Mexico Aviation & Aerospace Review 2016/17 by Mexico Business Publishing

2016/17

“Man must rise above the Earth, to the top of the atmosphere and beyond, for only thus will he fully understand the world in which he lives” Socrates

Having thrived on the ground, Mexico is reaching for the skies. Exploiting a strong manufacturing base developed in tandem with the auto sector, the country is halfway to its goal of being a vital player in the aerospace industry by 2020. Several factors are working to Mexico’s advantage, including its numerous free trade agreements, quality workforce and a prime location that makes it a gateway to the US and Latin America. Although the high dollarpeso exchange rate has hobbled certain segments, it also has helped OEMs here to optimize manufacturing costs. Still, after five years of unparalleled global growth, the industry appears to be losing some of its steam. Analysts say the slowdown that marked 2016 is a sign of deceleration rather than decline and that for Mexico at least, a little bad news is good news.

Both 2014 and 2015 were record years for orders and deliveries at Airbus and Boeing, the top two OEMs, but industry insiders pin this on exchange rate fluctuations. The global aerospace industry, they say, will remain stable in the coming months. Mexico, meanwhile, can play to its strategic advantages to capitalize on international economic turbulence and attract new companies. Roughly 300 aerospace-related businesses are present in the country and that number is expected to grow. This year marks the midway point of the Pro-Aéreo 2012-2020 plan, a development program for the aerospace industry laid out by the government in collaboration with FEMIA, which the latter organization says is on track to meet its goals.

On the aviation front, new airlines have appeared in the national market and more are prepped to enter thanks to the implementation of BASA. Private aviation and aftermarket services also are thriving and many in these segments are planning expansions to capture more than just the domestic market. Mexico Aviation & Aerospace Review 2016 collects the insights of top executives and decision-makers. Featuring the opinions of those who shape the sector, this book is the go-to guide for anyone who wants to understand and contribute to the development of the industry.

ALL RIGHTS RESERVED © Toguna, S. de R.L. de C.V., 2016. This annual publication contains material protected under International, United States and Mexican Laws and international Treaties. Any unauthorized reprint or use of this material is prohibited. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system without express written permission from Toguna S.A. de C.V. Mexico Aviation & Aerospace Review is a registered trademark. The publisher has made all reasonable efforts to provide accurate information, and the information contained in this publication is derived from sources believed to be true and accurate. However, the information in this publication should not be considered to be complete or definitive, and may contain inaccuracies or typographical errors. The publisher accepts no responsibility regarding the accuracy of information and use of such information is at your own risk. The publisher will not be liable to any party for any direct, indirect, special or other consequential damages arising out of any use of information in this publication. The publisher provides no representations or warranties, express or implied, including any implied warranties of fitness for a particular purpose, merchantability or otherwise in relation to any information provided by the publisher in this publication.

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TABLE OF CONTENTS

STATE OF THE INDUSTRY

EMERGING AEROSPACE HUBS

AEROSPACE OEMS

COMMERCIAL, CARGO & LOGISTICS

BAJA CALIFORNIA

EXECUTIVE TRAVEL

CHIHUAHUA

HELICOPTERS

NUEVO LEON

AIRPORTS & INFRASTRUCTURE

QUERETARO

MRO & AFTERMARKET

SONORA

MEXICO’S AEROSPACE FUTURE

STATE OF THE INDUSTRY

Mexico is boosting its presence in the aerospace industry. The country’s geographic position, numerous free trade agreements, competitive workforce and a growing middle class have allowed aerospace companies to flourish, whether they are OEMs, Tier companies contributing to the supply chain or airlines. Governmental support and the participation of regulatory entities, financial institutions and academia have all helped the sector develop. Despite the progress, the industry still has room to grow. The recently signed BASA between Mexico and the US offers promising business opportunities for airlines and airports with the possibility of lower prices for consumers in both countries, creating a win-win situation. The government also has pegged aerospace as a strategic industry, creating the Pro-Aéreo 2012-2020 plan to position the country as a key player.

This chapter underlines the importance of the collaboration required between different levels of government and the private sector, prioritizing the development of local talent and suppliers. Seen through the eyes of industry leaders, the chapter offers a complete perspective that paints the big picture.

CHAPTER 1: STATE OF THE INDUSTRY 8

ANALYSIS: The Year on Review

VIEW FROM THE TOP: Luis Lizcano, FEMIA

VIEW FROM THE TOP: Brig. Gen. Rodolfo Rodríguez, FAMEX

VIEW FROM THE TOP: Sergio Allard, CANAERO

VIEW FROM THE TOP: Melvin Cintron, ICAO

VIEW FROM THE TOP: Gen. Julián Corona, Ministry of National Defense

VIEW FROM THE TOP: Miguel Peláez, DGAC

VIEW FROM THE TOP: Francisco Mendieta, AEM

AIRCRAFT SPOTLIGHT: Boeing 737 Family

MAP: Mexican Aerospace Industry by State

ANALYSIS: New Air Freedoms for Mexico and the US: BASA

ROUND TABLE: Talent Disparities and Industry Solutions

ANALYSIS

THE YEAR IN REVIEW

After years of record-breaking growth, the aerospace

account, European A&D shrunk 6.6 percent in 2015.

industry appears to be reaching a plateau as new aircraft

According to PwC, the exchange rate brought about

orders slip in the wake of a weaker global economy. In this

significant loses for Airbus, which is valued in euros. The

period of uncertainty, the sector is looking to optimize

French OEM reported a 6.2 percent increase in revenue,

costs by outsourcing processes to emerging economies.

to €64.45 billion (US$71 billion) in 2015 from €60.7 billion

Mexico, with its strong manufacturing base, already is

(US$67 billion) the year before. When calculated in

reaping the benefits, solidifying its position as it looks to

dollars, the company’s revenue fell 11 percent, to US$71.52

become a key player by 2020.

billion from US$80.54 billion. However, PwC says these losses are only signs of deceleration not the decline of

GLOBAL OVERVIEW

a healthy industry. It expects the sector’s revenue to

To understand where the industry now stands, a little

remain flat during 2016. Deloitte has a more positive

history is illuminating. In the five years leading to 2016,

outlook, forecasting 3 percent growth for this year. While

the global aerospace sector enjoyed unprecedented

the sector undoubtedly has suffered, aerospace likely will

growth. In 2014, both major OEMs, Airbus and Boeing,

remain in stable condition through 2016, as suggested

broke records for orders and deliveries, airline profits

by the S&P Aerospace and Defense Select Industry

topped US$20 billion and load capacity hit a best-ever 80

Index, which saw an 8,806.14 price return at the end of

percent. Expectations across the sector raced higher on

September 2016, almost 1,000 points higher than at the

the back of plunging oil prices and improved efficiency.

beginning of the year.

In its report “Current Market Outlook 2015-2035,” Boeing said it expected this growth trend would continue for

Those numbers look good but many insiders still see the

years to come. 2015 was another remarkable year for the

sector losing speed. Part of this is caused by shrinking

multibillion-dollar industry, as it chalked up more records

orders. In 2014, 1,796 orders were placed for Airbus

for revenue and deliveries. But orders lagged, which was

aircraft and 1,432 for Boeing. These numbers dropped

a sign of things to come.

to 1,190 and 743, respectively, in 2015. The trend appears to be continuing through this year. In the third quarter,

Globally, the aerospace and defense (A&D) sector

Boeing reported 150 commercial plane orders, a 17.6

reported revenue of US$674.4 billion in 2015. According

percent drop from the 182 orders during that period

to Deloitte, this 3.8 percent increase was mostly driven

last year. Honeywell, which manufactures engines, parts

by commercial aircraft as the defense sector appeared

and avionics for aircraft and helicopter OEMs, lowered

to rebound after two years of decline. Deloitte calculates

its forecast for the year, citing weak demand during the

this data using a constant US dollar base. But a strong

first half.

US currency is having an impact on companies outside the US. Once exchange rate fluctuations are taken into

While the sector may be slowing, it still has a strong pulse. Boeing expects that over the next 20 years a total

AEROSPACE REVENUE GROWTH PERFORMANCE A&D REVENUE GROWTH PERFORMANCE (US$ billions) (US$ BILLION) 694.4

700 680

674.4

5.8%

660 637.6

640 620

6.0%

649.7

5.0% 3.8%

617.8

3.0%

600

3.2%

580 560

1.9%

2012

2013

global sector

Global A&D revenues sector revenues

2014

*2016

*2016 data projected by Deloitte. Source: Deloitte.

production, alongside a need to optimize expenses, makes low-cost countries attractive for outsourcing noncore manufacturing. This is good news for emerging countries because it provides an opportunity to incorporate into

3.0%

attractive prospect for those locations looking for job

0.0%

growth percentage

Revenue growth revenues percentage

year, yet the current production rate is 1,400. The lag in

global economies. The aerospace industry also is an

1.0% 2015

of US$5.6 trillion. This translates to 1,900 aircraft per

4.0%

2.0%

540 520

7.0%

38,050 new aircraft will be needed worldwide, a list value

creation and the transfer of advanced technologies. Mexico, with a flourishing aerospace sector already in place, is ready for the next step.

GLOBAL VALUE CHAIN Mexico has much to offer the aerospace sector, from an ideal location close to the US to being an entry point for Latin America and with a young labor force. The country has 45

MEXICAN AEROSPACE EXPORTS AND

MEXICAN AEROSPACE EXPORTS (US$ billions) IMPORTS (BILLIONS)

The goal of these strategies is to see the country exporting

over US$12 billion and employing 120,000 workers in the

industry by 2020 through joint efforts among the private sector, public institutions and academia. The sector

closed 2015 with 54,000 employees and US$7 billion “We

are well within Pro-Aéreo’s timeframe as most objectives

have been completed on time,” says FEMIA’s Lizcano.

3 Aerospace is present in 18 states in Mexico but most

companies are concentrated in five: Baja California,

1 2016*

2015

2014

2013

2012

2011

2010

2009

2008

Chihuahua, Nuevo Leon, Queretaro and Sonora. The

*2016 data projected by FEMIA. Source: Ministry of Economy and FEMIA.

industry’s growth in these states led local governments and businesses to create clusters to support, strengthen and consolidate the sector. Companies in Chihuahua, Nuevo Leon and Queretaro belong to an individual aero cluster, while Baja California has two clusters and Sonora

free trade agreements and offers competitive manufacturing,

is represented by Sonora Council for Economic Promotion

being 88 percent cheaper compared to the US, according

(COPRESON).

to ProMéxico. In 2016, Mexico climbed to 51st on the global competitiveness index, its highest ranking in nine years.

BAJA CALIFORNIA Baja California says it is home to the oldest and

There is little doubt the country is capitalizing on the

largest aerospace industry in Mexico. The state has 76

aerospace industry and is increasingly becoming an

industry-related companies, according to the Ministry of

attractive destination for the sector. The sector is still

Economy, including Zodiac Aerospace, GKN Composites,

small, with about 300 related companies, but it is growing

Bap Aerospace, Coast Aluminum, Chromalloy, Eaton

at an accelerated rate. “Mexican aerospace exports have

Aerospace, Honeywell, Curtiss-Wright, TE Connectivity

grown more than 400 percent from 2004 to 2015, driven

and UTC Aerospace Systems. Most of these are located

by commercial and civil aviation,” says Luis Lizcano,

in Tijuana, Tecate and Mexicali. The region specializes

Director General of FEMIA. According to that organization,

in electric components and parts manufacturing. Ardy

aerospace exports have increased about 20.6 percent

Najafian, President of Aerospace Alliance, says the

annually for the past five years to US$6.6 billion in 2015.

industry employs over 14,000 people.

The federation expects the sector’s growth will continue and in late 2016 projected exports to represent US$7.5

CHIHUAHUA

billion for the year. The industry also has been a significant

This

source of employment, providing 53,000 jobs. According

Honeywell, Safran, Zodiac Aerospace, Westinghouse,

to Gerardo Ruiz, Minister of Communications and Transport

GKN Aerospace and over 40 specialized suppliers. The

(SCT), Mexico is now the fourth-ranked global investment

cluster says it generates over 17,000 direct jobs, over

destination for aerospace manufacturing and the sixth top

US$1 billion in local and foreign investment and more

supplier for US aerospace.

than US$1.5 billion in annual exports. Chihuahua’s cluster

state

hosts

Textron

Aviation,

Bell

Helicopter,

“has developed a wide diversity of processes in the past The industry here is just getting started. While it

years, including expertise in aerostructures, sheet metal,

represented only 0.66 percent of GDP in 2015, according

machining and composites thanks to the companies

to the Ministry of Economy, the sector is recognized as

established in the state,” says Rene Espinosa, President of

strategic due to the potential impact on the country’s

Chihuahua Aerospace Cluster. The state has capabilities

economy. For that reason, the ministry alongside FEMIA

for high-precision machining and heat and thermal

created the Pro-Aéreo 2012-2020 development plan.

treatments

With the ultimate goal of placing Mexico among the

aerostructures, seats and slides.

and

manufactures

harnesses,

aeroparts,

world’s top 10 aerospace suppliers, Pro-Aéreo is targeting five areas: promoting and developing the internal and

NUEVO LEON

external market, strengthening the capabilities of the

Monterrey Aerocluster is younger than the previous

national industry, training the necessary human capital,

two and hosts 33 companies, including Exova, Noranco,

supporting

developing

Tecmaq, Viakable, USTI, AEISA, Mimsa and Frisa. “What

transversal factors to support the industry, including

differentiates our cluster is that 95 percent of our companies

international agreements, financing and deregulation.

are Mexican and 80 percent of the products manufactured

technological

development,

TRANSPORT PASSENGERS (MILLIONS) AIR AIR TRANSPORT PASSENGERS (millions)

300 250 200 150 100 10

50 0 1970

1975

1980

1985

1990

World

1995

2000

2005

2010

2015

Latin America and the Caribbean

Source: Source: World Bank, 2016.

