolidated aeronautical revenue, respectively.
An aircraft accident or other material factors beyond our control may affect the operation of our runways.
Our runways may require unscheduled repair due to natural disasters, aircraft accidents and other factors beyond our control. The closure of any runway for a significant period of time could have a material adverse effect on the number of passengers that use our airports, and therefore, a material effect on our operations and financial results.
Ongoing and proposed construction, renovation or repair work at our airports could have a negative impact on our revenues.
At any time, we may be in the process of constructing, renovating and/or repairing a number of our airports. These works may sometimes affect the passenger experience, which may ultimately adversely affect our commercial revenue. The operations of our other airports may decrease or be adversely affected by future construction, renovations or repairs, and this could have an adverse effect on our business, financial condition or results of operations.
We are exposed to certain risks in connection with the use of certain spaces by subconcessionaires at our airports.
We are exposed to risks related to the spaces subconcessioned to third parties, such as non-payment by subconcessionaires of certain fees and other lease arrangements or a weakening demand for the use of the spaces allocated to subconcessionaires. For example, many of our subconcessionaires’ locations are situated
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beyond the security checkpoints at airports, and they rely heavily on their customers spending a significant amount of time in the terminal and waiting areas of the airport terminals in which they have subconcessioned space. Changes in customers’ travel habits prior to departure, including an increase in the availability or popularity of airline business and first-class lounges, or an increase in the efficiency of ticketing, transportation safety procedures and air traffic control systems could reduce the amount of time that customers spend at such subconcessioned locations, which could materially reduce the revenue they are able to generate and which, in turn, could reduce the amount of fees and rent we can collect from our subconcessionaires. Any material reduction in the fees and lease payments that we are able to charge to our subconcessionaires could adversely affect our business, results of operations and financial condition.
Our insurance policies may not provide sufficient coverage against all liabilities.
We are required to maintain insurance under all of our concession agreements and we seek to insure all risks for which insurance coverage is available on commercially reasonable terms. We can offer no assurance that our insurance policies will cover all of our liabilities in the event of an accident, natural disaster, terrorist attack or other incident. The insurance market for airport liability coverage generally, and for airport construction in particular, is limited, and a change in the coverage policy by the insurance companies involved could reduce our ability to obtain and maintain adequate or cost-effective coverage. For some of our airports, we do not currently carry business interruption insurance or property insurance against terrorism and related risks. Consequently, any substantial interruption of our business or terrorist attacks could have a material adverse effect on our results of operations and our financial condition. See “Business—Property and Insurance.”
We are exposed to liability to third parties for injuries or damages.
We are obligated to protect the public and to reduce the risk of accidents at our airports. As with any company dealing with the security of individuals, we must implement measures for the protection of the public, such as hiring private security services, maintaining our airports’ infrastructure and fire safety in public spaces, and providing emergency medical services. These obligations could expose us to liability to third parties for personal injury or property damage and, to the extent not adequately covered by insurance, could adversely affect our financial condition and results of operations.
Most of our operations are in emerging markets.
Our existing concessions are mostly in countries with emerging economies, and investing in developing economies generally involves risks. These risks include political, social and economic events, any of which could impact our operations or the market value of our common shares and have a material adverse effect on our business, financial condition and results of operations. These risks and instability are caused by many different factors, including the following:

adverse external economic factors;

inconsistent fiscal and monetary policies (including currency devaluation);

dependence on external financing;

changes in governmental economic and tax policies and regulations;

high levels of inflation;

fluctuations in currency values;

high interest rates;

wage increases and price controls;

limitation on imports;

exchange rates and capital controls;

political and social tensions;

