Mexico's Aerospace Industry: Opportunities and Challenges

Aerospace is one of the most active and fastest-expanding sectors in the world. This rapid expansion of the aerospace sector creates a growing and profitable market for aircraft, materials, and component producers, as well as technology developers and research facilities.

However, the sector's sectors face substantial problems on multiple fronts, including competition, supply chain, the desire to expand operations, and the pursuit of macroeconomic predictability. The customers of these enterprises expect ongoing advancements in technological development, delivery times, and pricing. Manufacturers are attempting to cut fuel consumption in new aircraft to suit the needs of operators, who must reduce costs in the face of increasing competition among airlines.

Mexico is promoting itself as a worldwide player for the major aerospace corporations that need to boost their competitiveness. This industry represents one of the most critical opportunities for the country to leverage its comparative advantages and significant industrial growth to improve the national content of exports, create more and better employment, and boost the country's productivity.

Overview of the Aerospace Industry in Mexico

In Mexico, there are currently more than 300 aeronautical firms. 80% of these are manufacturers, while the remaining 20% provide design and engineering services, as well as maintenance, repair, and operations. Mexico exports 65% more manufactured goods than the rest of Latin America combined and is involved in several specialized industries such as automotive and electronics.

The northern region has the greatest concentration of businesses. The aerospace sector's development plan is built on the generation of new technologies and the promotion of clusters, which bring together corporations, universities, research institutions, and government agencies.

Baja California is one of the most important entities for the growth of the aerospace sector in the country's north. After more than 40 years of manufacturing goods for this sector, the industrial activity is highly consolidated there. Currently, this state is home to aerospace companies mostly focused on the development of airframe systems and power plants.

Sonora, on the other hand, has businesses that specialize in the production of turbine and aero-engine blades and components. This state distinguishes out because it performs nationally distinctive activities such as die casting, lost wax and sand molding, as well as heat and surface treatments. This state's strength is concentrated on research and development activities, in which the Advanced Manufacturing and Aerospace Institute of Sonora (IMAAS) and private sector enterprises engage.

Chihuahua has manufacturing businesses, suppliers who have been certified according to international industry standards, and original equipment manufacturers. These businesses are part of a cluster that operates in five areas: certification, design and engineering, supply, production, and repair and maintenance. This cluster is responsible for the design, engineering, production, and assembly of various components such as airframes, aerostructures, engines, electrical wiring systems, high-precision machining, interiors, and seats.

Querétaro stands out in the central area as the state with the biggest influx of foreign investment in recent years, owing to the success of its "triple helix" strategy, which is built on collaboration between companies, institutions, and the government. A cluster of manufacturing and supply companies, maintenance and repair companies, design and engineering institutes, innovation and development centers, and educational institutions exists in the state. Querétaro is notable for possessing Latin America's first test laboratory comprised of research facilities, as well as the country's sole university dedicated to the study of aeronautical issues, with educational programs targeted to this area.

Querétaro is home to General Electric, which specializes in the production and repair of large engines; Snecma/Safran, which specializes in the production and repair of medium-sized engines; and Industria de Turbo Propulsores, which specializes in the production and maintenance of low-pressure turbines. Honeywell is based in Chihuahua and specializes in the production and repair of small and medium-sized engines.

In addition, Delta Air Lines and Grupo Aeromexico operate TechOps Mexico, Latin America's largest airplane maintenance, repair, and overhaul facility, with a total surface area of more than 100,000 square meters and the capacity to service up to nine aircraft at the same time. The complex is close to the Intercontinental Airport in Querétaro.

Unlike the automobile terminal business, one of the obstacles for Mexico's established aviation industry is the take-off of an aircraft made fully in the nation. To that goal, several businesses have gradually expanded their design, engineering, and production skills. Bombardier is one of the most advanced firms in this regard, with exceptional progress with the Learjet 85.

This aircraft is an example of the North American Free Trade Agreement (NAFTA) collaboration, as it involves the company's plants in Mexico, the United States, and Canada. Bombardier Aerospace's Querétaro plant manufactures the fuselage, assembles the wings, and horizontal and vertical stabilizers, and manufactures and installs the aircraft's electrical harnesses. The final assembly takes place in Wichita, Kansas, USA.

Mexico's Aerospace Industry: Strong Heritage and Growing Global Desirability

The growth and promise of Mexico's aerospace industry stem from the country's industrial and technical heritage, as well as the country's expanding global desirability as a destination for international investment. The Mexican workforce is regarded as productive, innovative, and hardworking by international industry. Mexicans have shown a desire to learn new manufacturing methods and become qualified to manufacture high-quality goods.