Number of Passengers (millions)

in the state are destined for exportation,” says Pauline

specialized workforce,” says Enrique Ruiz, Director

Medori, Director General of Monterrey Aerocluster. Nuevo

General of COPRESON. The state specializes in turbine

Leon has considerable room for growth in the segment,

components, fuselages and composites.

says Carlos Ramírez, the cluster’s President. “We are slightly behind other clusters in Mexico and growth will

GROWING PAINS

come with considerable effort,” he says. “At this point our

While some companies such as Curtiss-Wright in Baja

goal is to attract foreign aerospace companies into the

California and Westinghouse in Chihuahua have been in

state to invest and generate the necessary infrastructure.”

Mexico for the past 40 years, the sector is considered to

The cluster’s strategy is to capitalize on Nuevo Leon’s

be relatively young and it faces some growing pains. To

numerous infrastructure advantages, including proximity

consolidate it needs to close the supply chain gap. “Many

to the US border, extensive experience with several

companies are turning to Mexico to expand their operations

manufacturing industries and existing suppliers.

but their growth is limited by the domestic availability of the required products and processes, so the country still

QUERETARO

needs to nurture more Tier 1, 2 and 3 companies,” says

Known as the youngest and seen by some as the

Federico de la Hoz, Subdirector of Promotion of the

most dynamic aerospace cluster in Mexico, Queretaro

Aerospace Sector at Bancomext. The second challenge

Aerocluster was created after Bombardier’s arrival to the

is having the appropriate human capital on hand. For the

state in 2006, from which point the sector grew quickly.

sector to grow, it is imperative that leading companies are

“Queretaro now has 37 percent of Mexico’s aerospace

able to acquire qualified employees.

industry and has attracted almost 50 percent of the total foreign direct investment in the sector in the last 15

Expectations for the sector are high. The country can

years,” says Claude Gobenceaux, the cluster’s President.

benefit from this growing industry through the generation

The state now hosts Aernnova, ITP, Bombardier and

of employment and the introduction of new technologies.

Airbus Helicopters, among many others, and has the only

Some companies, including GE Aerospace, Safran and

university in Mexico specialized in the aerospace industry,

Zodiac Aerospace, see Mexico as more than a low-cost

UNAQ, and the largest MRO center in Latin America,

manufacturing base and have invested in design divisions

TechOps. Queretaro specializes in the manufacture of

for many components, from turbines to drainage systems.

motor and landing-gear components.

For many, the sector is a long-term investment. “The aerospace industry has guaranteed demand for the next

SONORA

10 years, since at the current global production capacity

Unlike the previous clusters, aerospace companies in

it will take this long to fill the commercial jet purchase

Sonora are spread throughout the state, from Ciudad

orders backlog held by OEMs,” says de la Hoz. “This

Obregón to Nogales. The state also hosts the second

demand also is fueled by the expected increase in air

largest number of aerospace companies in Mexico,

passengers worldwide.”

including

Rolls-Royce,

Daher

Aerospace,

Sargent

Aerospace, Bodycote and Ducommun Incorporated.

GLOBAL TRENDS

“Aerospace has allowed the introduction of the latest

According to the World Bank, globally 3.44 billion people

technologies to the state and the creation of a highly

flew on an airplane in 2015. This impressive number,

AIR PASSENGERS GLOBALLY IN 2015 AIR PASSENGERS GLOBALLY IN(MILLIONS) 2015 (millions) NUMBER OF PASSENGERS

1,200

expected to keep increasing. It gre 6.7 percent in 2015 and IATA projects a rise to 6.9 percent for 2016.

1,000

Among the many challenges are security concerns,

800

natural events and price pressures, as tickets prices in the

600

reports PwC.

US and other countries have been dropping for decades,

400

Projections for Latin America as a whole are not overly positive. Brazil’s economic crisis knocked the sector for a

200 Asia-Pacific

Europe

Latin America

North America

Medio Oriente

Africa

loop. Argentina and Venezuela landed two further blows,

Source:ICAO

with the latter blocking the repatriation of US$3.78 billion for foreign carriers. The Mexican aviation sector, on the other hand, is in better condition than the region’s. At the end of September, Latin America had an average of 0.57 air trips per capita while Mexico had 0.64, according to UBS. The Mexican industry is expected to grow 4.1 percent annually until

almost half the world’s population, is expected to keep

2020, says Tony Tyler, former president of IATA. The

growing due to many factors. These include lower oil

country has hurdles to overcome, including the saturation

prices, high demand for passenger travel and high

of its main airport, AICM. In that sense, the construction

airplane load factors, according to IATA. Data from the

of a new airport in Mexico City, NAICM, for which the first

World Bank show the sector has grown at an accelerated

stage will be completed by 2020, is expected to underpin

pace since the 2008 financial crisis. From 2004 to 2014

the sector. “Mexico is in a good position to turn into a

the sector’s revenue doubled, to US$746 billion from

connection center for America,” says Tyler.

US$369 billion, according to PwC, led mostly by low-cost carriers.

Many in the sector also have positive expectations for the BASA with the US signed at the end of 2015 and ratified

Business is rarely linear, however, and IATA warns of the

by the Mexican senate in June 2016. “BASA will increase

cyclical nature of the industry lasting eight to nine years

flight supply and competition between airlines, which

from peak to peak. The latest low point was in 2009,

will force us to improve practices in airports, airlines,

leading the association to warn of a potential slowdown.

regulations and customer services,” says Sergio Allard,

This is consistent with data for recent years. In 2014,

President and Director General of CANAERO.

industry revenue peaked at US$758 billion. A stronger dollar lowered revenue to US$710 billion in 2015. For

Despite the rough patches in the past year, aerospace is

now, the sector appears poised for a small recovery. IATA

positioned for growth. With its competitive manufacturing

estimates a 0.9 percent increase in revenue for a total

base and prime position as an entry point to new markets,

of US$717 billion for this year. Demand for air travel is

Mexico is revving the engine and ready to take off.

VIEW FROM THE TOP

STRENGTH IN NUMBERS LUIS LIZCANO Director General of FEMIA

Q: What primary trends have you identified as drivers of

to open a center with more than 50 people because the

growth in the aerospace sector?

company did not believe the country had the expertise

A: The backlogs registered by the world’s largest

for a larger operation. The center now has close to 500

aerospace OEMs show the industry’s global motor is the

engineers focused on design. GE also shows that Mexico

market. For example, Airbus and Boeing have an eight

is competitive with 1,800 engineers in Queretaro.

to 10-year backlog on airplanes, which is indicative of an excess demand for aircraft. The air transport sector

Today, about 10 percent of the aerospace companies

is projected by some authorities to grow 5 percent

operating in Mexico have a local design and engineering

annually over the next 20 years, thus increasing pressure

division. While some firms operate with foreign design

on airlines and aircraft manufacturers. Mexican aerospace

teams, many have design operations in Mexico. For

sector exports grew over 400 percent from 2004 to 2015,

example, Dreamliner’s complete energy transmission

driven by commercial and civil aviation.

system was designed in Chihuahua, as was 60 percent of Safran’s power system, which was then incorporated into

Despite having very few operations in the country, the

the Airbus A380. Some companies are more concerned

defense sector could represent an interesting business

with interior design, many of which are based in the state

opportunity in the future. Worldwide trends show the

of Baja California.

defense segment represents roughly half of the aerospace industry. In Mexico, we have not yet tackled this sector

Q: How does FEMIA represent the aerospace industry

strongly, as we are still in the process of developing the

and directly benefit companies?

necessary expertise and certifications, which are slightly

A: FEMIA was founded in 2007 by a group of aerospace

stricter than those for commercial aviation.

companies to provide representation for all companies in the sector. FEMIA incorporates most of the main

Q: What are the sector’s main strengths?

companies from the 300 entities that form Mexico’s

A: Even though there have been aerospace companies

aerospace industry and in fact, in 2015, 80 percent of the

in Mexico for the past 40 years (such as Curtiss-Wright

US$7 billion obtained in exports was from our members.

in Baja California and Westinghouse in Chihuahua), the sector is relatively young. From the end of the ‘90s

The federation supports the Mexican aerospace industry

into the beginning of this century the local aerospace

and bases its operations on three pillars. The first is

industry experienced growth led by the introduction

competitiveness, which relies on the development of

of several OEMs into the country, such as Bombardier,

the supply chain, as well as supporting certification

Cessna, Beechcraft and Airbus Helicopters, as well as

processes and providing workshops on compliance. This

several Tier 1s.

support is of the utmost importance because we had noticed that some small and midsized companies were

the

unaware of the proper practices regarding this subject

manufacturing sector, 11 percent are MROs and the

Mexico,

percent

operations

are

so we are working to help them improve. The second

remaining 9 percent are in engineering and design

pillar is human capital. We collect information regarding

areas. Many foreign companies seem to be under the

the needs of our members and work together with

impression that Mexico is only focused on low-cost

universities and government agencies at the state and

manufacturing given the fact that costs here are more

federal level so they can train quality human capital in a

competitive than elsewhere but this is not the case. The

timely manner. The third pillar is to promote the sector,

country has managed to turn this stereotype around. For

which is done both locally and internationally. FEMIA

example, when Safran came to Mexico it did not want

gives its members the opportunity to enter this supply

chain network, which will facilitate their operations in the

those to come. We are well within ProAéreo’s timeframe

country. One of our main goals is to help local and foreign

as most objectives have been completed on time. For

companies interested in entering the Mexican market to

example, one of the goals of ProAéreo 2012-2020 was to

join forces and strengthen the supply chain with the least

provide jobs to 120,000 individuals and we closed 2015

possible risk.

with 54,000 employees. ProAéreo also plans to reach US$12 billion in exports and in 2015 we achieved US$7

Q: What should be the top priority for the aerospace

billion. These are clear signs the sector is moving forward

industry here?

according to ProAéreo’s plan.

A: The consolidation of the supply chain is a priority. At this point, Mexican companies need to focus on increasing

Still,

their presence and incorporation into the sector, not just

While it already possesses “hard” infrastructure such

the

sector

developing

its

infrastructure.

at a local level but also in the US and Canada. It is common

as equipment and technology, we are working on

for companies to only want to enter the local supply chain

developing more “soft” infrastructure for mid and long-

but a large percentage of the sector is based north of

term opportunities, namely the impending need for more

the border. With the necessary certifications, technology

human capital. It takes four and a half years to train

and expertise, those companies could enter supply chains

an engineer so we need to plan in advance for human

in other countries. Our main goal is to help the industry

resources. In my opinion, authorities and companies are

grow through the consolidation of its supply chain.

taking the necessary steps to achieve ProAéreo’s goal to reach US$12 billion in exports and we are on target to

The second challenge we face is ensuring we have the

employ 120,000 individuals by 2020.

appropriate human capital on hand. For the Mexican aerospace sector to grow it is imperative that companies

Q: What are FEMIA’s goals for 2016 and how does the

leading its growth can hire qualified employees as soon

federation plan to achieve them?

as they open facilities.

A: Our strategy for 2016 is to continue on our current path. One of our goals is to increase and consolidate

Q: What were the reasons behind FEMIA’s creation of

our membership, another is to keep pushing the sector

ProAéreo alongside the government and how will it

forward in line with ProAéreo’s objectives and finally,

benefit the sector?

even though we are only halfway through this plan’s

A: When ProAéreo was created the sector needed to have

timeline, a revision to create ProAéreo 2.0 would not

a growth plan for the next 10 years. This plan generated

be amiss. It may soon be necessary to analyze and

several strategies and objectives that established our

re-evaluate our achievements to date and set new

road plan for these past few years and will determine

objectives for the next 10-20 years.