fluctuations in central bank reserves; and

trade barriers.
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Emerging markets have historically experienced uneven periods of economic growth, as well as recession, periods of high inflation and economic instability. Adverse economic conditions in any of these countries could have a material adverse effect on our business, financial condition and results of operations.
Some of the countries in which we operate have experienced, or are currently experiencing, high rates of inflation. In an effort to control inflation, governments of these countries often maintain a tight monetary policy with high interest rates, thereby restricting the availability of credit and retarding economic growth. Inflation, measures to combat inflation and public speculation about possible additional actions have also contributed significantly to economic uncertainty in many of these countries and to heightened volatility in their securities markets. Periods of higher inflation may also slow the growth rate of local economies. Inflation is also likely to increase some of our costs and expenses, which we may not be able to fully transfer to our clients, which could adversely affect our operating margins and operating income in some of the emerging markets in which we operate.
Depreciation or fluctuation of the currencies of the countries where we operate could adversely affect our results of operations and financial condition.
Many of the countries where we operate have experienced volatility in the exchange rate of their currency against the U.S. dollar. Because we present our financial statements in U.S. dollars, this volatility may reduce the revenues we report or increase the expenses we report in any given period. These effects may in turn have an adverse effect on the market of our common shares. In addition, because we have a substantial amount of dollar-denominated indebtedness, exchange rate volatility may result in increased debt service costs. Finally, in some instances we receive revenues in a currency different from that in which we pay expenses, in which case currency volatility can affect the profitability of our operations.
We are subject to various environmental laws, regulations and authorizations that affect our operations and may expose us to significant costs, liabilities, obligations or restrictions.
We, our subconcessionaires and our aeronautical customers are subject to various environmental laws, regulations and authorizations governing, among other things, the generation, use, transportation, management and disposal of hazardous materials, the emission and discharge of hazardous materials into the ground, air or water, and human health and safety. Failure to comply with these environmental requirements, including the terms of our concession agreements, could result in our being subject to litigation, fines or other sanctions. We could also incur significant capital or other compliance costs relating to such requirements. We could also be held responsible for contamination, human exposure to hazardous materials or other environmental damage at our airports or otherwise related to our operations. Environmental claims have been asserted against us, and additional claims may be asserted against us in the future. See “Business—Legal Proceedings—Argentine Proceedings—Environmental Proceedings.” We are unable to determine our potential liability under these pending or possible future claims. We only have environmental insurance coverage for environmental damages at a limited number of our airports.
These environmental requirements, and the enforcement and interpretation thereof, change frequently and have tended to become more stringent over time. Future environmental laws, regulations and authorizations may require us to incur additional costs in order to bring our airports into, and maintain, compliance. Our costs, liabilities, obligations and restrictions relating to environmental matters could have a material adverse effect on our business, results of operations and financial condition.
We are subject to review by taxing authorities, and an incorrect interpretation by us of tax laws and regulations may have a material adverse effect on us.
The preparation of our tax returns requires the use of estimates and interpretations of complex tax laws and regulations and is subject to review by taxing authorities. We are subject to the income tax laws of the countries in which we operate. These tax laws are complex and subject to different interpretations by the taxpayer and relevant governmental taxing authorities, leading to disputes which are sometimes subject to prolonged evaluation periods until a final resolution is reached. In establishing a provision for income tax expense and filing returns, we must make judgments and interpretations about the application of these inherently complex tax laws. In some jurisdictions where we operate, the interpretations of tax laws by the
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taxing authorities are sometimes unpredictable and frequently involve litigation, introducing further uncertainty and risk as to our tax liability. If the judgment, estimates and assumptions we use in preparing our tax returns are subsequently determined to be incorrect, there could be a material adverse effect on us, which may ultimately affect our revenues. See “Business—Legal Proceedings—Tax Proceedings Related to Technical Assistance Agreements.”
We are dependent on information and communication technologies, and our systems and infrastructures face certain risks, including cybersecurity risks.
The operation of complex infrastructures, such as airports, and the coordination of the many actors involved in its operation require the use of several highly specialized information systems, including both our own information technology systems and those of third-party service providers, such as systems that monitor our operations or the status of our facilities, communication systems to inform the public, access control systems and closed circuit television security systems, infrastructure monitoring systems, air navigation systems, passenger ticketing and boarding, automated baggage handling, points of sale, terminals and radio and voice communication systems used by our personnel. In addition, our accounting and fixed assets, payroll, budgeting, human resources, supplier and commercial, hiring, payments and billing systems and our websites are key to the functioning of our airports. The proper functioning of these systems is critical to our operations and business management. These systems may, from time to time, require modifications or improvements as a result of changes in technology, the growth of our business and the functioning of each of these systems.
While we have contingency plans, backup systems, information and communication redundant systems, testing and certification procedures and information technology auditing systems, among others, these information systems cannot be completely protected against certain events such as natural disasters, fraud, computer viruses, hacking, communication failures, equipment breakdown, software errors and other technical problems.
The risk of cyber-crime has been increasing, especially as infiltrating technology is becoming increasingly sophisticated. If we are unable to prevent a significant cyber-attack, such attack could materially affect the number of passengers at our airports, cause the loss of passenger information, damage our reputation and lead to regulatory penalties and financial losses.
We have implemented continuity measures and technology disaster recovery plans to mitigate the damage from such incidents and in the future may incur in significant costs to protect against security threats or to alleviate problems caused by failures of or breaches to our systems. However, we cannot assure you that these measures will be adequate to prevent disruptions in all cases, the occurrence of which could significantly disrupt our operations, resulting in increased costs, a decline in revenue and significant harm to our business (including our public image) in general.
Our acquisition strategy could involve additional risks to us, many of which could have an adverse effect on our business, financial condition and results of operations.
We continue to examine opportunities to acquire or invest in existing or new concessions that complement or expand our business. These opportunities may involve government-owned entities as well as private sector companies. Any future acquisitions may result in a dilutive issuance of equity securities, incurrence of additional debt, reduction of existing cash balances, amortization of expenses related to goodwill and other intangible assets or other charges to operations. Additional leverage could require us to dedicate cash flow to fund debt service requirements, thus decreasing the funds available to us to finance working capital and business operations generally. All of the foregoing factors could have an adverse effect on our business, financial condition, results of operations or prospects.
Future acquisitions could involve numerous risks, including that we may recognize lower relative operating margins associated with such acquisitions, and we may recognize impairment charges with respect to future acquired assets due to the performance of such assets. Our results of operations may also be affected by the timing of acquisitions, the timing and amount of integration costs related to such acquisitions and the degree to and the rate at which the economic benefits of integration are realized.
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Future growth may also place additional demands on our personnel and other resources, including an increased level of responsibility for management. Our ability to manage growth effectively will require us to continue to improve our operational, management and financial systems and controls and to successfully train, motivate and manage our employees. If our management is unable to manage growth effectively, our business could be adversely affected.
Our inability to raise additional financing may limit our operations.
We may have limited ability to incur additional financing for some of our concession agreements, which may entail important consequences for investors, among them (i) limiting our capacity to satisfy our future investment obligations with respect to the airports we operate pursuant to the terms and conditions of our concession agreements, or other capital expenditures required for the operation of such airports; and (ii) limiting our flexibility to take advantage of opportunities for new business within the markets we operate or potential new markets. Any of these situations may ultimately affect our operations and financial results.
Many of our most significant subsidiaries have substantial minority interests outstanding.
We own indirectly 81.3%, 51.1% and 51.0% of our principal Argentina, Italy and Brazil operating subsidiaries, respectively, which are namely AA2000, TA and ICAB. Because we control these entities, we record all their revenues and expenses and then subtract the minority interest from their earnings. The other shareholders–including, in the case of Italy, public shareholders–of these entities may have interests different from ours, and any substantial conflict with minority shareholders may have an adverse effect on our business, financial condition or results of operations.
We may have conflicts of interest with the Selling Shareholder and we may not be able to resolve such conflicts on terms favorable to us.
We are currently controlled by the Selling Shareholder, which owns 100% of our equity interests prior to this offering. Following the closing of this offering, the Selling Shareholder will continue to be our parent company. Conflicts of interest may arise between our Selling Shareholder and us in a number of areas relating to our past and ongoing relationships. Potential conflicts of interest that we have identified include, among others, allocation of business and investment opportunities and/or the acquisition of airport assets outside of our existing corporate structure. Generally, the Selling Shareholder may from time to time make strategic decisions that it believes are in the best interest of the business as a whole, including its ownership interest in our business. These decisions may be different from the decisions that we would have made on our own and may not be aligned with your interests. We may not be able to resolve any potential conflicts and, even if we do, the resolution may be less favorable to us than if we were dealing with an unaffiliated party.
We have been advised by SCF, our ultimate controlling shareholder, that it does not intend to participate in any significant future acquisitions of airport concession assets or airport-related companies, except through us. See “Principal and Selling Shareholder.”
The U.S. Federal Aviation Administration or another regulatory agency could downgrade the aviation safety rating of any of the countries in which we operate, which could have a negative impact on passenger traffic.
Under the U.S. Federal Aviation Administration regulations, the aviation safety rating of any of the countries in which we operate could be downgraded. Airlines from such countries could be prevented from expanding or changing their current operations to and from the United States, except under certain limited circumstances, code-sharing arrangements between such airlines and U.S. airlines could be suspended, and operations by such airlines flying to the United States could be subjected to greater administrative oversight. Any such additional regulatory requirements could result in reduced passenger traffic originating in or departing to the United States by non-U.S. airlines operating at our airports or, in some cases, in an increase in that cost of service, which could result in decrease in demand for travel. The Federal Aviation Administration may downgrade the air safety rating of any of the countries in which we operate in the future. The European Aviation Safety Agency and other regulatory agencies may take similar actions, either independently or in response to any such action by the U.S. Federal Aviation Administration. Such actions might reduce our revenues and have a negative impact on passenger traffic.
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We are subject to anti-corruption laws in the jurisdictions in which we operate.
We are subject to and bound by U.S. and foreign anti-corruption laws and regulations, such as the U.S. Foreign Corrupt Practices Act, the Italian Corruption Law of 2012 (Law No. 190) and the Brazil Clean Company Act of 2014 (Law No. 12,846). These anti-corruption laws generally prohibit companies and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or keeping business and/or other benefits. Many jurisdictions have recently implemented new anti-corruption laws (such as in the case of Brazil), broadened the scope of existing anti-corruption laws (such as in the case of Italy) or are currently debating the introduction of new laws in this area (such as in the case of Argentina). The Brazilian Clean Company Act holds companies strictly liable for the corrupt acts of their employees and intermediaries, which means that a company may be held liable for such acts, without a finding of fault on the part of the company. See “—Risks Related to Our Other Principal Operations and Other Principal Markets in Which We Operate—Brazil—The ongoing economic uncertainty and political instability in Brazil may adversely affect our economic and financial condition” and “— Risks Related to Our Other Principal Operations and Other Principal Markets in Which We Operate— Brazil— We have identified payments made by ICAB that may not have had any proper purpose and that could expose us to fines and sanctions as well as reputational harm and other adverse effects.” Our business requires that we maintain continuous contact with governments and agencies from the initial bid process for any concession and throughout the entire term of any concession we are awarded. Despite our ongoing efforts to ensure compliance with anti-corruption laws, there can be no assurance that our employees, agents, and the companies to which we outsource certain of our business operations, will not take actions in violation of our policies, for which we may be ultimately held responsible. If we are not in compliance with anti-corruption laws and other laws governing the conduct of business with government entities (including local laws), we may be subject to criminal and civil penalties and other remedial measures, which could harm our reputation and have a material adverse impact on our business, financial condition, results of operations and prospects. Any investigation of any actual or alleged violations of such laws could also harm our reputation or have an adverse impact on our business, financial condition and results of operations.
Risks Related to Argentina and the AA2000 Concession Agreement
The AA2000 Concession Agreement expires in 2028, unless it is extended by the Argentine Government.
The AA2000 Concession Agreement expires in February 2028. Subject to the satisfaction of certain conditions by AA2000 and the authorization of the Argentine Government, we may extend the term of the AA2000 Concession Agreement for an additional period of up to 10 years. We have made a formal request to the Organismo Regulador del Sistema Nacional de Aeropuertos (the “ORSNA”) to extend the term of the concession for the additional 10-year period. However, under Section 5.2 of the AA2000 Concession Agreement, if the concession is extended, the Argentine Government has reserved the right to maintain, modify or eliminate the exclusivity granted under the concession. In case the Argentine Government does not extend the AA2000 Concession, our revenue will be significantly affected.
Pursuant to the AA2000 Concession Agreement, as of February 2018 and thereafter, the Argentine Government may buy out our concession, which would materially affect our revenues and operations.
Pursuant to the AA2000 Concession Agreement, on or after February 13, 2018, the Argentine Government has the right to “buy-out” (“rescatar”) the AA2000 Concession Agreement upon prior notification to us. In the event the Argentine Government were to exercise this option, it would be required to indemnify us in an amount equal to the value of the non-amortized aeronautical investments we have made as of the time of the buy-out, multiplied by 1.10, plus the value of all other investments we made that have not been amortized. The Argentine Government would not be required to indemnify us for investments that were not included in our investment plan or that were not approved by the ORSNA. The Argentine Government would also not be required to indemnify us for lost revenue. The Argentine Government would be required to assume in full any debts incurred by us to acquire goods or services for the purposes of providing airport services, except for debts incurred in connection with the investment plan for which we would be compensated as part of the payment made to us by the Argentine Government. Subsequent to such buy-out, we may have other claims against the Argentine Government or the ORSNA, but we may not prevail on these claims. See “Regulatory and Concessions Framework—Argentina—The AA2000 Concession Agreement.”
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Furthermore, the buy-out of the AA2000 Concession Agreement would constitute an event of default under our 6.875% senior secured notes due 2027 (the “Argentine Notes”), which will result in automatic acceleration of the Argentine Notes. As of the date of this prospectus, the total amount outstanding under the Argentine Notes is U.S.$400.0 million. The Argentine Government’s indemnification obligations in combination with the collateral structure under the Argentine Notes may not be adequate to repay the holders of such notes. See “Description of Indebtedness—Argentina.”
During the nine-month period ended September 30, 2017, and the year ended December 31, 2016, the revenue derived from our operation of the airports under the AA2000 Concession Agreement represented 62.6% and 61.3%, respectively, of our total consolidated revenue. If the Argentine Government exercises its right to buy-out the AA2000 Concession Agreement, such buy-out would have a material adverse effect on our business, financial condition and results of operations.
The ORSNA may adjust the fees we charge for aeronautical services, the payments we are required to make to the Argentine Government and our investment plan in a way that is detrimental to us, or fail to adjust them to restore the AA2000 Concession Agreement’s economic equilibrium.
Under the AA2000 Concession Agreement, the ORSNA is required to review annually AA2000’s financial projections and, if necessary, to re-establish economic equilibrium by making adjustments to (i) the fees we charge airlines and passengers for aeronautical services, (ii) certain payments we make to the Argentine Government pursuant to the AA2000 Concession Agreement, and/or (iii) our investment obligations. Since the renegotiation of the AA2000 Concession in 2007, the Argentine Government has reviewed the financial projections six times. Effective January 1, 2017, the ORSNA recently adjusted the fees we may charge by decreasing the fee for international passengers from U.S.$57.00 to U.S.$49.00 and increasing the fee for domestic passengers from AR$29.73 to AR$74.33, in a way we believe is detrimental to us and therefore, we have filed a claim regarding this adjustment of fees. As of the date of this prospectus, such claim has not been resolved. For more information, see “Regulatory and Concessions Framework—Argentina—The AA2000 Concession Agreement—Financial Projections.”
In addition, the Argentine Government recently announced its plan to hire a consulting firm to review the terms and conditions of the AA2000 Concession Agreement. According to the ORSNA, the Argentine Government is seeking to obtain detailed information about the quality of service provided by our airports under the AA2000 Concession Agreement as compared to the service levels at other international airports. It is unclear whether the Argentine Government expects to take any action based on the results of the consultant’s review.
If the ORSNA adjusts the fees we may charge or that we must pay under the AA2000 Concession in a way that is detrimental to us, if the ORSNA fails to adjust such fees in order to restore the AA2000 Concession Agreement’s economic equilibrium, or if the ORSNA seeks to modify our rights under the AA2000 Concession Agreement, such adjustments or failures to adjust, may have a material adverse effect on our business, financial condition and results of operations.
If the ORSNA does not approve the capital expenditures already made under the AA2000 Concession Agreement, we would be required to make additional capital expenditures, which may affect our cash flows and financial condition.
The ORSNA reviews our capital expenditures to monitor our compliance with the investment plan under the AA2000 Concession Agreement, and to record such expenditures in the registry maintained by the ORSNA. If a capital expenditure is approved by the ORSNA, it is then entered into its registry. Accordingly, we may record investments in any given period that have not yet been (and may never be) approved by the ORSNA. If the ORSNA does not approve our capital expenditures under the investment plan of the AA2000 Concession Agreement, we will be required to make additional capital expenditures. This may require us to obtain additional financing, which we may not be able to obtain on terms favorable to us, or at all. Our capital expenditures for the years ended December 31, 2016 and 2015 and 2014, are currently under review by the ORSNA. In addition, we filed claims with the ORSNA in connection with the investment amounts recognized by the ORSNA for the years ended December 31, 2011, 2012 and 2013, which as of the date of this prospectus have not been resolved.
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The ORSNA may reject the transactions whereby Cedicor S.A. acquired from Societa per Azioni Esercizi Aeroportuali and from Riva S.A.I.I.C.F.A. 8.5% and 0.85% of AA2000’s shares, respectively.
In June 2011, our subsidiary, Cedicor S.A. (“Cedicor”), which is the controlling shareholder of Corporación América S.A. (“CASA”), agreed to purchase from Societa per Azioni Esercizi Aeroportuali (“SEA”) 21,973,747 class A shares of AA2000, which represented 8.5% of AA2000’s ordinary capital and voting stock, and 2.5% of its capital stock on a fully diluted basis (including the preferred shares). In addition, in July 2011, 2,197,375 Class B Shares of AA2000 which represented 0.85% of AA2000’s ordinary capital and voting stock, and 0.25% of the capital stock on a fully diluted basis (including the preferred shares), were transferred to Cedicor by Riva S.A.I.I.C.F.A. (“Riva”).
Both of these transfers are subject to the prior authorization of the ORSNA. As of the date of this prospectus, the ORSNA has not issued any resolution approving or rejecting such transaction. While this approval is pending, all economic and political rights pertaining to the shares, including all distributed dividends, have been assigned to Cedicor pursuant to the terms of the sale agreements between Cedicor and SEA and between Cedicor and Riva.
If the ORSNA rejects the transfers of shares, Cedicor is entitled to transfer the shares to a third party upon the ORSNA’s approval within 18 months of the date that ORSNA notifies Cedicor of its denial resolution. If the ORSNA subsequently rejects the transfer to the proposed third party, the agreements between Cedicor and each of SEA and Riva will cease to have any effect, except that (i) all payments made by Cedicor to SEA and Riva shall be retained by SEA and Riva; and (ii) all dividends distributed or to be distributed by AA2000 to Cedicor with respect to the transferred shares and all additional shares subscribed by Cedicor in exercise of the pre-emptive rights pertaining to such shares shall be retained by Cedicor. In such case, SEA and Riva will be reinstated as owners of all of the shares originally proposed to be transferred to Cedicor.
While we have no reason to believe that the transaction will be rejected, if the transaction is rejected by the ORSNA, then the ownership of AA2000 will be affected which in turn could ultimately reduce our share of the earnings of AA2000 which may not be completely offset by the consideration received from any transfer of the shares to a third party.
Our operations in Argentina depend on macroeconomic conditions in Argentina.
Our business and financial results in Argentina depend to a significant degree on macroeconomic, political, regulatory and social conditions therein, generally, and in the City of Buenos Aires, especially. The Argentine economy has experienced significant volatility in recent decades, characterized by periods of low or negative growth, high levels of inflation and currency devaluation, and may experience further volatility in the future.
During 2001 and 2002, Argentina experienced a period of severe political, economic and social crisis, which caused a significant economic contraction and led to radical changes in government policies. Among other things, the crisis resulted in Argentina defaulting on its sovereign foreign debt obligations, a significant devaluation of the Argentine peso and ensuing inflation, and the introduction of emergency measures that affected many sectors of the economy.
In 2005 and 2010, Argentina conducted exchange offers to restructure part of its sovereign debt that had been in default since the end of 2001. As a result of these exchange offers, Argentina restructured over 92% of its eligible defaulted debt. In April 2016, the Argentine Government settled U.S.$4.2 billion outstanding principal amount of debt held by creditors who had not participated in the 2005 and 2010 restructurings. However, as of the date of this prospectus, litigation initiated by bondholders, or holdout creditors, that have not accepted Argentina’s settlement offer continues in several jurisdictions, although the size of the claims involved has decreased significantly. See “—Argentina’s ability to obtain financing from international markets may be limited, which may in turn impair its ability to implement reforms and public policies and foster economic growth and could impact the ability of Argentine companies to obtain financing.”
Although Argentina has largely recovered from the 2001-2002 crisis, the pace of growth of Argentina’s economy has diminished, suggesting uncertainty as to whether the growth experienced between 2003 and
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2011 was sustainable. Economic growth was initially fueled by, among other things, a significant devaluation of the Argentine peso and high commodity prices. During 2008 and 2009, however, the Argentine economy suffered a slowdown resulting from local and external factors, including the effects of the global economic crisis and an extended drought affecting agricultural activities. Economic conditions in Argentina from 2012 to 2015 included a tightening of foreign exchange controls (beginning in the second half of 2011), increased inflation, a rising fiscal deficit and limitations on Argentina’s ability to service its sovereign debt in accordance with its terms due to its ongoing litigation with holdout creditors. In addition, there is an increasing need for capital investment in many sectors. A decline in international demand for Argentine products, a lack of stability and competitiveness of the Argentine peso against other currencies, a decline in confidence among consumers and foreign and domestic investors, a higher rate of inflation and future political uncertainties, among other factors, may affect the development of the Argentine economy. Any of these factors may be especially significant if they have a concentrated impact on the City of Buenos Aires metropolitan region where our two main airports in the country are located. More recently the economy has shown signs of a slowdown, primarily due to the decline in global commodity prices and adverse conditions in Brazil, one of Argentina’s principal trading partners.
Volatility in the Argentine economy and measures taken by the Argentine Government have had and are expected to continue to have a significant impact on us. A decline in economic growth, increased economic instability or an expansion of economic policies and measures taken by the Argentine Government to control inflation or address other macroeconomic developments that affect private sector entities such as us—all developments over which we have no control—could have an adverse effect on our business, financial condition or results of operations.
The long-term impact of the presidential and congressional elections on the future economic and political environment of Argentina is uncertain.
The administration of Mauricio Macri took office on December 10, 2015. Since taking office, the new administration has announced and implemented several significant economic and policy reforms, including:

Foreign exchange and trade reforms. The new administration implemented reforms to the foreign exchange market in order to provide greater flexibility and easier access to the foreign exchange market. Likewise, export duties on several agricultural products and export duties on most industrial and mining exports were eliminated.

Electrical system state of emergency and reforms. The administration declared a state of emergency with respect to the national electrical system, which will be effective until December 31, 2017. The state of emergency allows the Argentine Government to take actions designed to guarantee the supply of electricity. In addition, the administration eliminated certain energy subsidies and substantially increased electricity tariffs in the Electrical Wholesale Market (Mercado Eléctrico Mayorista). On December 1, 2017, the National Electricity Regulation Entity (Ente Nacional Regulador de la Electricidad) approved increases in electricity tariffs to be applied through two phases; the first one as from December 1, 2017, and the second one as from February 1, 2018, onwards. The impact of the tariffs’ increase varies among users and geographical region. For instance, the aggregate increase (including both phases) is of approximately 70% for residential consumers located in the city of Buenos Aires.

Reforms of gas prices. The Macri administration substantially increased the price of natural gas in the regulated market, particularly for residential and commercial users. On December 1, 2017, the National Gas Regulation Entity (Ente Nacional Regulador del Gas) approved a 43% increase in gas tariffs for residential consumers located in the city of Buenos Aires.