Mexico has 18% more manufacturing and construction engineering degrees per capita than the United States, according to data from the United Nations Educational, Scientific, and Cultural Organization (UNESCO). Since 1937, Mexico has been training aeronautical technicians and engineers. There are now 21 institutions offering 52 aerospace education programs ranging from technical to master's degrees.

On the other side, the cost of manufacturing items in Mexico is 20% lower than in the US. Mexico is a suitable destination for the formation of international enterprises because the cost of manufacturing production in China is just 3% lower than in the United States. According to KPMG's "Competitive Alternatives" assessment, Mexico is one of the most competitive countries in the world in terms of aerospace manufacturing prices, and the most competitive in North America. Because of the availability of laboratories and certification units, as well as the presence of Mexican civil aeronautical authorities, the global quality infrastructure has also played an important role in this industry.

Mexico's growth in the aerospace sector has aided in the signing of the BASA (Bilateral Aviation Safety Agreement) with the Federal Aviation Administration of the United States. This agreement implies that Mexico's aeronautical certification systems and goods will be recognized. The signing of this agreement enables the development and reinforcement of Mexican suppliers by allowing for the design and manufacture of internationally approved components.

Mexico's domestic market for the aircraft sector is expanding. The introduction of low-cost Mexican airlines, as well as the overall decline in air rates in the face of increasing competition, has resulted in a large increase in the number of passengers carried by domestic aircraft. On the other hand, the country's tourist appeal and enhanced air connections have increased to passengers transported by foreign carriers.

Because of the increased competition among Mexican airlines, firms such as Interjet, Volaris, and Aeroméxico have increased and renewed a substantial portion of their fleet, resulting in a steady demand for maintenance and repair services. The latter is an example of Mexico's aviation market's potential for the producing sector.

Mexico's strategic geographic location close to the world's largest market, the United States, provides a once-in-a-lifetime chance to enhance supply in an industry with rising demand and a bright future. The expansion of the aerospace sector represents an opportunity to increase the country's productive specialization while also developing a high-value-added supply chain that will enable long-term development by creating well-paying jobs.

Productivity in Mexico's Aerospace Industry: A Driver of Economic Growth

Productivity, or the efficiency with which the factors of production are employed, is the primary predictor of a country's growth. The greater the productivity with the same number of factors of production, the bigger the output of products and services. Globally, the major economic success stories have resulted from long-term productivity increases.

Mexican authorities have enhanced access to funding for Mexico's most productive industries, as well as directed human capital to create a national supply chain around these enterprises, to increase productivity in the country. The National Productivity Committee is a consultative body of the Federal Executive and the production plant whose mission is to improve access to financing for productive activities, increase investment and human capital, strengthen the business environment, and promote balanced regional development.

Aerospace, like many other industrial sectors in Mexico, is one of the most productive. The aircraft industry is one of the manufacturing areas that requires a high degree of technological and educational content, as well as global certifications for its procedures. There is no doubt that Mexico's aerospace sector will be a deciding element in the country's pursuit of accelerated and sustained economic growth in line with the country's huge potential.

Mexico's Strengths in Advanced Manufacturing: A Key Driver of the Aerospace Industry

Mexico's economy is active and expanding, with stable macroeconomic underpinnings and legal clarity. It is a very appealing home market target, with a young population of 130 million people and a growing middle class. It has a wealth of experience in innovative manufacturing and product development. It has one of the world's largest networks of free trade agreements, and its privileged location in the heart of the Americas makes it a strategic platform for the entire continent.

Mexico is also known for its proficiency in advanced manufacturing. In reality, Mexico is currently the G20's third largest exporter of medium- and high-tech manufacturing as a proportion of GDP, trailing only Germany and South Korea. Currently, medium- and high-tech exports account for 50% of Mexican exports.

Other advantages include proximity to the United States, the world's largest market; infrastructure and large transportation and logistics networks that connect with the two main manufacturing corridors in North America; and the appealing business case that Mexico represents, due to its low-cost structure, ease of producing in the dollar zone, and a favorable business environment.

Mexico's inclusion in the Wassenaar Arrangement, which ratifies the international community's confidence in the country as a platform for the creation of dual-use items and technologies, provides an essential competitive advantage. It also acknowledges Mexico as a dependable destination for investment in the manufacture of these items.

Above all, there is a skill and human capital. More than 110,000 engineers and technicians graduate from Mexican universities each year, outnumbering countries such as Germany, the United Kingdom, and Brazil. Our skill is of such high quality that more than 45 thousand people work in the country's aerospace business every day. All of these advantages have enabled the major OEM (Original Equipment Manufacturer) aircraft businesses to operate in Mexico.

Sources: Comercio Exterior 3