VIEW FROM THE TOP

SKILLS, COSTS PUT SECTOR IN POSITION TO GROW BRIG. GEN. RODOLFO RODRÍGUEZ 14

President of FAMEX

Q: How would you define Mexico’s contribution to the

Mexican aerospace industry’s strongest symbol is Mexico’s

global aerospace industry?

Aerospace Fair (FAMEX) organized by SEDENA. This event

A: The aviation industry has enjoyed double-digit growth

is an initiative from Gen. Salvador Cienfuegos Zepeda,

for the past few years, from 70 companies in 2007 to over

the Minister of National Defense, in accordance with the

300 companies in 2014. This impressive statistic is thanks to

National Development Plan implemented by President

Mexico’s cost competitiveness and Mexican workers’ skills

Enrique Peña Nieto. Its goal is to promote the economic

and abilities. This has allowed Mexico to become the 14th

growth of the country throughout all federal agencies.

aerospace manufacturing country in the world as global exports have grown from US$3 billion six years ago to

Q: What are FAMEX’ goals for international promotion?

US$6.7 billion in 2014 and US$7.2 billion in 2015. This growth

A: FAMEX’s goal is to promote the growth of the

even surpassed the automotive industry, which grew 10.4

aerospace industry by attracting the main OEMs, primarily

percent in the past year, while aerospace grew 18 percent.

Airbus, Beechcraft, Bell Helicopters, Boeing, Bombardier, Gulfstream,

Helicopters

and

Pilatus

and

their

Q: What are Mexico’s main advantages and which

supply chain. By facilitating business meetings between

challenges must it overcome?

Mexican representatives and companies throughout the

A: The aerospace industry’s giant, the US, produces

supply chain, from OEMs to Tier 3 companies, the event

over US$250 billion and France produces approximately

encourages communication and saves local executives

US$50 billion. Given its proximity to the US and as its

the need to travel overseas to reach the most important

sixth top supplier, Mexico is in a privileged position to

players in the sector. This is the first effort of its kind, as

grow, added to the advantage of a large number of

other smaller, localized efforts to generate regional events

bilateral agreements with the US, including BASA and the

were unable to represent Mexican capabilities effectively.

Wassenaar Arrangement. Mexico also receives significant direct investment from France from companies such as

We were able to attract 240 aerospace companies to

Airbus and Safran. Collaborations of this kind have led to

the first FAMEX with more than 3,500 scheduled B2B

the development of educational institutions dedicated to

meetings, over 70 conferences and the first Forum for

the aerospace industry, such as UNAQ. These entities train

Aeronautic Education, which united all universities that

the significant number of workers needed by this sector,

have aerospace programs. FAMEX also hosted the first

which generates more than 45,000 high-skilled jobs.

seminar for foreign investment in aeronautics, with participation from the Minister of Economy, the director of

If Mexico follows the growth expectations projected by the

ProMéxico, FEMIA and several state Ministers of Economy.

Ministry of Economy, the country will be home to more than

The event hosted Boeing’s seminar on the supply chain,

420 companies by 2020, pushing exports over US$12 billion

with participation from 70 of their suppliers, and a similar

and providing employment to more than 110,000 Mexicans.

course from Airbus. Several aerospace enterprises such as Safran, UTC Aerospace and Honeywell, used the event as

Q: How is Mexico promoting these numerous advantages

a platform to announce their expansion plans.

at an international level? A: ProMéxico manages a promotional program through

The first FAMEX edition became the second most

its offices in several countries. The Ministry of Economy

important aerospace event in Latin America, after the

also is endorsing these advantages through seminars

International Air and Space Fair (FIDAE). At SEDENA we

and conferences, such as a conference that was recently

are proud to serve Mexico not only through FAMEX but

organized in Malaysia. The ministry promoted several

also through our presence at several events, including the

economic sectors including aerospace. However, the

Farnborough International Air Show, Dubai Air Show, and

the Asian Business Aviation Conference and Exhibition, to promote the event and local industry. FAMEX was hosted by Santa Lucia Military Air Force Base, the largest in the country, which has more available space for exhibitors

Global exports have grown from US$3 billion six years ago to US$7.2 billion in 2015

than the Farnborough International Air Show. We are now organizing FAMEX 2017, from April 26 to 29. Q: What have you identified as the main needs for Mexican aerospace and how are governmental institutions

MEXICAN AEROSPACE EXPORTS (in(in billion US$) MEXICAN AEROSPACE EXPORTS billion US$) 8 7

addressing them?

A: Both the Ministry of the Economy and ProMéxico have

generated excellent programs to promote the growth of

the aerospace industry. Every state government also has created a series of incentives to benefit local companies and promote the industry’s development through the

3 2

introduction of more companies to each state. Safran, for

instance, has over 6,000 employees in Mexico, which is the

company’s second largest branch outside its home country. Mexico needs to provide these companies with human

2002 2004 2006 2008 2010 2012 2014 2015

Source: Ministry of Economy (SE), DGIPAT Source: Ministry of Economy, DGIPAT

capital. To that end, we are organizing the second forum in aeronautical education at FAMEX 2017. Mexico produces

If Mexico follows the growth expectations predicted by the

about 100,000 engineers per year but we must continue

Ministry of Economy, the country will be home to more than 420

to encourage talent development and that of the clusters.

companies by 2020, pushing exports over US$12 billion and providing employment to over 110,000 Mexicans

The country must also prioritize the strengthening of airport infrastructure in each state, which is essential

A piece that costs US$100 to manufacture in the US costs only US$86.4 in Mexico

to Mexico’s connectivity. With 86 airports, Mexico has excellent aerial connectivity but many need to be upgraded to receive larger and more modern aircraft, such as the Airbus A380 and the Boeing 787. President Peña Nieto is implementing a program to update the country’s airports and is investing in the construction of a new airport in Mexico City, which will create more time slots that will help airlines to continue growing. Q: What are your expectations for FAMEX 2017? A: FAMEX 2015 was the most important platform for the

SEGMENTATION OF OF AEROSPACE AEROSPACE COMPANIES COMPANIES IN MEXICO SEGMENTATION IN MEXICO

promotion of the Mexican aerospace industry. Our goal is to increase the number of companies from 240 to over 400. Attracting such a large number of companies is ambitious 79% Manufacturing

because each has a set budget for events and may have

11% Maintenance, repair,

to choose between FAMEX and other exhibitions. FIDAE,

overhaul (MRO)

in comparison, received more than 500 companies to its

10% Development and

2015 edition but that event has 38 years of experience.

engineering

FAMEX 2017 will host the second forum for aeronautical education and over 100 conferences. Furthermore, the event will have a second seminar for foreign investment in aerospace alongside the Ministry of Economy. We are also in talks with the ministry to help SMEs finance the cost of the event. We will continue to attend other events, including the Berlin Air Show and the Farnborough International Air Show to promote the country’s strong aerospace industry all over the world.

Source: MexicoNow research

Development and engineering

FAMEX 2015 attracted Maintenance, repair, overhaul (MRO) 240 aerospace companies to have Manufacturing more than 3,500 scheduled B2B meetings

VIEW FROM THE TOP

THE PASSENGER COMES FIRST SERGIO ALLARD President and Director General of the National Chamber of Air Transport (CANAERO)

Q: What is CANERO’s strategy for supporting the aviation

A: Mexican airlines successfully entered many countries

industry’s growth?

before BASA was signed. Our airlines are competitive,

A: The aviation industry is responsible for 2 percent of

have modern fleets and are efficient. Several routes to

Mexico’s GDP. The airline industry generates 150,000 direct

the US are controlled by Mexican airlines due to our great

jobs and almost 750,000 indirect jobs. The clusters in

product offering and excellent service. We expect that by

Queretaro, Chihuahua and other states are also contributing

the end of 2016 we will have transported around 80 million

to employment. CANERO has 73 members across different

passengers, almost 30 million more than in 2010. Of

aviation sectors including commercial airlines, cargo airlines

those, more than 42 million passengers will have traveled

and private aviation. For the latter we have a working

through the AICM. BASA, implemented in August 2016,

group of 12 members that focuses on implementing better

is expected to increase flight supply and competition

practices. The chamber is an open body and membership

between airlines, which will force us to improve practices

is available to everyone. We hope that as our importance

in airports, airlines, regulations and customer services. The

and relevance in the industry increases we will attract more

tourism industry will be positively impacted by this. The

members. By the end of 2016 we expect to have three more

trans-border market between Mexico and the US is the

members who will help us make sure the industry improves

third largest in the world and by the end of 2016, 30 million

through the implementation of international practices.

passengers will have traveled between both countries.

Throughout 2016 our strategy has revolved around four

We tend to overlook the good things about our country

key points. The first is to increase our competitiveness and

and our industries. There are complaints about operations

deepen alliances with US airlines. Our second goal is to

within the AICM but it is at the same levels as other

support the operations of Mexico City International Airport

airports in the US and Europe. We are developing the

(AICM). Although the AICM is saturated there are more than

needed infrastructure and airport groups are investing in

159 working saturated airports such as JFK in New York and

terminals. Monterrey has a functional airport and Cancun

Heathrow in London. CANAERO’s operations and schedules

is constructing its fourth air terminal.

committee has contributed to creating a methodology for conducting operations in the AICM. The third part of our

Q: In what ways can CANAERO improve the Mexican

strategy is the construction of the new airport in Mexico

aviation industry’s competitiveness?

City, NAICM, complemented by the fourth key point, which

A: We just finished an analysis on the key competitiveness

is to improve passenger facilitation services.

factors of US aviation that need to be applied in Mexico. One of our main conclusions is that we need to improve

NAICM is a long-term project that we need to support.

the productivity of our pilots. Other practices include

It entails investments, connectivity, more and better

improving airport operations or materials costs. Mexican

jobs with higher salaries. The airport will be like a small

jet fuel, for example, is 7 percent more expensive than

city with hotels and businesses, as well as a beautiful

in the US. The growth of the aviation industry depends

architectural composition. Most importantly, it will allow us

on GDP growth and infrastructure, a strong regulatory

to reduce layover times, increasing our competitiveness.

entity and improved services for passengers. In the AICM,

Without this airport, aviation growth in our country would

we follow the best international practices and observe

be severely limited.

international regulations, such as transparency for the allocation of slots following IATA’s worldwide guidelines.

Q: How will BASA impact air operations in Mexican airports and how prepared is the local infrastructure to

Developed

handle an increase in passenger traffic?

passenger per capita per year. If we can improve the

countries

transport

average

one

conditions needed for the industry’s growth in five or six

interesting and improved connectivity opportunities. In

years we should be moving around 125 million people

Mexico, we have a misguided concept of what connectivity

annually. Cargo aviation also needs to be bolstered. The

is, which is not having direct flights between a small city

federal government can implement a series of public

and Tokyo. European and US consumers understand that

policies to improve passenger facilitation services and

the most efficient way to travel is through hubs. We need

cargo. Specific operations such as migration, customs and

to understand this to recognize that Mexico City’s hub is

airport safety also need support. Our goal is to coordinate

well connected.

all these factors to improve the industry. Airlines need to take advantage of BASA, find ways to Q: What is the extent of the creation and adoption of a

operate efficiently in the AICM, support the construction

passenger culture?

of the NAICM, respect passenger rights and improve

A: CANAERO supports the diffusion of passenger’s rights

passenger services. Airlines participate in finding the

and obligations, which are all featured on our website.

best way to manage logistics of passengers, luggage

People need to be more informed so we work with the

and connectivity. They contribute immensely to defining

federal government, the Ministry of Communications and

the best practices for the new airport’s operation.

Transport (SCT), the Ministry of Tourism (SECTUR) and the Federal Attorney’s Office of Consumers (PROFECO)

Q: What major trends in the aviation industry do you

to ensure every passenger is aware of this information.

expect in the short term?

About 99 percent of passengers are educated on travel

A: There have been important advances in aerodynamics.

culture. We are seeing passengers becoming increasingly

We have seen transformations in fleets, processes and

high-tech so the whole industry is investing in technology

most importantly, in safety. Airplanes have become the

to speed up processes for our clients. All industry

safest transportation method. People are traveling more

participants have a clear and common vision and we want

comfortably with more technology and safety and at

to give customers better services.

lower prices. What Boeing, Airbus and Embraer are doing today barely resembles their operations 20 years

Q: How has connectivity evolved in Mexico and what

ago. Airports are placing safety and security above all

needs to be improved?

and air transport is becoming accessible to broader

A: Mexico City has become a traveling hub and Monterrey

demographics.

is on its way. Similarly, the new Cross-Border Walkway

collaborations such as SkyTeam and StarAlliance allow

between the Tijuana and San Diego airports offers

for greater connectivity.

Flight

offerings

are

impressive

and

VIEW FROM THE TOP

NO COUNTRY LEFT BEHIND MELVIN CINTRON Regional Director of International Civil Aviation Organization (ICAO)

Q: How has ICAO helped to shape the safe and orderly

Q: What are the main challenges the region is facing

growth of international civil aviation?

and how does ICAO help to overcome them?