Financial Policy. The administration settled the majority of outstanding claims with holdout creditors and has issued sovereign bonds in the international capital markets.

Deficit reduction. The administration announced its intention to reduce its primary budget deficit from approximately 5.8% of GDP in 2015 and 4.6% of GDP in 2016 to 4.2% of GDP in 2017, in part by eliminating public services’ subsidies in effect and decreasing public spending. Macri’s administration aims to achieve a balanced primary budget by 2019.
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Agreement with holdout creditors and new bond issuances. In February 2016, the Argentine Government entered into settlement agreements with certain holdout bondholders to settle pending claims, which were subject to the approval of the Argentine Congress and the lifting of the pari passu injunctions. In March 2016, after the U.S. District Court agreed to vacate the pari passu injunctions subject to certain conditions, the Argentine Congress ratified these settlement agreements through Law No. 27,249 and repealed the so-called Lock Law No. 26,017 and the Sovereign Payment Law No. 26,984, which prohibited Argentina from offering holdout bondholders more favorable terms than those offered in the 2005 and 2010 debt exchanges. In the following months, the Argentine Government reached settlement agreements with holders of a significant portion of the defaulted bonds and repaid the majority of the holdout creditors with the proceeds of a U.S.$16.5 billion international offering of 3-year, 5-year, 10-year and 30-year bonds on April 22, 2016.