A: ICAO works with the Convention on International Civil

A: The North and Central American and Caribbean

Aviation’s 191 member states and industry groups to

regions are home to some of the richest countries

reach a consensus on global civil aviation standards and

in the world but also smaller communities. These

recommended practices (SARPs) and policies. Decisions

latter jurisdictions face major challenges in funding to

must be in line with the creation of a safe, efficient,

construct the necessary aviation infrastructure and one

secure, economically sustainable and environmentally

of the greatest callings for ICAO is to help governmental

responsible civil aviation sector. In addition to this

administrations

core activity, ICAO has several priorities and programs.

advantages of civil aviation because some authorities do

The organization coordinates assistance and capacity

not consider it a priority. It should be stressed, however,

building for states in support of numerous aviation

that every job created through aviation supports four

development objectives. It produces global plans to

to five subsequent jobs in different economic sectors.

coordinate multilateral strategic progress for safety and

Therefore, we are developing a study alongside the

air navigation, monitors and reports on numerous air

International Air Transportation Association (IATA) to

transport sector performance metrics and audits states’

gauge the condition of aviation in every country before

civil aviation oversight capabilities in the areas of safety

and after committing to its development. Our goal is to

and security.

continue driving positive economic results in terms of

understand

the

socioeconomic

tourism sector expansion, the opening of international The aviation industry continues to grow and to improve

markets to local businesses and producers and ultimately

connectivity, building on the economic returns it

overall GDP growth.

generates. Air transport in North and Central American and Caribbean regions contributed over US$150 billion

Air transport plays a major role in driving sustainable

dollars to the GDP of the countries on this continent

economic and social development. It directly supports

in 2013 and each slice of the pie is directly tied to the

the employment of over 58 million people worldwide,

success of each country’s aviation system.

contributes US$2.4 trillion to global GDP and transports over 3.3 billion passengers and US$5.3 trillion worth of

Q: Besides the growth in tourism and the decline in oil

cargo annually.

prices, what is behind the exponential growth of civil aviation?

Aviation

A: Connectivity and socio-economic priorities have

cause the international aviation sector to double in flight

development generates initial employment and airline

and passenger volumes every 15 years since 1977. These

operations bring about new supply networks, the sector

are expected to double again in the next 15 years.

indirectly benefits from tourism and access to distant

serves

communities

through

clear

investment

opportunities.

While

infrastructure

cycles

markets. As trade and tourism continue to expand, they Overall air travel in the region is expected to grow from

generate larger sustainable growth. An efficient and

about 1.2 million flights in 2011 to reach slightly over 3.7

affordable global air transportation system helps to

million in 2031, reflecting an annual growth rate of 5.9

improve standards of living, spreads social and cultural

percent. A significant factor for such encouraging statistics

benefits, delivers better services and aid to the public

has been the rise of low-cost airlines, which are sound

and enhances access to remote and underdeveloped

options for travelers, promote competition in the sector

areas. For instance, in 2011 aviation contributed MX$50.2

and increase the total volume of air travel more generally.

billion (US$3 billion) to Mexican GDP (0.4 percent),

of which MX$23.5 billion (US$1.4 billion) was directly

Q: How has ICAO supported the development of NAICM?

generated and the remainder indirectly. The aviation

A: It is necessary to ensure that this new airport meets

sector also supported 60,000 direct jobs and 98,000

all standards and recommendations. The NAICM will

indirect jobs that same year.

bring great benefits to Mexico because the airspace is saturated. The NAICM will eventually replace the current

A main challenge involves achieving sufficient support

airport because the location of both airports makes

from local government, highlighting the importance of civil

overlapping air routes unsafe. This is a significant risk

aviation to other industries such as tourism, developing

when you have two large, complex airports performing

each country’s safety oversight capacity, strengthening

operations close to each other. Multiple studies analyzed

navigation according to air traffic and developing a

the feasibility of having both airports and concluded that

security oversight capacity. ICAO is helping member

it is beneficial for the city to only have one. Our role now

states to tackle these issues through the implementation

is to ensure the new airport complies with international

of our No Country Left Behind program, in which ICAO

standards and finds safe and secure ways to prevent

plays an active leadership role in coordinating with states

oversaturation. The NAICM, just like any other airport in

and aviation authorities to monitor and provide assistance

the world, has access to our 19 annexes, which address

through efficient communications for stakeholders. No

every part of the international standards on airports,

Country Left Behind tailors each country’s priorities to

security, safety oversight, operations and maintenance.

their individual needs and characteristics. We generate

Having set the standards at ICAO, countries must decide

a unique strategic plan for each country and follow and

how to meet them. But our technical committee can also

monitor its implantation through collaborations with air

send experts to assist in these processes.

navigation regional groups as well as Regional Safety Oversight Organizations (RSOOs), including the Central American Intergovernmental Corporation (COCESNA)’s Central American Agency for Aeronautics Safety and the Caribbean Aviation Safety and Security Oversight System (CASSOS). Q: How would you define Mexico’s position in civil aviation? A: Mexico is appropriately advanced. Based on the country’s level of compliance according to the degree of implementation of SARPS, Mexico is above the global average of 62 percent. A little less than half the countries in our region are below our average compliance rate. The end goal within four years is to have no more than two countries at any point in time below the 80 percent compliance rate. To test the efficacy of the program we selected Mexico as our beta test for the No Country Left Behind program, even though it has a much higher level

In 2015 the aviation industry contributed 2 percent of Mexican GDP, substantially higher than the 0.4 percent in 2011

of compliance than other countries in the region. Q: What are ICAO’s goals for reducing CO2 emissions Mexico has several advantages, including its central

and noise contamination?

location

tremendous

A: Both noise contamination and CO2 emissions are of

importance to this industry. Moreover, the country’s

utmost importance to us because we want to reduce

stability and commitment to aviation means that Mexico

aviation’s carbon footprint. One of our goals is to

has become one of the most important destinations

achieve a neutral aviation footprint by 2020. Technology

from the US and Canada. In Mexico, we have had the

is playing an important role in this by generating

complete support of the government and are closely

airplanes that pollute less and use less fuel. There is also

collaborating with the presidential administration on

a procedural aspect. If it is possible to reduce the flight

numerous projects, including the construction of the

time of a specific route without reducing security, the

New International Airport of Mexico City (NAICM) to

time a plane is not in the air contributes to improving

ensure that it becomes both what the local government

this footprint. Consequently, one of ICAO's goals is

wants it to be and what the international community

the implementation of performance-based navigation

needs it to be.

procedures.

because

connectivity

VIEW FROM THE TOP

MILITARY EYES HOMEMADE AIRCRAFT GEN. JULIÁN CORONA Deputy Director General for the Military Aeronautic Industry of the Ministry of National Defense

Q: What is SEDENA’s view of the state of the aerospace

will go on to the third phase, called Azteca 3. This will

industry and what strategies is it following to foster

involve the creation of a training jet aircraft in 2021. We

growth?

expect the combination of these projects will lead to the

A: ProMéxico, FEMIA and the High Technology and Heavy

development of the Olmeca project in 2035, when we

Industries General Office specify that Mexico is home to

expect to manufacture fighter jets.

300 aerospace companies, of which 231 companies have international certifications to perform manufacturing

The Azteca 1 will be used to train cadets at the military

processes for commercial and private aviation. We expect

school of aviation and will substitute the aircraft we

the strength that civil aviation is manifesting will be

currently have medium-term, which will allow us to

reflected in the military sector. To foster national aviation

optimize

industry growth SEDENA created the Deputy Directorate

development in Mexico. The project is in the R&D phase

General for the Military Aeronautics Industry in 2014. This

and is funded and directed by SEDENA. The number of

division is charged with the development of aerospace

planes that will be manufactured will be determined by

projects and in the future, of the complete cycle of aircraft

the training needs and disposition of the military school.

training

costs

and

promote

technology

development, construction and maintenance. We have didactic rocket models with 100 percent Mexican Q: What aircraft characteristics is the air force considering

components. Though this project is being implemented

for the renewal of its fleet?

by military engineers, we are considering joining efforts

A: We always consider the aircraft’s final mission when

with universities and research centers such as IPN. These

acquiring new units. There are certain characteristics that

rockets have been subjected to several lab tests in which

every aircraft needs to meet, including the capability to

they have reached heights of 300m. The development of

perform civilian support tasks and the necessary range

an aircraft or rocket will allow complementary growth of

to reach the whole country. Due to the diversity of

diverse areas and permit the strengthening of the Mexican

Mexico’s terrain all planes must be able to land on short

aerospace industry.

and unsuitable runways. Depending on the mission, they also might need armor plating. It is necessary to consider

Q: What does the Mexican Aerospace Fair (FAMEX)

the environmental conditions of the zones they operate

represent for the development of Mexican industry?

in so every aircraft we purchase is functional in extreme

A: FAMEX is a SEDENA initiative and is intended to

conditions and temperatures.

support the economic development of Mexico. Its first edition in 2015 attracted the presence of 240 aerospace

Q: What military aerospace projects is the Deputy

companies from 15 different countries to a business

Directorate developing?

enabling-environment, which led to 3,500 business

A: One of our largest projects is the Azteca, which

meetings. It also was the scene of the first Foreign

envisages manufacturing a training plane, designed

Investment Seminar and the first Forum for Aeronautic

and created in Mexico for military use. According to

Education, which took a scientific and academic approach

statements made by the Gen. Salvador Cienfuegos

involving 23 Mexican universities. FAMEX received more

Zepeda, head of SEDENA, we expect to have an aircraft

than 32,000 visitors and over 200,000 on its last day,

prototype and two experimental planes by 2018. Starting

when the event was open to the public.

in 2017, we will put in a request for the Azteca 2 project that will encompass a training turboprop aircraft and

The next FAMEX will take place in 2017. We expect to

the construction of a light plane with rotary wings

receive up to 400 companies and to host the second

by 2019. Once these two projects are completed, we

edition of our investment and education forums.

VIEW FROM THE TOP

MEXICAN AIR TRAVEL JUMPS BY DOUBLE DIGITS MIGUEL PELÁEZ Director General of General Direction for Civil Aviation (DGAC)

Q: What are DGAC’s main areas of focus when promoting

50 million travelers. When the airport is completed that

the development of private aviation in the country?

number will reach the 120 million passenger target, making

A: Our number one priority is safety, followed by service

the NAICM one of the largest airports in the world.

quality and the correct implementation of corresponding regulations. We are in charge of monitoring safety in different

Q: How will airports near Mexico City be affected once

areas, including airport operations, training centers, MROs

NAICM is completed?

and several other maintenance and manufacturing centers

A: The metropolitan airport system functions as a relief for

located at every airport in the country. Our role is to ensure

the AICM and we hope the system increases its support

that every airport complies with national and international

role until the NAICM is completed. Airports belonging

safety, maintenance and preservation guidelines as stated

to the metropolitan system will not disappear because

by the regulatory framework.

of the new infrastructure. Conversely, we expect these airports to continue growing with the increased number

The federal network of Mexican airports consists of 76

of passengers the new airport will attract.

aerodromes administered by four airport groups, the Pacific Airport Group (GAP), North Center Airport Group (OMA),

Within the metropolitan airport system, the Toluca

Southeast Airport Group (ASUR) and Mexico City Airport

International Airport (AIT) can easily act as a third

Group (GACM). Besides those, Airports and Auxiliary

terminal for the AICM due to its location. For people living

Services (ASA), a decentralized organism, manages 19

in the western part of the city getting to Toluca is easier

airports. The four airport groups have developed five-year

and faster than going to Mexico City’s airport. Toluca

plans with investment projects that are subject to DGAC

already functions as an extension of the country’s main

approval. Some aerodromes do not belong to DGAC’s

air terminal and it has the infrastructure to handle excess

system. Local governments are responsible for those.

demand. AIT’s proximity to the capital helped the airport to act as a launching platform for Interjet and Volaris, two

Q: How has commercial aviation and manufacturing

of the country’s most successful airlines. Airports located

evolved in Mexico?

in Toluca, Puebla and Queretaro will continue to support

A: In 2015, the number of passengers who traveled by

Mexico City’s operations whenever weather conditions

air in Mexico increased 12.5 percent over the year before,

hinder the AICM’s operations.

surpassing the country’s 2 percent GDP growth. This double-digit increase is higher than the global average and

Q: What is DGAC’s perspective regarding the impact of

was attained thanks to policies and strategies implemented

the new BASA between the US and Mexico?

by the federal government. In 2015, the country’s industrial

A: The signing of civil aviation agreements such as that

activity registered 2.6 percent growth, while air cargo

between Mexico and the US in December 2015 will help

transportation more than doubled this number, showing a

boost operations in metropolitan airports. This agreement

6.1 percent rise in operations. Between 2013 and 2015, the 50

will increase operations with the US by allowing more

working Bilateral Air Service Agreements (BASA) signed by

flexibility. It implies a cessation of the existing restrictions

DGAC helped to inaugurate 186 international flying routes.

regarding the number of aircraft and flights allowed in

During this administration, 23 new bilateral agreements

each country. The treaty offers important and attractive

have been negotiated, approved and signed.

growth opportunities for both countries and the flexibility that will come as a result will generate new business

The construction of the NAICM also is expected to increase

opportunities for airlines. It also creates an opportunity

the number of passengers traveling. We forecast the airport’s

to build alliances between Mexican and US airlines, which

inaugural phase beginning October 20, 2020 will see around

inevitably generates more benefits for end users.

VIEW FROM THE TOP

LOOKING BEYOND THE HEAVENS FRANCISCO MENDIETA Director General of the Mexican Space Agency (AEM)

Q: What is the state of the space sector in Mexico and

foreign space companies and one is interested in coming

how does the Mexican Space Agency (AEM) support it?

to the country. Mexico also is an attractive destination for

A: The aerospace sector has grown extremely quickly due

foreign direct investment as a gate to the US market for

to human curiosity, ingenuity and our desire to explore.

European companies and to Latin America.

Space R&D can be divided into space exploration through manned and unmanned missions, and observation of

AEM is identifying and promoting several technological

Earth through satellites. For over 30 years, Mexico has

niches in which Mexico can add value but the country

been buying and operating satellites to exploit their

already is developing some products, mainly for satellite

communications capabilities. From Morelos in the 1980s,

communications and global positioning systems. These

Solidaridad in the ‘90s and the partial privatization of

are used by many entities, including SEDENA, PEMEX,

Satmex, the space sector is growing in Mexico, partly as

the National Institute of Geography and Statistics (INEGI),

an extension of the expanding aerospace sector.

the Ministry of the Environment and Natural Resources (SEMARNAT), the National Commission for the Knowledge

AEM was created to stimulate development in the

and Use of Biodiversity (CONABIO) and the Ministry of

Mexican space sector. While this segment has some

Agriculture, Livestock, Rural Development, Fishing and

aspects in common with aerospace, it also deals with

Nourishment (SAGARPA).

unique requirements such as high temperatures and vacuums. We are mostly focusing on technology because

Q: How interested is the private sector in developing

to develop a space sector we have to expand Mexico’s

projects and technologies for space?

abilities from users to developers in a similar way to

A: Many private companies see the potential in this

the aerospace sector. That industry is spread across 18

sector. BlueOrigins and SpaceX among several others in

states, and universities in those regions have adapted

the private sector are developing new markets, including

their syllabi to address the sector’s needs. Aerospace

communications, while governments focus on exploration.

provides over 40,000 jobs. The agency’s goal is for both

The International Space Station is developing projects

the space and aerospace industries to represent an equal

alongside the private sector, beyond communications to

share of the market.

include meteorology and medicine.

Q: How can the growing Mexican aerospace sector

Q: Which market niches has AEM identified that can be

support the development of a national space industry?

addressed by Mexican industry?

A: The Mexican industry is evolving from aerospace

A: An important and urgent market need is the development

into space. For instance, Mexico is a pioneer in satellite

of a new type of satellite. Up to a few years ago, only

harnesses,

large multiton satellites were launched. But current trends

which

was

achieved

through

gradual

development of harness manufacturing for airplanes.

point toward the miniaturization of satellites. These utilize technologies for cameras, processors, accelerometers and

Mexico manufactures all the wiring and connectors for the

gyroscopes. A new system flies a constellation of several

Orion spacecraft, a US project intent on sending humans to

dozen small satellites, which resembles the performance

Mars. We also produce avionics components for satellites,

of a large satellite. It is less expensive, lighter and easier

including positioning instruments and propulsion systems,

to launch. Mexico has about 20 research centers for the

tanks for cryogenic rocket fuels and rockets for small

development of small satellites.

satellites. While some of these developments are intended for the defense sector, most are used in the civil market.

OneWeb, an international project that aims to launch 800

Our expertise in the area has attracted the attention of

small satellites to link all the schools in the world, is a

remarkable example of how new satellite technology can

of two satellites to improve communications. This two-

be implemented to change how we connect. OneWeb’s

way system will do more than provide information, it will

pilot project will be launched from Oaxaca and it will

collect data generated by users and facilitate several

incorporate Mexican technology. We launched a tender

models for education, government and healthcare that

for the platform on the ground. For the antennae, we

are currently interactive. Satellite images can also help

expect to incorporate all Mexican schools in a project to

local emergency organizations to respond to earthquakes,

develop them.

hurricanes and forest fires. Furthermore, they can predict natural disasters and warn the population to prepare.

Many other companies also are developing systems to enhance communication, such as technology giants

Q: How will AEM support the growth of a local space

Facebook and Google, which are creating solutions to

industry?

introduce free Internet around the world using satellites,

A: We are supporting the five aerospace clusters,

balloons and drones. Mexico has several research centers

promoting the transition from airplanes to rockets and

with many capabilities for development, satellite study

from turbines to engines. We are developing centers

and even several SMEs producing them including a local

exclusively for space R&D. The first is in Zacatecas

company that is manufacturing satellite launch systems.

focusing on space telecommunications but many others will emerge in coming years.

Q: How does AEM choose projects to support and which alliances have helped consolidate the Mexican space sector? A: AEM supports projects developed by academia and the private industry in many areas. Now, we are evaluating the third call for research proposals from which we will choose 20 to support. We are still financing the first projects and once completed, we will call for larger projects. All members of the National Registry of Scientific and Technological Institutions and Enterprises (RENIECYT) can apply for funding. We are creating alliances with other space agencies to educate students and develop projects, including NASA, the Italian Space Agency and the French Space Agency. Alongside the Indian Space Research Organization and the Mexican National Center for Disaster Prevention

OneWeb’s pilot project, an international mission that aims to launch 800 small satellites to connect all schools in the world, will be launched from Oaxaca

(CENAPRED), we launched a workshop on civil safety. We also have agreements with Japan, China and

The global space market represents US$500 billion per

Argentina, as the latter is now developing its own rockets

year, including satellites, GPS and antennae. Our goal is

and satellites.

for Mexico to represent 1 percent of this market during the next decade. We have several advantages to do so

Q: How would you describe the Mexican authorities’

including governmental support, strong academics and

involvement in the space sector?

researchers in many space areas. While this market has

A: For the first time in history, the National Development

historically been led by the US, Russia, Japan and Europe,

Plan includes an agenda for space, focused on satellite

emerging countries including Mexico, India, China and

communication and GPS. Internet is primordial to every

Brazil are becoming stronger.

single aspect of modern life, yet in countries where the population is as disperse as that of Mexico, Internet

We are focusing on the areas in which Mexico has

connection is not sufficient and access can be limited in

experience such as the generation of new composites

certain areas. In this situation, satellites provide the only

and ceramics, navigation systems, robots and avionics

means to grant Internet access to over 120,000 remote,

products produced specifically for space. These include

isolated towns.

semiconductors and other electronic components, which have to be resistant to cosmic radiation. Mexico also has

Increasing Internet access is one of the most important

many projects in astrobiology, evaluating the behavior of

projects for the Ministry of Telecommunication and

plants in zero gravity and the impact of cosmic rays on

Transportation (SCT), which is using the Mexsat system

living things and telecommunications.

AIRCRAFT SPOTLIGHT

BOEING 737 FAMILY More than 40 years after making its debut, Boeing’s 737 is on the verge of welcoming new members to the family: the 737 MAX range. The new relatives are the fourth generation of Boeing’s iconic plane and consist of four models: the 737 MAX 7, 737 MAX 8, 737 MAX 9 and 737 MAX 200 promise efficiency, reliability and passenger appeal. The 737 MAX will be the standard bearer for the singleaisle aircraft while the MAX 8 is expected to lead the market. The efficiency of the new models will reduce fuel consumption, generating savings for airlines. The 737 MAX 8, for instance, boasts a 14 percent reduction in CO2 emissions compared to its competitors. A fleet of 100 737 MAX 8 aircraft would generate almost 350,000 fewer metric tons of CO2 emissions than a 100-aircraft fleet of today’s most efficient planes. This could save operators more than US$100 million and reduce operating prices by 8 percent per seat compared to Airbus’ A320neo, which would give the aircraft the lowest operating prices in the single-aisle segment. Besides reducing air pollution, the new aircraft also contribute to the environment by cutting up to 40 percent of noise pollution and NOx emissions. In fact, the 737 MAX family will lower NOx by 50 percent more than the permitted limit established by the Committee on Aviation Environmental Protection (CAEP) of ICAO. The fuel efficiency of the CFM International LEAP-1B engine included in 737 MAX models reaches an extended range of 6,510km, which is an increase of 629-1,055km over the previous 737 model, the Next-Generation. The 737 MAX also features Boeing’s Advanced Technology winglet, which helps reduce drag, particularly for longrange flights. The structural design of the newest member of the 737 family, combined with the engine’s thrust decrease and maintenance services required less frequently, are part of the advantages offered by the aircraft. Currently, 99.7 percent of the flights featuring the NextGeneration are ready to depart within 15 minutes of the programmed time and the 737 MAX will improve on that. These new planes are expected to present 590 fewer flight delays per year, which would mean almost 65,000 fewer flight disruptions for passengers compared to the competition’s fleet. Beginning 2017, the 737 MAX family will take the single-aisle flight segment to new heights.

MEXICAN AEROSPACE INDUSTRY

1 26

2 4

15 Aerospace Cluster

17 Emerging Hub

State

Number of Aerospace Companies

Baja California

71 52

Sonora

Queretaro

Chihuahua

Nuevo Leon

Jalisco

State of Mexico

Tamaulipas

Mexico City

Coahuila

San Luis Potosi

Guanajuato

Yucatan

Puebla

Durango

Aguascalientes

Zacatecas

Hidalgo

Source: FEMIA and ProMexico

Research Centers with Aerospace Studies

9 14

ANALYSIS

NEW AIR FREEDOMS FOR MEXICO AND THE US In a year where Donald Trump’s intentions to build a

Flights to Panama, South America, Canada, Europe or

wall made headlines, the US and Mexican governments

other countries can also make stops on established

have taken steps in the opposite direction. The Ministry

destinations in Mexico or the US.

of Communications and Transport (SCT) and the US

Department of Transportation (DoT) implemented BASA,

Gerardo Ruíz, head of the SCT, said at the signing the

whose purpose is to increase the number of passengers

agreement contributes to Mexico’s consolidation as an

traveling between the countries.

added value logistics platform, with the needed mobility and connectivity infrastructure that contributes to the

After two years of negotiations, Mexico and the US

country’s insertion on international markets. For Ruíz,

signed the Open Skies Agreement in December 2015.

the deal reinforces the existing high-level of cooperation

By Aug. 21, 2016, the new BASA was in place, allowing

between Mexico and the US. Anthony Fox, his US

commercial and cargo airlines to freely operate across

counterpart, added it benefits both countries, airlines

the two borders. The agreement’s main objective is to

and passengers, while strengthening the economic and

expand existing air freedoms and hence the number of

commercial relationship through touristic and business

travelers.

exchange.

BASA’s goal is to promote and facilitate binational

For José Garza, CEO of Interjet, BASA allows Mexican

aviation,

implement

airlines to make their way into new markets. “The Mexican

competitive costs and ensure the highest degree of

aviation market is perceived to be at a disadvantage as

safety and security. For Miguel Peláez, Director General of

it is smaller than that in the US. However, foreign airlines

DGAC, the deal “offers important and attractive growth

have operated in Mexico for decades and they have yet

opportunities for both countries and the flexibility that

to be overtaken. BASA will be a great opportunity for

will come as a result will generate new business.”

Mexican airlines to reaffirm their market penetration.”

Cargo operations and charter flights will benefit by

Users will experience direct benefits such as an increase

lifting all restrictions regarding the number of airlines

in the flight offering and a decrease in ticket prices.

allowed to fly any given route between paired cities.

According to DGAC, in 2015 a total of 25.2 million people

The deal also permits transport flights to third countries,

traveled between Mexico and the US by air. By 2020, this

making stops in Mexico or US cities first. Commercial

number is expected to reach 37 million passengers, up

operations will also get a boost from the deal as price

57 percent. Without BASA, the number of travelers was

restrictions are removed and alliances between airlines

only expected to increase 33 percent.

while

encouraging

airlines

are permitted. Travelers are not the only ones to benefit. Industries such as tourism and manufacturing also will be enhanced.