The long term impact that these measures and any future measures Macri’s administration may implement will have on the Argentine economy cannot be predicted. Some of the measures proposed by Macri’s administration may generate political and social opposition, which may in turn prevent the new government from adopting its proposed measures. Likewise, congressional elections were held in Argentina in October 2017, and although Macri’s party won in most jurisdictions, there is still uncertainty as to the administration’s ability to pass its proposed agenda or as to the possibility that some of the market reforms already executed may be reversed or amended.
We can offer no assurances as to the policies that may be implemented by the new Argentine administration, or that political developments in Argentina will not adversely affect our financial condition and results of operations.
The long-term impact of the recent reforms to several Argentine economic indices is uncertain.
From 2007 to 2015, the Argentine National Statistics and Censuses Institute (Instituto Nacional de Estadística y Censos) (the “INDEC”) underwent a process of institutional and methodological reforms that have created controversy with respect to the reliability and credibility of its reports with respect to the consumer price index, as well as other indexes published by the INDEC, including inflation, gross domestic product and unemployment data.
During December 2015 and January 2016, the Macri administration declared the national statistical system and the INDEC to be in a state of administrative emergency. The INDEC resumed its publication of the consumer price index in June 2016, after implementing certain methodological reforms and adjusting certain macroeconomic statistics on the basis of those reforms. The INDEC recently released revised GDP data for the years 2006-2015.
These events may affect the Argentine economy and investors’ perception of the country even after institutional and methodological reforms undertaken by the INDEC. Adverse economic developments, in turn, may ultimately affect the number of passengers in our airports in Argentina.
Argentina’s ability to obtain financing from international markets may be limited, which may in turn impair its ability to implement reforms and public policies and foster economic growth and could impact the ability of Argentine companies to obtain financing.
Argentina’s 2001 sovereign default and its failure to fully restructure its sovereign debt and negotiate with the holdout creditors has limited and may continue to limit Argentina’s ability to access international financing. In 2005, Argentina completed the restructuring of a substantial portion of its indebtedness and settled all of its debt with the International Monetary Fund. Additionally, in June 2010, Argentina completed the restructuring of a significant portion of the defaulted bonds that were not swapped in the 2005 restructuring. As a result of debt exchanges in 2005 and 2010, Argentina restructured approximately 92% of its defaulted debt that was eligible for restructuring. However, holdout bondholders that declined to participate in the restructurings filed lawsuits against Argentina in several countries, including the United States. In February 2016, the new Argentine administration entered into settlement agreements with certain holdout bondholders to settle these claims, which were subject to the approval of the Argentine Congress and the lifting of the injunctions imposed by the U.S. courts. In March 2016, after the U.S. District Court agreed to vacate the injunctions subject to certain conditions, the Argentine Congress ratified these
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settlement agreements through Law 27,249 and repealed the so-called Lock Law No. 26,017 and the Sovereign Payment Law No. 26,984, which prohibited Argentina from offering holdout bondholders more favorable terms than those offered in the 2005 and 2010 debt swaps. In recent months, the Argentine Government has reached settlement agreements with holders of a significant portion of the defaulted bonds and has repaid the majority of the holdout creditors with the proceeds of a U.S.$16.5 billion international offering of bonds on April 22, 2016. Although the size of the claims involved has decreased significantly, litigation initiated by bondholders that have not accepted Argentina’s settlement offer continues in several jurisdictions.
Additionally, foreign shareholders of several Argentine companies have filed claims with the International Centre for Settlement of Investment Disputes (“ICSID”) alleging that the emergency measures adopted by the Argentine Government since the crisis in 2001 and 2002 differ from the just and equal treatment standards set forth in several bilateral investment treaties to which Argentina is a party. ICSID has ruled against Argentina with respect to many of these claims.
Litigation involving holdout creditors, claims with ICSID and other claims against the Argentine Government resulted and may result in material judgments against the government, may lead to attachments of or injunctions relating to Argentina’s assets and could cause Argentina to default under its other obligations, and such events may prevent Argentina from obtaining favorable terms or interest rates when accessing international capital markets or from accessing international financing at all. In addition, Argentina’s ongoing litigation with the remaining holdout creditors as well as ICSID and other claims against the Argentine Government, or any future defaults on its financial obligations, may prevent Argentine companies, such as us, from accessing the international capital markets or cause the terms of any such transactions to be less favorable than those provided to companies in other countries in the region, potentially impacting our financial condition. Therefore, our ability to obtain favorable financing to develop or grow our operations in Argentina and in our airports may be impaired.
In June 2017, after the Macri administration had entered into settlement agreements with certain holdout bondholders, Argentina completed the U.S.$2.75 billion sale of 100-year government bonds. However, if, for any reason, Argentina is not able to access capital markets in the future, it could have a negative impact on our ability to obtain financing and our financial condition in Argentina.
Historical exchange controls and restrictions on capital inflows and outflows could limit the availability of international credit, adversely affecting the Argentine economy, and, as a result, our financial condition and results of operations.
Exchange controls introduced in Argentina in the past, and in particular after 2011 during the prior administration, gave rise to an unofficial U.S. dollar trading market, and the Argentine peso/U.S. dollar exchange rate in that market substantially differed from the official Argentine peso/U.S. dollar exchange rate. Additionally, the level of international reserves deposited with the Argentine Central Bank significantly decreased from U.S.$47.4 billion as of November 1, 2011, to U.S.$25.6 billion as of December 31, 2015. The decline in international reserves reduced the Argentine Government’s ability to intervene in the foreign exchange market and to provide access to such markets to private sector entities. The Macri administration has eliminated a significant portion of foreign exchange restrictions, including certain currency controls that were imposed by the previous administration. On August 8, 2016, the Argentine Central Bank introduced material changes to the foreign exchange regime and established a new foreign exchange regime by means of Communication “A” 6037 that significantly eases access to the free floating foreign exchange market. As of January 2, 2018, the level of international reserves deposited with the Argentine Central Bank had increased again to U.S.$55.7 billion.
Although the Macri administration has lifted most of the restrictions on capital inflows and outflows in and from Argentina and the level of international reserves deposited with the Argentine Central Bank have increased significantly, in the future the Argentine Government could impose new exchange controls or restrictions on the movement of capital and/or take other measures in response to capital flight or a significant depreciation of the peso, which could limit our ability to access the international capital markets and our ability to make payments abroad may be affected. Such measures could lead to political and social tensions and undermine the Argentine Government’s public finances, which could adversely affect Argentina’s economy and prospects for economic growth.
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Government measures, as well as pressure from labor unions, could require salary increases or additional employee benefits, all of which could increase companies’ operating costs.
Most industrial and commercial activities in Argentina are regulated by specific collective bargaining agreements that group together companies according to industry sectors and trade unions. Argentine employers, both in the public and private sectors, have experienced significant pressure from their employees and labor organizations to increase wages and to provide additional employee benefits. Due to the high levels of inflation, employees and labor organizations are demanding wage increases. In the past, the Argentine Government passed laws, regulations and decrees requiring companies in the private sector to maintain minimum wage levels and to provide specified benefits to employees. The Argentine Government increased the minimum salary to AR$3,300 in August 2013, to AR$3,600 in January 2014, to AR$4,400 in September 2014, to AR$5,588 in August 2015, to AR$6,060 in January 2016 and to AR$8,060 in January 2017. From July 1, 2017 and until December 31, 2017, the minimum monthly salary of private employees has been set at AR$8,860.
In the future, the Argentine Government could take new measures requiring salary increases or additional employee benefits, and the labor force and labor unions may pressure employers to implement those measures. Increases in wages or employee benefits could result in added costs and adversely affect our results of operations in Argentina.
Increased public expenditures could result in long-lasting adverse consequences for the Argentine economy.
In recent years, the Argentine Government has substantially increased public expenditures. In 2016, public sector expenditures increased by 50.1% year over year and the Argentine Government reported a primary fiscal deficit of 4.6% of GDP, according to the Argentine Ministry of Economy (currently the Ministry of Treasury). Further fiscal deficits could negatively affect the Argentine Government’s ability to access the long-term financial markets and could, in turn, result in more limited access to such markets by Argentine companies, including us.
Restrictions on imports may adversely affect our revenues from cargo operators, as well as our ability to access capital goods that are necessary for our operations.
In 2012, the Argentine Government adopted an import procedure (declaraciones juradas anticipadas de importación), pursuant to which local authorities must pre-approve any import of products and services to Argentina as a precondition to allow importers to access the foreign exchange market to pay for such imported products and services. In 2012, the European Union, the United States and Japan filed claims with the World Trade Organization against certain import-related requirements maintained by Argentina. Recently, the World Trade Organization determined that those measures are not consistent with Argentina’s obligations under the World Trade Organization and requested their elimination. On December 22, 2015, through Resolution No. 3,823, the Argentine Federal Administration of Public Income (Administracion Federal de Ingresos Publicos) removed the import authorization system and replaced it with the new Comprehensive Import Monitoring System (Sistema Integral de Monitoreo de Importaciones). Among other changes, local authorities must now reply to any approval requests within a ten-day period from the date of filing.
If the Argentine Government further modifies the current import regulations and/or restricts the import of certain products, our revenues derived from cargo operations may be adversely affected.
A continued decline in the global prices of Argentina’s main commodity exports could have an adverse effect on Argentina’s economic growth.
Since the beginning of 2015, international commodity prices of Argentina’s primary commodity exports such as soy, wheat and other agricultural products have declined, which has had an adverse effect on Argentina’s economic growth. If international commodity prices continue to decline, the Argentine economy could be adversely affected. In addition, adverse weather conditions can affect the production of commodities by the agricultural sector, which account for a significant portion of Argentina’s export revenues.
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These circumstances could have a negative impact on the levels of consumer discretionary spending, government revenues, available foreign exchange and the Argentine Government’s ability to service its sovereign debt, and could generate either recessionary or inflationary pressures, depending on the Argentine Government’s reaction. Any of these results could adversely impact Argentina’s economic growth and our financial condition and results of operations.
The Argentine economy could be adversely affected by economic developments in other global markets and by more general “contagion” effects.
Argentina’s economy is vulnerable to external shocks that could be caused by adverse developments affecting its principal trading partners. A significant decline in the economic growth of any of Argentina’s major trading partners (including Brazil, the European Union, China and the United States) could have a material adverse impact on Argentina’s balance of trade and adversely affect Argentina’s economic growth. In particular, Brazil’s economy, which is Argentina’s largest export market and its principal source of imports, is currently experiencing heightened negative pressure due to the uncertainties stemming from ongoing political crises, including the impeachment of Brazil’s former president, Dilma Rousseff, the corruption investigations and allegations involving President Michel Temer and the recent criminal conviction of former president Luiz Inacio da Silva for corruption. The Brazilian economy declined by 3.6% during 2016. In addition, the Brazilian currency lost approximately 17.7% of its value relative to the U.S. dollar in 2016. Brazilian demand for Argentine exports has generally declined over the past five years and further deterioration of economic conditions in Brazil may increasingly reduce demand for Argentine exports and create advantages for Brazilian imports. Further adverse developments in the Brazilian political and economic crisis may have further negative effects on the Argentine economy and our operations.
Argentina may also be affected by other countries that have influence over world economic cycles. If interest rates rise significantly in developed economies, including the United States, emerging market economies, including Argentina, could find it increasingly challenging and expensive to borrow capital and refinance existing debt, which could negatively affect their economic growth.
Significant fluctuation in the value of the Argentine peso may adversely affect the Argentine economy as well as our financial condition and results of operations.
The Argentine peso has suffered significant declines against the U.S. dollar and has continued to decline against the U.S. dollar. Despite the positive effects of the decline of the Argentine peso on the competitiveness of certain sectors of the Argentine economy, it can also have far-reaching negative impacts on the Argentine economy and on businesses’ and individuals’ financial condition.
After several years of relatively moderate variations in the nominal exchange, the Argentine peso depreciated 14.4% against the U.S. dollar in 2012, 32.6% in 2013, 31.2% in 2014, 52% in 2015 and 22.2% in 2016. Since the depreciation of the Argentine peso in December 2015, the Argentine Central Bank has allowed the Argentine peso to float and has limited its intervention only to ensure the orderly functioning of the foreign exchange market. As of January 3, 2018, the exchange rate was AR$18.45 to U.S.$1.00. If the peso continues to depreciate, all of the negative effects on the Argentine economy related to such depreciation could resurface. Moreover, it could result in a material adverse effect on our financial condition and results of operations due to our exposure to financial commitments in U.S. dollars.
International and regional passenger use fees are denominated in U.S. dollars and are payable in both U.S. dollars and Argentine pesos. Currency exchange rate volatility directly affects conversions of U.S. dollars into Argentine pesos. Any appreciation in the value of the Argentine peso against the U.S. dollar may reduce our cash flows. Conversely, any depreciation in the value of the Argentine peso against the U.S. dollar may increase our cash flows.
The overall cost increase of international travel as a result of fluctuations in currency exchange rates could potentially lead to decreased passenger traffic volume as a result of increases in travel costs. A large decrease in the value of a particular foreign currency relative to the value of the Argentine peso or the U.S. dollar, as applicable, could have an adverse effect on the number of international air passengers originating from nations that use such devalued currency.
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Continuing high inflation may impact the Argentine economy and adversely affect our results of operations.
Inflation has, in the past, materially undermined the Argentine economy and the Argentine Government’s ability to foster conditions that would permit stable economic growth. In recent years, Argentina has confronted inflationary pressures, evidenced by a significant increase in fuel, energy and food prices, among other factors. According to the most recent publicly available information, the inflation rate was 31.6% for 2015, 41.0% for 2016 and 17.6% for the first nine months of 2017.
High inflation could undermine Argentina’s foreign competitiveness by diluting the effects of the depreciation of the Argentine peso, negatively affecting the level of economic activity and employment, and undermining confidence in Argentina’s banking system, which could further limit the availability of domestic and international financing to businesses. Furthermore, a portion of Argentina’s sovereign debt is subject to adjustment by the Stabilization Coefficient (Coeficiente de Estabilización de Referencia), a currency index that is strongly related to inflation. Therefore, any significant increase in inflation could cause an increase in Argentina’s external debt and, consequently, in Argentina’s financial obligations, which could aggravate the pressure on the Argentine economy. If inflation remains high or continues to increase, Argentina’s economy may be negatively affected and our results of operations could be materially affected.
Government intervention in the Argentine economy could adversely affect the economy and our financial condition and results of operations.
During past years, the Argentine Government increased its direct intervention in the economy, including through the implementation of expropriations or nationalizations and price controls. In 2008, the Argentine Government nationalized the Argentine private pension funds (Administradoras de Fondos de Jubilaciones y Pensiones) and in April 2012, the Argentine Government nationalized the Argentine energy company Yacimientos Petrolíferos Fiscales.
Although the current administration has not implemented or advocated any nationalization or expropriation measures, similar measures, such as mandatory renegotiation or modification of existing contracts, new taxation policies, changes in laws, regulations and policies affecting foreign trade, investment, among others, that may be adopted by the Argentine Government in the future could adversely affect our business, financial condition and results of operations.
Risks Related to Our Other Principal Operations and Other Principal Markets in Which We Operate
Italy
Our revenues and operations may be affected if the Ente Nazionale per L’Aviazione Civile (“ENAC”) and the Ministro delle Infrastrutture e Dei Transporti (“MIT”) do not comply with the executed Financing Program Agreement (Contratto Di Programma Quadro Di Finanziamento), to finance the works in the Florence Airport as required by the Florence Airport Master Plan.
On February 16, 2017, TA, MIT and ENAC executed an agreement whereby TA agreed to conduct the works in the Florence Airport master plan. ENAC, together with MIT, agreed to partially finance the works through a €150 million financing commitment. If these governmental entities do not provide such financing, the completion of the works at the Florence Airport may be delayed. We may not be able to replace such financing for completion of the works on comparable terms or at all. If any of these situations arise, our results of operations and revenues may be affected.
If the approval process from local and national authorities of the master plan for the Florence Airport is further delayed, our financial results from the operation of such airport will be negatively impacted.
Under the current master plan for the Florence Airport, we are planning to complete certain construction and renovation works. Prior to commencement of such works, we require technical, environmental impact study and urban planning approvals, among others, to be granted by local and national authorities. The approval process is taking longer than initially anticipated and therefore, completion of the projects is also being delayed. Our ability to increase revenues and profits derived from the operation of the Florence Airport will be adversely affected if the approval process is further delayed.
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The exercise of the special powers of the Italian Government may restrict our ability to take certain corporate actions or restrict the ability of investors to acquire a significant stake in our share capital.
Certain regulations concerning legal restrictions on transfer of assets of strategic national importance to persons or entities that are not residents of the European Union may apply to us, as controlling shareholder of TA, the operator of our Italian Airports.
Although we do not believe that our offering will trigger the provisions of Law Decree No. 21 of March 15, 2012 (“Law Decree 21/2012”), as converted with amendments into Law No. 56 of May 11, 2012, which granted the Italian Government special powers (the “Golden Powers”), in the event that: (i) we try to transfer our shareholding in TA and/or the Italian Airports; or (ii) a controlling stake of our share capital is transferred to a third party in the future, the Italian Government may exercise its powers under Law Decree 21/2012. Below is a description of the procedure that would apply in such a case.
Pursuant to current laws and regulations, (i) the approval of specific corporate resolutions by companies operating in the energy, transport, and communications sectors, which are understood to be of strategic importance to the nation, and (ii) the acquisition of significant shareholdings in such companies by investors, are subject to the Golden Powers. Article 2 of Law Decree 21/2012 specifically regulates the special powers of the Italian Government over the strategic assets of companies operating in the transport sector. In particular, these provisions state that, in relation to companies that own one or more of such strategic assets, the Italian Government may:

veto any resolutions, acts and transactions that would (i) determine a change in the ownership, control, or transferability of those assets themselves or change their use, (ii) result in an exceptional situation not regulated by national or European laws applicable to the sector, or (iii) constitute a threat of a serious prejudice to the interest of public safety and operation of the networks and installations, and the continued provision of services (Article 2, paragraph 3);

impose conditions requiring certain buyers outside the European Union to give guarantees in any purchase and for any reason, (Article 2, paragraph 5), of shareholdings in an amount that would give the buyer control of the company purchased, pursuant to Article 2359 of the Italian Civil Code and the Consolidated Financial Services Act, if such a purchase poses a serious threat to public interest in the security and operation of networks and installations and the continued provision of services (Article 2, paragraph 6); and

oppose the purchase described in sub-section b), if such a purchase entails exceptional risks to the protection of public interest relating to the security and operation of networks and installations and continued provision of services, which cannot be mitigated by the buyer committing to guarantee the protection of such interests (Article 2, paragraph 6).
Article 2 of the Decree of the President of the Italian Republic No. 85 of March 25, 2014 has identified “strategic assets” in the transport industry in Italy as large networks and plants of national interest, intended to ensure the main trans-European corridors and the related conventional reports, including (i) ports of national interest; (ii) airports of national interest; and (iii) national railroad networks of relevance for trans-European networks.
The infrastructure located at our airports in Italy fall within the definition of  “strategic assets” mentioned above.
As a result, our ability to enter into certain commercial transactions (and, in particular, those involving the transfer of the shareholding in TA and/or the strategic assets owned by TA) may be further restricted by the Italian Government’s decision to exercise its Golden Powers with respect to the management of strategic transport assets in Italy. Furthermore, in the future, our or our shareholders’ ability to enter into change of control or takeover transactions may be impacted by the exercise by the Italian Government of its special powers under the Golden Powers rules. In either case, this may limit our ability, as TA’s shareholder, to benefit from the proceeds of certain proposed asset sales or acquisitions or business combinations, and may limit our shareholder’s ability to benefit from possible premiums connected to a proposed change in control transaction or tender offer.
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If the Italian Government exercises these Golden Powers in the future with respect to any transaction involving, directly or indirectly, TA and/or the Italian Airports, such exercise could have a material adverse effect on our business, financial condition, results of operations or prospects in the future.
Volatility in the global financial markets resulting from the recurrence of the Eurozone crisis, geopolitical developments in Eastern Europe or otherwise could have a material adverse effect on our business, financial condition and results of operations.
Volatility in the global financial markets could have an adverse effect on the economic recovery in the United States and could result from a number of events, including a relapse in the Eurozone crisis, geopolitical developments in Eastern Europe or otherwise. The effects of the Eurozone crisis, which began in late 2009 as part of the global economic and financial crisis, continued to impact the global financial markets through 2013. Numerous factors continued to fuel the Eurozone crisis, including continued high levels of government debt, the undercapitalization and liquidity problems of many banks in the Eurozone and relatively low levels of economic growth. These factors made it difficult or impossible for some countries in the Eurozone to repay or refinance their debt without the assistance of third parties. As a result of the combination of newly implemented austerity programs, debt write-downs and the European Central Bank’s commitment to restore financial stability to the Eurozone, as well as the finalization of the primary European Stability Mechanism bailout fund, in 2013 and into 2014 interest rates began to fall and share prices began to increase. Although these trends have helped to stabilize the effects of the Eurozone crisis, the underlying causes of the crisis have not been completely eliminated.
In particular, in the second quarter of 2014, Italy’s economy entered a recession for the third time since 2008, underscoring the residual weakness of certain Eurozone economies. In June 2017, the European Central Bank announced that two small local Italian banks, Banca Popolare di Vicenza and Veneto Banca, were failing due to such bank’s reported breach of supervisory capital requirements. While the Single Resolution Board of the European Central Bank elected not to intervene, the Italian Government has decided to provide bailout funds to the two banks in order to protect depositors. Future bank failures in Italy could potentially affect our ability to obtain local financing from local banks in Italy. Furthermore, a weaker economy in Italy may lead to a decrease in air travel and related spending, which may have a material adverse effect on our business, financial condition and results of operations.
If other economies in the Eurozone experience similar trends in the near term, volatility in the global financial markets could return to levels experienced in the peak of the Eurozone crisis, which could have a material adverse effect on our business, financial condition and results of operations.
We intend to transfer our handling and security services from TA to a third party.
We currently directly provide handling and security services at the Florence Airport and Pisa Airport. We intend to transfer these businesses, services and employees to a third-party service provider. Such transfer or process of transfer could potentially result in either temporary or periodic disruption of operations due to work stoppages, protests or the transferred employees may seek to challenge the legitimacy of the transaction in the courts under applicable Italian law. Any such work stoppages may affect the experience of our passengers at such airports, reduce our revenues or potentially negatively affect their decisions to use such airports in the future.
Coordinating compliance with regulatory obligations may strain our resources and divert management’s attention.
TA is listed on the Milan Stock Exchange. As a public company, TA is subject to the reporting requirements of local regulations in Italy and other applicable securities rules and regulations. Compliance with these rules and regulations involves our legal and financial compliance costs, makes some activities more difficult, time-consuming or costly and increases demand on TA’s systems and resources. Coordination between TA and us to comply with our respective regulatory and filings procedures can be burdensome, divert management’s attention and affect our daily operations and business.
In addition, the interests of TA’s public shareholders may not be the same as the interest of our new public shareholders or the Selling Shareholder. This conflict of interest may affect our operation and business.
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The Alitalia Air Company bankruptcy proceeding, or any other bankruptcy proceeding filed by any of the other airlines that service any of the airports we operate, may affect our operations and revenue.
In May 2017, Alitalia Air Company (Società Aerea Italiana or “Alitalia”), filed for bankruptcy for a third time. The Italian Government did not institute a bailout program and is currently undertaking a sales process for Alitalia. Alitalia represented 4.7% of revenue in Italy and 0.5% of our combined consolidated revenue in 2016. If we are unable to replace Alitalia’s business, the financial results and condition of our Italian operations could be adversely affected.
Furthermore, if any of our aeronautical customers were to reduce their use of our airports or cease to operate in them for any reason, including bankruptcy, the remaining airlines may not increase their flight frequency to replace the flights our aeronautical customers were no longer operating, in which case, our business would be adversely affected.
Our organization, management and control model may prove to be inadequate or insufficient pursuant to the requirements of the Italian Legislative Decree 231/2001.
TA is subject to the obligations arising from Legislative Decree No. 231 of June 8, 2001 (“Italian Legislative Decree 231/2001”). Italian Legislative Decree 231/2001 introduced a specific system of enterprise liability for several types of criminal offenses committed in corporate interest and/or to its advantage by persons in senior management positions or those persons’ subordinates.
In compliance with the Italian Legislative Decree 231/2001, TA has adopted and has currently in place an organization, management and control model (the “231 Model”) in order to adopt corporate governance structures and risk prevention systems to stop managers, executives, employees and external collaborators from committing crimes. However, the adoption of a 231 Model does not itself exclude any form of liability under Italian Legislative Decree 231/2001, and failure to update the 231 Model increases the risk that administrative liability under Italian Legislative Decree 231/2001 may arise. If TA’s 231 Model proves to be inadequate or insufficient following a violation committed by any of our managers, executives, employees and/or external collaborators, TA may be subject to pecuniary fines, suspension or revocation of licenses, permits or even disqualification from the public administration registry and prohibition on contracting with Italian public authorities. If any of these situations arises, our operations and business may be significantly affected.
We might be negatively affected by government instability in Italy.
Over the last 67 years, Italy has had 61 different governments. We have no control over and cannot predict the effects of future changes in the Italian Government and the future policies that these new governments may adopt. These developments, as well as potential crises and forms of political instability arising therefrom or any other as of yet unforeseen development, may adversely affect us and the price of our common shares.
Brazil
Officials of the entity that controls Infravix, a former shareholder of ICASGA and ICAB, were found guilty of corruption, money laundering and criminal organization in connection with the Car Wash Affair.
In recent years, the Office of the Brazilian Federal Prosecutor has been conducting various ongoing investigations into allegations of money laundering and corruption in Brazil, including the largest investigation, known as Lava Jato (the “Car Wash Affair”).
In 2014, Engevix (the entity that controlled Infravix, a former shareholder of ICASGA and ICAB) was the subject of investigations and allegations related to the Car Wash Affair. In 2015, Engevix’s executive officers were found guilty and required to pay penalties for corruption, money laundering and criminal organization in connection with Engevix’s engineering and construction companies unrelated to their airport business. According to public sources, these penalties are still under review by local courts in Brazil.
As part of the Brazilian Consolidation, we acquired all of the interests owned by Infravix in Inframerica and in ICAB and, as a result, Infravix is no longer a shareholder in either Inframerica or ICAB. Neither ICAB nor ICASGA have been notified of any investigation against them and, to our knowledge, the
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investigations of Engevix are related solely to its engineering and construction businesses and not to their investments in either ICAB or ICASGA. However, to the extent any of Engevix’s executive officers are found to have acted illegally in connection with business directly involving ICAB or ICASGA, we could be subject to penalties or reputational harm which, in either case, could have a material adverse effect on our business.
We have identified payments made by ICAB that may not have had any proper purpose and that could expose us to fines and sanctions as well as reputational harm and other adverse effects.
We have identified three payments totaling approximately U.S.$250,000 made by ICAB during 2014, when Infravix was still an indirect shareholder of ICAB, to individuals or entities that the press have suggested made illegal payments to government officials on behalf of corporate clients. We have been unable to identify a proper purpose for some of these payments. We may be, but have no official notice that we are, under investigation by Brazilian authorities in connection with these payments. We could be exposed to reputational harm and other adverse effects in connection with these payments. If these payments are ultimately found to have been improper, we could be subject to fines and sanctions, as well as other penalties. Any of the foregoing effects could have a material adverse effect on our business.
The ongoing economic uncertainty and political instability in Brazil may adversely affect our economic and financial condition.
Brazil’s political environment has historically influenced, and continues to influence, the performance of the country’s economy. Political crises have affected and continue to affect the confidence of investors and the general public, which have historically resulted in economic deceleration and heightened volatility in the securities issued by Brazilian companies.
The recent economic instability in Brazil has contributed to a decline in market confidence in the Brazilian economy as well as to a deteriorating political environment. In addition, various ongoing investigations into allegations of money laundering and corruption being conducted by the Office of the Brazilian Federal Prosecutor, including the Car Wash Affair, have negatively affected the Brazilian economy and political environment. Members of the Brazilian Government as well as senior officers of large state-owned companies have faced or are currently facing allegations of corruption and money laundering as a result of the Car Wash Affair. These individuals are alleged to have accepted and/or offered bribes by means of kickbacks on contracts granted by the Brazilian Government to several infrastructure, oil and gas and construction companies. These kickbacks allegedly financed the political campaigns of political parties forming the previous government’s coalition that was led by former President Dilma Rousseff, which funds were unaccounted for or not publicly disclosed. These funds were also allegedly destined toward the personal enrichment of certain individuals. A number of senior politicians, including former president Luiz Inacio da Silva, members of the Brazilian Congress, and high-ranking executive officers of major corporations and state-owned companies in Brazil have been arrested, convicted of various charges relating to corruption, entered into plea agreements with federal prosecutors and/or have resigned or been removed from their positions. The potential outcome of the Car Wash Affair as well as other ongoing corruption-related investigations is uncertain, but they have already had an adverse impact on the image and reputation of those companies that have been implicated as well as on the general market perception of the Brazilian economy, political environment and capital markets. These investigations and allegations may lead to further political and economic instability, and new allegations against government officials may arise in the future.