In 2015 a total of 25.2 million people traveled between Mexico and the US by air. By 2020, this number is expected to reach 37 million passengers

The cargo deregulations are expected to boost the manufacturing industry, allowing regional growth as the existing clusters become better connected with all aerospace hubs in Mexico. Once the construction of Mexico City’s new airport is complete, the area destined for cargo operations will increase to five times its current size. Commercial airlines were among the most enthusiastic supporters of the agreement and Southwest Airlines was the first to take advantage. The low-cost service expects to operate flights between Los Angeles (LA)-Cancun,

Both countries are obliged to maintain equal competition

LA-Los Cabos and LA-Puerto Vallarta by December

opportunities,

and

2016. Delta Airlines said in a company statement the

regularity of the service offering. This means any airline

agreement “lays the foundations for the growth of the

can offer flights between any paired city in the country.

cross-border market” between the two countries.

without

limiting

traffic

volume

So far, Aeroméxico and Delta Airlines seem to be ready

protect the domestic industry and conduct annual

to take the most advantage of the deal. In May 2016,

revisions on the results of the deal.

the Mexican Federal Antitrust Commission (COFECE) approved Aeromexico’s and Delta’s joint venture (JV). The

Joint ventures between Mexican airlines and their US

JV would allow both airlines to compete more effectively

counterparts, such as that between Aeromexico and

with other carriers in both countries, generating US$1.5

Delta, will become part of the scenario. “The agreement

billion in earnings. Should the JV be approved by the US

creates

government at the end of 2016, the airlines would invest

alliances between Mexican and US airlines, which will

jointly in airport facilities, VIP lounges and waiting rooms

generate more benefits for final-end users,” said Peláez.

in the US and Mexico.

Interjet already has an agreement on shared codes with

opportunity

for

the

materialization

American Airlines, which could be used as the foundation Even though the private sector was among the first to

for a future alliance.

applaud the agreement, unions received the news with a more cautious approach. Mario González, General

According to Sergio Allard, President and Director

Secretary for the Pilots Union (ASPA), rejected the deal

General of CANAERO, BASA will increase flight supply

during a protest in front of the media in September 2015,

and competition, which will force Mexican airlines to

arguing that the survival of the Mexican aviation industry

improve practices and customer services. DGAC data

was at stake. “We barely have 350 aircraft, we cannot

states that almost 75 percent of passengers that travel

compete against the 7,000 units the US has. If we allow

by air to the US do so using US airlines.

an open skies policy, the Mexican aviation industry could suffer catastrophic consequences” said González at the

For Garza, being able to compete in the US market will

demonstration.

be a long-term process. “At this point, both Mexicans and US citizens prefer US airlines, as they believe them to

Still, at the end of 2015 ASPA endorsed the agreement.

be safer. However, US airlines suffer from disadvantages

Among the reasons for a change of heart, they argued

including older fleets. We believe that once passengers

that the text was not as damaging as they had previously

try our airlines they will prefer the younger fleet and

thought. They also asked the federal government to

overall improved service.”

ROUND TABLE

TALENT DISPARITIES AND INDUSTRY SOLUTIONS A common factor uniting companies in all industries in

collaborate with academia in the hope their feedback will

all new locations is the search for the right expertise.

filter through to university curriculums. Some enterprises

Throughout 2016, several key players touched on the

are even working directly with higher education institutes

topic of human talent and training or education, which

to have punctual input into course designs.

seems to be abundant in Mexico but not always where 30

needed or to the required standards.

Industry players comment on the projects designed to develop future professionals for the aerospace industry,

Many companies have resorted to offering courses in-

some of which receive financial support from CONACYT.

house, accepting available engineering graduates, for

Here, several aerospace executives detail their recruiting

example, and offering them hands-on experience to

experience in Mexico and their companies’ strategies to

obtain specialized knowledge for aerospace. Others

place the right people in the right jobs.

Mexico has a promising future in aerospace as the country is now consolidating its expertise. One of Safran’s greatest contributions to the local industry, beyond generating employment and foreign investment, is education. In response to its importance, we are developing joint education programs with UNAQ, in which students learn theory at the university and get practical experience at our plants. We also can send some of them to our plants in France with support from the Mexican government. We are forging a generation that will shape the Mexican aerospace future.

DANIEL PARFAIT President of Safran Mexico

CENALTEC was founded to support local manufacturing, enhancing the competitiveness of local workers through cutting-edge technology programs. Foreign companies establishing in the state reported a lack of human capital for their local operations and as more aerospace companies arrived in Chihuahua, demand for these educational services kept increasing. Honeywell, for instance, predicted demand for about 1,000 machining technicians but could only find about 50 in the state. Their team flagged the problem, and together we started developing

ALBERTO SALOMÓN Director of Chihuahua Campus of CENALTEC

a model to provide the technicians they needed. To date we have trained 1,3001,400 technicians. Our training courses are recognized by the European American Society of Mechanical Engineers (ASME), the local Ministry of Education (SEP), the Ministry of Labor and Social Welfare (STPS) and several academic institutions.

Aerospace Alliance collaborates closely with national and international education institutions. We have a project with universities from the US and Europe to develop nonferrous materials including titanium and composites. We have developed about eight projects and trained over 1,300 people. Generating qualified professionals, including operators, maintenance technicians and engineers in targeted areas is critical to address the existing gaps between technicians and engineers. As we come to understand local human capital demographics and join forces to complete the first state-owned Training Center for Advanced Technology (ICAT)

ARDY NAJAFIAN

in Mexicali and Tijuana, it is also necessary to align university programs geared

President of Aerospace Alliance

toward aerospace.

A long history of industry in Mexico sets the foundation for aerospace companies to build on manufacturing activities that have existed since the 1970s. Such a deeply rooted industrial culture has manifested in plenty of transferable talent. However, as we developed activities here, we recognized a need to contribute to training the local talent base. Therefore, Zodiac Aerospace has collaborated with local universities to develop courses suited to our engineering needs, and to train young talent through innovative projects at our facilities. The talent pool is as important

BAPTISTE VALOIS Group Industrial Development Manager at Zodiac Aerospace

to us as the supply chain. There are many initiatives in place to strengthen local industry via Chihuahua’s Aerocluster, especially in the MRO segment. 31

AEROSPACE OEMS

With each passing year, the assembly in Mexico of a complete airplane sounds less like a dream and more like a reality. In the past decade, an important number of companies have made their way to the country. Citing Mexico’s strategic position south of the US, its record for graduating engineers, the commercial opportunities that arise from free trade agreements and the existing infrastructure, OEMs such as Bombardier, Textron, Cessna and Beechcraft have decided to establish manufacturing sites here. Though Mexico might not perform complete aircraft assemblies yet, its presence on the manufacturing chain is becoming essential in an increasingly globalized world. The establishment of OEMs in the country also has contributed to Mexico’s trade balance. In the past 10 years, the country’s aerospace exports have posted annual growth of 14.1 percent and in 2015 alone the total value of exports from this industry reached US$6.6 billion. The government’s Pro-Aéreo 2012-2020 development plan targets US$12 billion by 2020.

With insights and analysis on OEM operations, this chapter is a go-to guide on how original equipment manufacturers work in Mexico and the world, as well as the challenges and opportunities they foresee in the coming years.

CHAPTER 2: AEROSPACE OEMS 36

ANALYSIS: Checking the OEM Pulse

VIEW FROM THE TOP: Van Rex Gallard, Boeing

VIEW FROM THE TOP: Rafael Alonso, Airbus Latin America and Caribbean

ANALYSIS: Airbus A380 Versus the Boeing 787 Dreamliner

ANALYSIS: Can Bombardier Bounce Back?

INSIGHT: Embraer Puts Brazil on Aviation Map

AIRCRAFT SPOTLIGHT: Boeing 787 Dreamliner

VIEW FROM THE TOP: John Ortega, Gulfstream Aerospace

VIEW FROM THE TOP: José Rodríguez, Fokker in Mexico

VIEW FROM THE TOP: Daniel Parfait, Safran Mexico

AIRCRAFT SPOTLIGHT: Cessna Citation Latitude

INSIGHT: A Tale of Two Entities

VIEW FROM THE TOP: Cecilio López, Honeywell Chihuahua

VIEW FROM THE TOP: Gunther Barajas, Dassault Systèmes

VIEW FROM THE TOP: Baptiste Valois, Zodiac Aerospace

VIEW FROM THE TOP: Juan Carlos Corral, ITP Mexico

VIEW FROM THE TOP: Javier Pérez, Aernnova Mexico

ROUND TABLE: Mexican R&D: Getting the Word Out

ANALYSIS

CHECKING THE OEM PULSE Led by a rise in tourism, increasing global connectivity

the full year. For its part, Airbus reported a 0.48 percent

and helped by lower oil prices, the commercial aerospace

decline during the first half of 2016 to €28.76 billion.

sector has enjoyed steady growth over the past five years and, while it faced several difficulties in 2015,

The softer figures are not a surprise as the sector

expectations are for the industry to keep expanding.

appears to be leveling out after five years of record growth. While Boeing posted positive numbers with a year on year 6 percent increase in revenue to US$96.1

which is evident in the backlogs at the world’s largest

billion in 2015, companies based in Mexico were hit by

aerospace OEMs,” says Luis Lizcano, Director General

the strong dollar, PwC said in a report. Airbus reported

of FEMIA. Some outlooks project a 5 percent annual

an increase in revenue to €64.5 billion (US$71 billion)

growth rate for global air transport over the next 20

in 2015 from €60.7 billion (US$67 billion) but factoring

years, according to Lizcano.

in the exchange rate translates to an 11 percent loss. Bombardier Aerospace, Dassault Aviation and Embraer also saw revenues contract in the same period, registering

“The air transport sector is

6, 5 and 6 percent deficits, respectively.

projected to grow 5 percent

The year was positive in other areas, however. Both

annually for the next 20 years,

Airbus and Boeing broke records for aircraft deliveries.

increasing pressure on airlines

Boeing also reported 768 new orders and Airbus 1,080.

Boeing delivered 762 aircraft while Airbus managed 635. Those numbers were strong even if they did not reach

and aircraft manufacturers”

the record-breaking levels of previous years.

Luis Lizcano, Director General of FEMIA

Nonetheless, the industry is on solid footing. Driven by a continuous annual increase in passenger traffic and

The two top OEMs, Boeing and Airbus, have a nine-

aircraft orders, the aerospace sector is undergoing its

year backlog for airplane deliveries and demand is

most profitable growth cycle, according to PwC.

expected to keep pace. The growth in commercial aircraft production has translated to significant revenue

Smaller aircraft manufacturers also faced a challenging

increases for aerospace suppliers, according to Deloitte.

period. Embraer, the third largest commercial aircraft manufacturer after Airbus and Boeing, reported a 6

Boeing reported a revenue increase of US$1.49 billion to

percent drop in revenue, to US$5.9 billion in 2015 from

US$47.38 billion for the first half of 2016 over the previous

US$6.3 billion in 2014.

year, which is a 3.2 percent gain on the previous year. That compares with a jump of 10 percent year on year,

Bombardier Aerospace crossed a rocky road after its

in the first half of 2015, although that figure retreated for

bet on the C Series, a family designed for the 100 to

AIRCRAFT DELIVERY FORECAST 2009 – 2034 (units) AIRCRAFT DELIVERY FORECAST 2009 – 2034 (UNITS)

2,500 2,000 1,500 1,000

Source: 2016 Global Aerospace and Defense Sector Outlook, Deloitte.

2034

2033

2032

2031

2030

2029

2028

2027

2026

2025

2024

2023

2022

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

500 2009

“Across the globe, the industry’s motor is the market,

150-passenger segment and to compete with Airbus’

that same list. Both companies faced revenue reductions

A320 and Boeing’s 737. While this series now has 365

but at a much smaller 1 and 2 percent, respectively.

orders, according to the airline, it is also two years behind schedule and more than US$2 billion over its

OEM AND TIER 1 GROWTH

projected US$3.4 billion budget. Company revenue also

One way in which aerospace companies reduce operating

fell to US$11.2 billion from US$11.9 billion. These drops led

costs is by expanding their manufacturing chains and

the manufacturer to cut its payroll by 7,000 employees

moving specific processes to low-cost destinations. In

while it announced a US$1 billion bailout from its home

that sense, Mexico has proven to be attractive for the

province of Quebec, Canada in February 2016.

aerospace industry. Most aerospace OEMs operating in the country have expanded from having only a sales

Textron Aviation, which sells Beechcraft, Cessna and

office located in the country to full-blown production.

Hawker aircraft, also saw its revenue shrink 6 percent.

Safran, for example, now has 13 manufacturing plants in Mexico.

MEXICAN COMMERCIAL FLEET MEXICAN COMMERCIAL FLEET BY BY

Safran's plants are divided between Queretaro and

MANUFACTURER (NUMBER OF MANUFACTURER 2015 (number of aircraft) AIRCRAFT)

Chihuahua and it has announced plans for two more

Bombardier

locations in Mexico, one of which will be responsible for manufacturing the CFM LEAP engine. “The LEAP engine

ATR

project will put us at the forefront of the aerospace

Sukhoi

133 Airbus

industry for the next 20 years,” says Daniel Parfait,

88 Boeing Cessna

President of Safran Mexico.

47 Embraer Embraer 35 Cessna

21 Sukhoi

Honeywell Chihuahua manufactures parts for turbine and auxiliary power units, mainly rotary pieces including

Boeing

16 AT

2 Bombardier Airbus

blades, impellers, couples and gears, and some static pieces such as the gear box. “Our facilities are home to more than 1,400 machines across four plants,” said

Aircraft type

Average age (years)

Number of aircraft

Airbus 319

8.7

Airbus 320

5.9

109

Textron Aviation has seven facilities in Chihuahua,

Airbus 321

1.0

employing

Airbus B4

33.5

harnesses, one for fuselage, three for sheet metal and

ATR 42

20.9

Cecilio López, Plant Director of Honeywell Chihuahua.

over

1,800

workers,

one

making

wire

two for special processes.

ATR 72

3.0

Boeing 737

13.0

Boeing 767

19.0

Boeing 777

11.7

Boeing 787

3.4

Bombardier-200

21.0

Cessna

13.7

Embraer 120 ER

18.5

Embraer 145

15.3

Embraer 190

5.2

Embraer ERJ 170

11.1

Embraer ERJ 175

10.0

and 38 A320 units. Aeroméxico on the other hand, the

Sukhoi SU100

2.2

country’s largest and oldest operating airline, prefers

Despite

its

drop

revenue,

Textron

alongside

many companies, was attracted to Mexico by lower manufacturing costs, a large pool of potential employees, an ideal location in the NAFTA region and a strong local market. Mexico has the largest number of aircraft in the world after the US. The market is mostly dominated by Airbus, which is preferred by low-cost airline VivaAerobus. This company owns 14 Airbus A320, while Interjet owns 41 Airbus A320 and Volaris has 18 Airbus A319

Boeing and operates 50 Boeing 737, 4 Boeing 777 and

Source: DGAC 2015

9 Boeing 787. It also operates a regional airline under Other major players in the aerospace sector include

the Aeroméxico Connect brand with a fleet composed

Safran, a turbine engineering company that ranks 11th

entirely of Embraer models, 62 aircraft in total.

in PwC’s Aerospace & Defense Top 100 aerospace companies for 2015, and Honeywell Aerospace, which makes engines and avionics, and holds the 13

spot on

Other

aircraft

used

Mexican

airlines

includes

Bombardier, Cessna and Sukhoi, according to DGAC.

VIEW FROM THE TOP

BOEING ADAPTS TO MARKET TRENDS VAN REX GALLARD Vice President of Africa, Latin America and Caribbean Sales at Boeing 38

Q: How do trends influencing the Latin American

The Boeing 737 MAX will come to Latin America in 2018

market impact Boeing’s decisions and its attempts to

through GOL Airlines in Brazil, Copa in Panama and into

improve passenger experience?

Mexico that same year with Aeroméxico.

A: We have worked alongside our competition to develop jumbo airplanes, such as the 747, also known as the

Q: What is Boeing’s sales strategy for Latin America

Queen of the Skies. Over the past 10 years, however, we

given the economic fluctuations in the region?

realized the market was heading in a different direction.

A: Boeing is confident about the performance of the

Growth was shifting from hub-to-hub destinations

Latin American market. Long-term projections are

toward direct flights to secondary cities. This led us to

positive though some short-term challenges certainly

mirror the trend and invest in the 787 because it is the

exist. We are investing time in fully understanding the

right size for that market. The 777X, while larger than

region to ensure we are promoting the appropriate

the 787, can also compete and succeed in this market

products for local operators to maintain a sustainable

because it has only two engines.

business model.

Having fewer engines represents lower operational

Boeing has a large number of operators in Latin America

costs. Boeing expects to introduce the 777X to the

both for narrow and wide body planes, including GOL

global market in 2020.

Airlines, Copa Airlines, LATAM Airlines and Aeroméxico. Our presence in the region is as long as Boeing’s

Boeing holds 50 percent of the Mexican narrow body market

history, which gives us an advantage in terms of industry knowledge and operators. We are interested in allocating our products in all countries in Latin America, from Mexico to Tierra del Fuego.

Latin American airlines are looking for aircraft that can

We have been participants in the Mexican industry for

fly longer routes, for which the Boeing 787 is ideal.

many years, as operators, parts manufacturers and

This aircraft has a range of 13,620km so it can fly as far

sourcing suppliers based in Mexico. The country has

as China from Mexico. It also is the most comfortable

many advantages beyond its ideal location close to the

passenger airplane on the market. One of the reasons

US. Its qualified human capital are key to aerospace

the aircraft is comfortable is the lower internal pressure

developments in the country and the government is

as it operates at approximately 6,000ft while others

dedicated to developing the industry, without which such

tend to fly at 8,000ft. Operating at this lower altitude

growth would not have been possible.

generates more humidity. This decreases passenger fatigue and discomfort and allows travelers to arrive at

The

their destination feeling refreshed and less jet lagged.

airline feels the need to have better aircraft than the

aviation

sector

highly

competitive.

Every

competition. Boeing’s aircraft provide lower operational For medium distances, we are introducing the 737 MAX.

costs and higher performance for Mexico’s airports.

This is the new revamped version of the classic 737. This aircraft offers 16 percent reduction in fuel consumption,

Moreover, to remain competitive, Boeing places a

which leads to significant savings for airlines. It also is

special emphasis on customer support. We have been

a flexible aircraft that can access destinations others

rewarded for this effort as it has been recognized in

cannot, which permits airlines to open new markets to

recent surveys that our company is the world’s best in

places with less conventional runways.

customer service.

Q: How important is Aeroméxico for Boeing and what other segments is the company targeting? A: Aeroméxico is our main partner in Mexico. It operates the 737, a narrow body aircraft that enjoys great market success. Other airlines have preferred to match different aircraft to their business models and once an airline chooses a specific type, it is difficult for it to deviate because that would result in significant costs. Aeroméxico made an order for 100 units in July 2012 of varying types of aircraft, including the 737 MAX, which increases fuel efficiency by 1.8 percent due to its new

winglet, and the 787-8, which generates 20 percent less CO2 emissions and keeps noise levels to 85 decibels, a benchmark that is 60 percent less than Boeing’s 767 and below ICAO’s regulations. Major low-cost airlines including Ryanair, Southwest

Mexico represents 20 percent of Boeing’s market in Latin America

Airlines and WestJet, are using our aircraft. These airlines represent a great business opportunity for us

it cost up to five times more than regular business class

because we have a product designed for them. We

and the aviation industry is keen to increase access to all

recently launched the 737 MAX 200, which reduces the

economic levels of the population.

fuel-cost per seat by 20 percent and is ideal for low-cost Q: What must be done to expand the use of biofuel in

airlines due to its size and specifications.

aircraft? Q: What are the main advantages granted by new

A: One of the advantages of modern aircraft is they can

aviation technology and how are your operations

use biofuel. Aeroméxico recently used it for a flight to

changing to accommodate them?

Costa Rica from Mexico but its use remains unpopular

A: Technology has brought about benefits such as

or less common because its production is expensive. We

improved reliability. Composite materials are reducing

are investing in developing better ways to manufacture

airplane weight while maintaining its strength and

biofuels, which will reduce the environmental impact

durability. Until recently, all aircraft required four engines

for safety reasons. Modern aircraft only incorporate two,

technologies in many areas, from propulsion systems

as new engines are more reliable than their predecessors.

to aircraft designs aimed at offering more competitive,

our

aircraft.

Boeing

constantly

develops

new

efficient products with smaller environmental impacts. Maintenance times also have been reduced, greatly improving operational costs and reducing ticket prices

Q: How many Boeing airplanes do you expect Mexican

enough to make overseas flights accessible to a larger

airlines to acquire in the short term considering existing

segment of the population. Boeing focuses heavily on

market needs?

reliability because that is what helps our customers

A: Over the next 20 years, Mexico will need to replace

successfully

60 percent of its existing aircraft. Ideally, Boeing would

and

safely

operate

and

grow

their

businesses.

replace 100 percent of that number projected to be renewed.

Airplanes and air travel still have limitations. The duration of a flight can be longer than desired due to

We dominate the wide body market in Mexico and hold

air traffic control, the type of aircraft and the available

an approximate 70 percent share in the global market.

time slots at the airport. In the case of aircraft, while

Mexican airlines interested in operating international

there is sufficient technology for airplanes to fly faster,

flights will turn toward Boeing. We expect to retain 50

as evidenced by the Concorde, these technologies are

percent of the Mexican narrow body market and are

too expensive, in spite of the fact that the ticket prices

introducing new products and excellent services to

keep dropping.

ensure this. Boeing is the leader in aviation.

The cost of fuel consumption and engine maintenance

Although our competition may have more aircraft

counteracts the cost saved by flying faster. The

orders, we have a higher delivery rate than anyone in

Concorde itself did not have the expected popularity, as

the market, which is what really matters.

VIEW FROM THE TOP

AIRBUS SEES A380 AS INDISPENSABLE RAFAEL ALONSO President of Airbus Latin America and Caribbean 40

Q: What is Mexico’s role in Airbus’ global strategy?

LCCs have changed regional transportation by making air

A: Mexico is our second most important market in Latin

travel more affordable, especially when passengers require

America after Brazil and we have had a leading presence here

an immediate trip. Part of their business model is to move

for almost 30 years. This can be seen in the approximately

long-distance bus passengers toward LCCs and Mexico is

120 aircraft managed by our four clients in Mexico, which

leading this trend. By increasing the number of flights LCC

are AeroUnion, Interjet, Volaris and VivaAerobus. With these

model but it is now developing in other significant markets

airlines, we hold 62 percent of the market for commercial

such as Chile and Colombia.

aircraft and 61 percent of orders for this market. Q: What characteristics attracted unprecedented demand To showcase Mexico’s importance regionally and globally,

for the A320neo?

in September we inaugurated the first Airbus Training

A: A320neo offers several advantages including 15

Center in Latin America. Also in September, Volaris

percent reduction per seat in fuel use in comparison to the

became the first airline in North America to receive the

previous generation, the A320ceo. This is thanks to the

Airbus A320neo, the newest and most efficient model of

incorporation of many innovative measures such as next-

the A320 family, which holds the honor of being the most

generation engines and the use of Sharklets on the wings.

popular in the history of aviation. At the beginning of 2016,

These savings will continue to increase and are expected

Air France brought the A380, the largest aircraft in the

to reach 20 percent by 2020.

world, to Mexico, making Mexico City the only one in Latin America to receive this aircraft.

Another reason for the popularity of this aircraft is its adaptability to airlines’ preferences. Because it comes in

Q: What are your projections for the Mexican market?

three different sizes, from 140 to 240 seats, airlines can

A: We forecast significant growth for Mexico and for Latin

choose configurations that most adapt to their needs. Due

America. According to our global market forecast, Mexico

to these advantages the Airbus A320neo has captured 30

will need 600 aircraft over the next 20 years and, just as we

percent of single-aisle aircraft orders globally, representing

are dominating the market now, we are certain that most of

almost 4,800 orders for 87 clients since its launch in

these will be Airbus planes. The growing demand for single-

2010. Some of the first customers for this aircraft include

aisle airplanes in the country will help airlines to continue

Lufthansa, LATAM and Volaris. We are setting our sights on

growing, alongside the fact that the air travel per capita

Latin America for this aircraft and during September and

rate is expected to double in 20 years. Mexico’s economic

October, Avianca Brasil, Azul, Frontier, Spirit, Volaris and

growth also is higher than Latin America’s average, which

VivaAerobus have started to receive them.

brings interesting opportunities for Mexican companies to expand their fleet and routes, especially internationally.

Q: In light of the growth of single-aisle aircraft in Latin America, how much potential does a large aircraft like the

Q: How are Mexican low-cost carriers (LCC) Interjet,

A380 have in the region?

VivaAerobus and Volaris shaping the aviation sector?

A: While Latin America is a key player for the single-aisle

A: LCCs have grown significantly in Mexico over the past

market, with over 400 aircraft currently operating, the region

10 years and the model is expanding to service more

urgently needs to develop longer routes. Nowadays, airlines

of Latin America. In Mexico, LCCs have grown from 11

from Europe and the US hold most of the long-distance

percent of the market in 2002 to 60 percent in 2015.

market in Latin America with 83 and 75 percent, respectively.

One of the reasons for this was Mexicana’s bankruptcy.

By 2034, air traffic flows between South America and

When this airline left the market, Interjet, VivaAerobus

Western Europe are expected to become the strongest

and Volaris quickly captured it.

worldwide alongside those connecting South America and

the US. For these routes we are seeing airlines use larger and

help Mexican airlines, especially LCCs, improve their position

more efficient aircraft with a longer range, such as the A350

and capitalize on routes between the two countries.