On April 17, 2016, the Brazilian House of Representatives voted to hold a trial on impeachment charges against former President Rousseff and suspended her from office. President Rousseff was replaced by Vice President Michel Temer, who served as acting President until Ms. Rousseff was impeached and permanently removed from office by the Brazilian Senate on August 31, 2016. While President Temer is expected to serve as President until December 2018, he is currently under investigation for corruption and the Office of the Brazilian Federal Prosecutor is seeking his indictment. Likewise, former president Luiz Inácio da Silva was recently sentenced to 9.5 years in jail for his conviction for corruption and is currently appealing such conviction. He is also subject of several other ongoing criminal investigations. Any of the above factors may create additional political uncertainty, which could have a material adverse effect on the Brazilian economy and, consequently, on our Brazil operations and on us.
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We expect to incur losses in our Brazilian operations for the next several years due to the accretion of the financial liability recognized as a result of the fixed concession fee committed.
Under the Brazilian Concession Agreements with the Brazilian Government for the operation of the Brasilia Airport and the Natal Airport, we are obligated to pay an annual fixed concession fee which is adjusted for inflation. Initially, we recognized this contractual obligation as a financial liability at fair value in acquisition accounting. Now, we measure the liability at amortized cost using an effective interest rate. Any change in the current market-based discount rate used to discount the estimated cash outflows, as well as an increase in the liability that reflects the passage of time (also referred to as the unwinding of a discount or accretion) is recognized as expense, period over period. During the nine-month period ended September 30, 2017, and the year ended December 31, 2016, we recognized a loss of U.S.$66.3 million and U.S.$107.4 million, respectively, relating to these effects. See Note 24 to our Audited Restated Combined Consolidated Financial Statements and Note 14 to our Condensed Consolidated Interim Financial Statements. We expect the accretion described above to occur in a similar magnitude in the next several years.
We may not be able to achieve our strategy to expand commercial activities at the Brasilia Airport.
A key part of our strategy to expand and increase our commercial revenues in the Brasilia Airport is the development of an approximately 40,000 square meter gross leasable commercial area connected to the existing terminal, which will also be completely accessible from outside of the passenger departure area. We expect that the total cost of such development will be U.S.$190.0 million. Although ICAB could partner with third parties to complete the investment associated with such expansion, ICAB may elect to fund all or a part of the cost of the development with a mix of cash and financing obtained in the local market. If ICAB provides the capital and the costs of development exceed the current budget, the completion of the construction projects is delayed or the commercial area fails to attract the number of customers that we anticipate, our business, financial condition and results of operations could be adversely affected.
The Brazilian Government has exercised, and continues to exercise, significant influence over the Brazilian economy. This involvement, as well as Brazil’s political and economic conditions, could adversely affect us.
The Brazilian Government frequently exercises significant influence over the Brazilian economy and occasionally makes significant changes in policy and regulations. The Brazilian Government’s actions to control inflation and other policies and regulations have often involved, among other measures, increases in interest rates, changes in tax policies, price controls, foreign exchange rate controls and currency devaluations. We have no control over and cannot predict what measures or policies the Brazilian Government may take in the face of mounting macroeconomic pressures or otherwise. Uncertainty over whether the Brazilian Government will implement changes in policy or regulation in the future may affect economic performance and contribute to economic uncertainty in Brazil and to heightened volatility in the Brazilian capital market and securities issued by Brazilian companies. Furthermore, a significant percentage of the revenue of the Brasilia Airport and the Natal Airport derives from the subleasing of rental space within and around the airport. Should such subleases not be renewed given the macroeconomic situation in Brazil, the results of operations of our Brazilian operations could be negatively affected.
Exchange rate instability may have adverse effects on the Brazilian economy and us.
The Brazilian currency has been historically volatile and has been devalued frequently over the past three decades. Throughout this period, the Brazilian Government has implemented various economic plans and used various exchange rate policies, including sudden devaluations, periodic mini-devaluations (during which the frequency of adjustments has ranged from daily to monthly), exchange controls, dual exchange rate markets and a floating exchange rate system. Although long-term depreciation of the Brazilian real is generally linked to the rate of inflation in Brazil, depreciation of the Brazilian real occurring over shorter periods of time has resulted in significant variations in the exchange rate between the Brazilian real, the U.S. dollar and other currencies. The Brazilian real depreciated against the U.S. dollar by 46.6% in 2015, and by 13.7% in 2014. The Brazilian real/U.S. dollar exchange rate reported by the Brazilian Central Bank was R$3.9048 per U.S. dollar on December 31, 2015 and R$3.2591 per U.S. dollar on December 31, 2016,
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reflecting a 16.5% appreciation in the Brazilian real against the U.S. dollar, but there can be no assurance that the Brazilian real will not again depreciate against the U.S. dollar or other currencies in the future, which could lead to fluctuations in our consolidated earnings and cash flow as measured in U.S. dollars.
We may not be successful in our claims before the Brazilian National Civil Aviation Agency (Agencia Nacional de Aviação) (“Brazilian ANAC”), and we may not prevail in any arbitration proceeding challenging claims denied by the Brazilian ANAC.
On January 13, 2016, ICAB filed claims before the Brazilian ANAC in the total amount of R$758.0 million (U.S.$253.1 million), requesting the economic re-equilibrium of ICAB’s concession agreement based on, among other things, additional construction works required to complete the terminals and the runway that were not provided for in the concession agreement, and the negative impact of the issuance of new rules and regulations by the Brazilian Ministry of Health, which reduced ICAB’s revenues in connection with the use of the cargo terminal.
In addition, on June 29, 2017, ICAB filed new claims with the Brazilian ANAC in the amount of R$196.8 million (U.S.$61.2 million) requesting the economic re-equilibrium of ICAB’s concession agreement based on, among other things, the loss of revenues as a result of the modification to the rules and regulations affecting the air traffic system at the Congonhas airport. In total, ICAB has claims in the amount of R$734.0 million (U.S.$225.9 million) that were denied by the Brazilian ANAC.
Claims in the amount of R$454.1 million (U.S.$120.2 million) were denied by the Brazilian ANAC, and ICAB expects to initiate an arbitration proceeding with respect to the denied claims. The remaining claims are under review by the Brazilian ANAC.
On December 29, 2015, ICASGA filed claims in the total amount of R$1.0 billion (U.S.$263.1 million) before the Brazilian ANAC requesting the economic re-equilibrium of ICASGA’s concession agreement. In total, ICASGA has claims in the amount of R$957.0 million (U.S.$251.7 million) that were denied by the Brazilian ANAC.
Both ICAB and ICASGA expect to initiate a judicial or an arbitration proceeding with respect to the denied claims.
The failure to recover such claimed amounts could adversely affect our profitability in future periods as a result of not being able to include these amounts in our income or to use the funds for general corporate purposes.
Uruguay
Our revenue derived from the operation of the airports in Uruguay could be adversely affected by the deterioration of neighboring markets.
In 2002, Uruguay experienced its steepest economic and financial crisis in recent history, resulting mostly from external factors. Devaluation in neighboring Brazil in 1999 and recent political and economic crises in Brazil made Uruguayan goods less competitive. Starting in late 2001, an economic crisis in Argentina also undermined Uruguay’s economy. In mid-2002, Argentine withdrawals from Uruguayan banks started a bank run that was overcome only by massive borrowing from international financial institutions, leading in turn to serious debt sustainability problems.
As the number of passengers that use the airports we operate in Uruguay remains highly linked to the numbers of passengers using the airports in Uruguay’s main trading partners, such as Brazil and Argentina, any deterioration of a neighboring market could have a material impact on the number of passenger at our Uruguayan airports which, in turn, could adversely affect our business, results of operations and financial condition.
Ecuador
The results of the recent Ecuadorian presidential elections may create further political instability which may adversely affect our business, financial condition and results of operations.
On April 2, 2017, Lenin Moreno narrowly won the Ecuadorian presidential election by a margin of 3% of votes cast, amid widespread accusations of voting irregularities. Voting officials recounted up to 1.3 million
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votes, representing 10% of all votes cast, despite opposition leader Guillermo Lasso’s call for a full recount of all votes cast. On August 3, 2017, President Moreno removed Vice President Jorge Glas from office due to his alleged connection to the Car Wash Affair. We have no control over and cannot predict the effects of Lenin Moreno’s administration or policies. These developments, as well as potential crises and forms of political instability arising therefrom or any other as of yet unforeseen development, may adversely affect us.
The ongoing economic uncertainty in Ecuador may adversely affect us.
Ecuador defaulted on a sovereign debt obligation in 2008 and its economic policies have created uncertainty about its future. The Ecuadorian economy is heavily dependent on the oil industry, and the decline of oil prices in 2014 and 2015 had a significant impact on the Ecuadorian economy and its national budget. Due to Ecuador’s dollarized economy, the strength of the U.S. dollar against local currencies of Ecuador’s trading partners has negatively impacted the export sector in Ecuador. All of the foregoing has increased uncertainty as to the future economic conditions in Ecuador which may affect our revenue derived from the Ecuadorian airports. A weaker economy may lead to a decrease in air travel and related spending, which may have a material adverse effect on our business, financial condition and results of operations.
Tensions with Colombia may affect the Ecuadorian economy and, consequently, our results of operations and financial condition in the future.
Diplomatic relations between Ecuador and Colombia have from time to time been tense and affected by events surrounding the Colombian armed forces’ engagement with the Revolutionary Armed Forces (Fuerzas Armadas Revolucionarias de Colombia, known as FARC), particularly on Colombia’s borders with Ecuador. Any future deterioration in relations with Colombia may result in the closing of borders, the imposition of trade barriers or a breakdown of diplomatic ties, any of which could have a negative effect on trade balance, economy and the general security situation, which may adversely affect our results of operations and financial condition.
Armenia
Our operations in Armenia are significantly affected by travel to and from Russia.
Approximately 68.8% of the traffic to our airports in Armenia comes from Russia. In the last two years, the Russian ruble has experienced significant depreciation against many world currencies. In addition, Russia has been subject, and may be subject in the future, to economic and other sanctions from the United States, other European nations and neighboring countries. Adverse developments relating to and occurring in Russia would have a negative impact on our operations in Armenia.
Armenia’s relations with Azerbaijan may deteriorate.
The dissolution of the Soviet Union, which allowed its constituent republics, including Armenia, to become sovereign nation states, also led other groups to assert claims for independence, sometimes leading to violent clashes. Such clashes have occurred, for example, in Russia’s Chechnya region, in Moldova’s Transdniester region and in Georgia’s Abkhazia and South Ossetia regions.
In December 1991, the population of Nagorno-Karabakh, a predominantly ethnic Armenian enclave on the border of Armenia and Azerbaijan, voted in favor of the establishment of the Nagorno-Karabakh Republic, now known as the Republic of Artsakh. After a period of armed conflict during which Azerbaijan tried to assert control over the Nagorno-Karabakh Republic, a ceasefire was established in 1994 and is currently in force.
Minor skirmishes continue to break out from time to time along the truce line. No country has yet recognized the Republic of Artsakh.
The Nagorno-Karabakh conflict has had serious repercussions for Armenia, including high cost for the defense of Nagorno-Karabakh. An escalation in hostilities arising from the situation in Nagorno-Karabakh could materially disrupt the Armenian economy (including reducing air traffic to the region), require Armenia to make substantial defense expenditures in the region and have negative consequences for
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Armenia in its international diplomatic and trade relations, which in turn, could have an adverse effect on our results of operations and financial condition.
Peru
Construction and improvement works performed at our AAP Airports have not been approved by the Peruvian Government and thus we may not be reimbursed for the investment and expenditures made under the AAP Concession Agreement.
We are currently completing the mandatory construction works necessary for our requesting of reimbursement from the Peruvian Government for the investments we made at the AAP Airports for the construction, improvement, operation and maintenance of such airports. The Peruvian Government has not yet agreed to reimburse us for such investments because the mandatory construction works have not yet been completed. Upon completion of such mandatory construction works and determination of final construction metrics, we will be able to determine the final settlement value of such works and request reimbursement from the Peruvian Government. As of September 30, 2017, there was approximately U.S.$26.6 million in construction works for which we anticipate requesting reimbursement. However, we may never be reimbursed by the Peruvian Government for the total investment amount, which could affect our results of operation and financial condition.
Risks Related to Our Offering and Our Common Shares
There is no previous public market for the sale of our common shares and the price of our common shares may be highly volatile.
We have not previously had any securities traded on any exchange and, as a result, have no trading history. We cannot predict the extent to which investor interest in our common shares will create or be able to maintain an active trading market, or how liquid that market will be in the future. The market price of our common shares may be volatile and may be influenced by many factors, some of which are beyond our control, including:

the failure of financial analysts to cover our common shares or changes in financial estimates by analysts;

actual or anticipated variations in our operating results;

changes in financial estimates by financial analysts, or any failure by us to meet or exceed any of these estimates, or changes in the recommendations of any financial analysts that elect to follow our common shares or the shares of our competitors;

announcements by us or our competitors of significant contracts or acquisitions;

future sales of our common shares; and

investor perceptions of us and the industries in which we operate.
In addition, the equity markets in general have experienced substantial price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of particular companies affected. These broad market and industry factors may materially harm the market price of our common shares, regardless of our operating performance. In the past, following periods of volatility in the market price of certain companies’ securities, securities class action litigation has been instituted against these companies. This litigation, if instituted against us, could adversely affect our financial condition or results of operations.
In the future, we may issue options, restricted shares and other forms of share-based compensation, which have the potential to dilute shareholder value and cause the price of our common shares to decline.
We may offer share options, restricted shares and other forms of share-based compensation to our directors, officers and employees in the future. If any options that we issue are exercised, or any restricted shares that we may issue vest, and those shares are sold into the public market, the market price of our
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common shares may decline. In addition, the availability of common shares for award under any equity incentive plan we may introduce, or the grant of share options, restricted shares or other forms of share-based compensation, may adversely affect the market price of our common shares.
We will have broad discretion in how to use the net proceeds we receive from this offering and we may not apply the proceeds to uses with which all our shareholders agree or that produce income.
We intend to use the net proceeds we receive from this offering to fund operations, including, but not limited to, repayment of debt to acquire or bid for concessions, and for other general corporate purposes. Notwithstanding the foregoing, we have no specific allocation for the net proceeds we receive in this offering, and our management retains the right to utilize the net proceeds as it determines. Our management could fail to use the proceeds to effectively continue the growth of our business or to use the proceeds in a manner with which all our shareholders will agree. Moreover, a significant portion of the common shares sold in this offering will be offered by the Selling Shareholder and we will not receive any of the proceeds of the sale of common shares by the Selling Shareholder.
You will experience immediate and substantial dilution in the book value of the common shares you purchase and you may face future dilution.
The initial public offering price for our common shares will be substantially higher than the net tangible book value per common share as of September 30, 2017. Purchasers of our common shares in this offering will therefore incur an immediate and substantial dilution of U.S.$      in the net tangible book value per common share from the initial public offering price of U.S.$      per common share. This dilution is due in large part to the fact that our earlier investors paid substantially less than the initial public offering price when they purchased their common shares. In addition, we may issue options to acquire common shares. To the extent these options are issued, there will be further dilution to investors in this offering. Moreover, if the underwriters exercise their option to purchase additional common shares from us or if we issue additional equity securities, you will experience additional dilution. See “Dilution.”
A significant portion of our common shares may be sold into the public market in the near future, which could cause the market price of our common stock to drop significantly, even if our business is doing well.
If our directors, executive officers or the Selling Shareholder sell, or indicate an intention to sell, substantial amounts of our common shares in the public market after the lock-up and legal restrictions on resale discussed in this prospectus lapse, the trading price of our common stock could substantially decline.
Our officers, directors, and the Selling Shareholder, holder of all of our common shares prior to this offering, have entered into lock-up agreements with the underwrit