XWB and the A380. These aircraft only began operating in the region in 2016 so there is room for growth. Taking into

Q: Which would you identify as Airbus’ most innovative

account that the aviation market doubles every 15 years, this

products in the last few years?

large increase in passenger volume makes us certain the

A: The A350 XWB is now the most modern aircraft in

A380 will become indispensable in the future.

the world. Its fuselage and wings are made of lighter aerodynamic materials and the aircraft incorporates new

We expect Mexico to need nine A380 within the next 20

engines that use less fuel. This state of the art technology

years due to the large passenger growth in the airports of

translates into unsurpassable efficiency, 25 percent less fuel

Mexico City and Cancun. These two airports are expected

use, 25 percent lower emissions and lower maintenance

to carry over 10,000 people a day in 20 years, thus large

costs. The first A350 XWB in Latin America was delivered

aircraft would be an ideal solution to avoid saturation.

to LATAM Airlines in 2015. These models can help airlines

We are certain the A380 will contribute to the growth of

capture the long-range market.

Mexico’s air market. This January, AICM became the 50

airport in the world and the first in Latin America to offer

Another of Airbus’ latest initiatives is 3-D printing. We started

commercial flights with the A380, thanks to Air France,

using this technique for the manufacture of aluminum pieces

which offers one daily flight to Paris.

for an A350 XWB in 2014. This technique to manufacture metallic parts allowed us to improve production processes

Q: What specific advantages will the A380 bring potential

and reduce waste. In June 2016 we tested a 3-D printed

users?

unmanned aerial vehicle (UAV) named Testing High-tech

A: The A380 generates a significant amount of benefits

Objectives in Reality (THOR).

besides being the largest aircraft in the world. First of all, it has the lowest fuel consumption per seat in comparison to

We are also working on creating virtual reality. Through our

all other aircraft in the market. For instance, with 544 seats

Airbus Innovation Center in Hamburg we have incorporated

in a four-class configuration, the A380 uses 30 percent less

videogame and cinema technology into our own systems

fuel per seat than the Boeing 747-800. Furthermore, the

to transform cabins' interior design, providing virtual reality

A380 is the most silent aircraft, producing 50 percent less

environments using 3-D glasses. This technology helps

noise than the Boeing 747-800, benefiting communities

engineers design parts and can be used for quality checks.

close to airports. Q: How do you expect BASA to influence the aviation Q: Airbus expects the Mexican fleet to double by 2034.

market in both countries?

Which aircraft will be most in demand by then?

A: The US represents two-thirds of international travel to

A: The A320neo has had enormous success in the region

Mexico because Mexican airlines have a weak presence in

with almost 500 orders and commitments with seven

this market. In that sense, BASA can help Mexican airlines

clients, representing almost 70 percent of orders for single-

better position themselves. Greater passenger flow between

aisle aircraft in the region. Nonetheless, Mexican airlines

both countries will boost Mexico’s economy, strengthening

have little presence on routes between Mexico and the US,

tourism and manufacturing. We support any initiative that

with only 30 percent of the market. Single-aisle aircraft can

promotes Mexico’s economy and the aeronautics industry.

ANALYSIS

AIRBUS A380 VERSUS THE BOEING 787 DREAMLINER

The two major aerospace OEMs are locked in a battle

to 242 passengers in a two-class configuration and the

that each hopes will lead to domination of the skies. For

latter up to 330 passengers. What is most remarkable

every aircraft that Airbus develops there is an alternative

about the Dreamliner is not its size but the technology

by Boeing, and vice versa. For that reason, the Airbus

it incorporates. It was manufactured using carbon

A320neo is compared to the Boeing 737 Max, the Boeing

composites, aluminum and titanium and incorporates

747 to the Airbus A380 and the Airbus A350 against the

technology that makes it the most efficient aircraft

Boeing 787. But the most hyped battle between the two

among Boeing’s current fleet for fuel use. It also leaves

in recent years pits the 787 Dreamliner against the A380.

a 60 percent smaller noise footprint than other aircraft

What makes this clash different is the nature of the fight.

of the same size. The Dreamliner offers a range of 11.9-

It is not aircraft versus aircraft but market vision versus

14.1km depending on the size of the aircraft. It comes at

market vision.

a listed cost of US$290 million.

Many have compared the two on their physical characteristics

In the other corner, the four engine Airbus A380 is the

and both are undeniably impressive machines.

largest passenger airplane in the world. This doubledecker behemoth offers 50 percent more floor surface

In the one corner stands the Boeing 787, a midsized

than its closest competitor and can carry 544 passengers

two-engine wide body that comes in three sizes. All

in a four-class configuration. If furnished exclusively

share a 60.17m wingspan, but vary on length and

with only economy class seats, it can fit a whopping 853

passenger capacity. The smallest, 757-8, is 56.69m

people. This enormous aircraft has a 79.75m wingspan

long while the largest is 68.27m. The first can carry up

and an overall length of 72.72m. Being a double decker,

it also has a height of 24.09m. The Airbus A380 comes

A380 VS DREAMLINER: ORDERS AND A380 VS DREAMLINER: ORDERS AND DELIVERIES DELIVERS

at a listed price of almost US$404 million.

Dreamliner From

the

number

engines,

wingspan

and

passenger numbers, these aircraft do not have much

A380

in common. In fact, the Airbus A380 can be compared

more closely to the Boeing 747, which is similar in size, while the Dreamliner is more closely related to the Airbus A350 XWB, both having two-engine wide bodies that incorporate a significant percentage of composites. Yet, many have pitted the Airbus 380 and Dreamliner against each other.

orders

500

1000

1500

2000

deliveries

Source: Airbus and Boeing, data as of Aug. 31, 2016.

Source: Airbus and Boeing, data as of Aug. 31, 2016. orders

Instead ofdeliveries hub-to-hub trips, the target was to transport passengers to secondary cities with direct flights.

This comparison is often made because both aircraft have been hailed by their manufacturers as game changers

Boeing’s play seems to be paying off. While the A380

that can increase revenue by optimizing performance.

is breaking size records, the Dreamliner has been more

For this reason, the discussion at its core is not an aircraft

attractive to airlines according to orders and deliveries.

comparison but an effect-on-the-market assessment.

The A380 has 319 orders and 194 deliveries, while the Dreamliner has 1,161 orders and 455 deliveries, including

With the A380, Airbus bet the market would continue to

all three models, as of Aug. 31, 2016.

rely on major airport hubs that would be supplemented by smaller aircraft. Such a market would require medium

These acquisition patterns are just a reflection of market

to small aircraft to carry passengers to and from hubs and

fluctuation and passenger preferences. As the sector

large aircraft that would directly connect hubs. Boeing

keeps evolving only time will tell what new trends will

placed its wager on a different market with the Dreamliner.

arise and which business model prevails.

ANALYSIS

CAN BOMBARDIER BOUNCE BACK?

The dark clouds hovering over Canada’s Bombardier

staples the Learjet, Challenger and Global. During the first

showed some signs of clearing in 2016, thanks partly to

quarter of 2016, Bombardier managed a book-to-bill ratio

a provincial government bailout, but uncertainty remains

close to 1. By August 2016, the Canadian company had

amid the bumpy rollout of the manufacturer’s first new

received 70 orders and delivered 73, of which 39 belonged to

aircraft program in 30 years, the C Series.

the Challenger family, 28 to the Global and six to the Learjet.

Bombardier's C Series is a family of narrow body jets with a

The company manufactures the Learjet 70 and 75 for the light

capacity for 110 to 135 passengers, depending on the aircraft.

business jet market segment. The Learjet 70 incorporates two

According to the manufacturer, this is its first completely

Honeywell TFE731-40BR engines that provide takeoff thrust

new aircraft program in over 30 years. Launched to break

of 17.1kN and a 3,815km range. The Learjet 75 has a range of

the duopoly of Airbus and Boeing commercial aircraft, the

3,778km and can fly at an altitude of almost 51,000ft. It has

C Series faced many problems over the years. While it was

carbon brakes that allow the aircraft to use shorter runways.

initially launched in 2004, it was dropped two years later

The Challenger family targets the midsize business jet

to be relaunched in 2008. Two years behind schedule, the

market and includes the 350 and the 650. Bombardier says

program incurred cost overruns calculated at US$2 billion.

the Challenger 350 has the lowest direct operating costs in

This situation led Bombardier to offer Airbus a majority stake

its class. This aircraft uses two Honeywell HTF7350 engines,

in the C Series project in 2015. Airbus rejected the proposal.

which give it the fastest time-to-climb in business aviation. The Challenger 650 uses two GE CF34-3B MTO engines

The OEM closed 2015 with a loss of US$5.3 billion and a US$10

for a range of 7,408km with six passengers onboard. It also

billion reduction in orders, causing the company to slash its

offers the widest and highest cabin in its class. For the large

70,900-strong workforce by 7,000 and leading the Canadian

business jets segment, Bombardier has the Global family,

province of Quebec, the company’s home base, to provide

which includes the 5000, 6000, 7000 and 8000. Global jets

a US$1 billion safety net. Similar aid talks with the federal

have the longest range among Bombardier’s aircraft and can

government remained deadlocked in mid-September. After

be used for transatlantic flights.

the many setbacks, the C series project finally appears ready to take flight. The first CS100, the 110-seat model, entered

Although the business aircraft division is Bombardier

service in mid-2016 with Swiss Global Air Lines, a subsidiary

Aerospace’s most profitable, it also is facing problems.

of Swiss International Air Lines. The first CS300, the 135-seat

In September 2016, the manufacturer announced it

model, will be the second of this family to enter service in

would halt completion work for the Global 5000 and

late 2016 when airBaltic begins flying the plane.

6000 at some point during 2017 due to weaker than expected demand from China, Latin America and Russia.

Orders are still a problem, however. By August 2016,

Bombardier’s business jets division reported a 3 percent

there were only 123 orders for the CS100 and 235 for the

loss in revenue in 2015 in comparison to the previous year.

CS300 and only two aircraft delivered. In comparison,

The year 2016 also has proved challenging as the company

by September 2016 Airbus had a total of 6,749 pending

reported a 19 percent loss in revenue in the second quarter

orders. In June 2016, the CS100 was certified by the

of the year compared to the same 2015 period.

FAA and the European Aviation Safety Agency (EASA). Bombardier said in its 2016 second-quarter report that

The company’s stock price has provided some respite from

the C Series is transitioning from a development phase

the gloom, although that too has been a rocky ride. Ahead

to a revenue-generating phase. The manufacturer also

of its earnings report in February, the stock tumbled to

reported an 8 percent rise in revenue at its commercial

a year low of CA$0.78 in February from CA$1.34 to start

aircraft division, to US$764 million from US$598 million.

the year. Since then it has climbed as high as CA$2.16 and

On April 28, Bombardier announced the successful

in early October was trading around CA$1.73. Analysts

agreement between Bombardier and Delta Airlines for the

polled by Reuters in early October produced a consensus

acquisition of 75 CS100 aircraft valued at US$5.6 billion,

hold recommendation on the stock. The manufacturer’s

with an option for an additional 50, making Delta Airlines

long-term debt load stands at around US$9 billion.

the largest customer for this series. These past few years have proven tricky for the Canadian While its commercial airplanes division faces problems,

manufacturer but with the launch of the C Series and a

Bombardier has a strong business jet area, although here,

strong business division, the company hopes to find

too, there are headwinds. The division produces industry

opportunities to turn this trend around.

INSIGHT

EMBRAER PUTS BRAZIL ON AVIATION MAP Embraer, a former state company, has come a long way

than 850 executive jets have been delivered to over 50

since its founding in 1969. From its beginnings as a military

countries and the segment accounted for a quarter of

and industrial aircraft manufacturer, the Brazilian OEM is

Embraer’s revenues in 2015.

now among the world’s top Tier producers. Industrial-use airplanes also are an integral ingredient for During its early years, the company grew under the

the manufacturer. The Ipanema aircraft, used mainly for

sheltering arm of the Brazilian government. Financial

agriculture, has been produced for over 50 years. With

constraints and lack of governmental investments led to

more than 1,300 units delivered, the Ipanema aircraft

Embraer’s privatization in 1994, which in turn helped the

accounts for almost 60 percent of the agriculture-use

company diversify its product portfolio. The development

aircraft in Brazil. The Ipanema is the first airplane in the

and sales of the ERJ 145 family allowed company to

world to use 100 percent ethanol as fuel. Ethanol is not

stabilize its finances and become one of the most

only more eco-friendly than gas or oil but also reduces

important OEMs in the world.

costs by about a third compared to gasoline.

Federico Curado, Embraer’s President and Executive

Embraer has come a long way since it was first created by

Director, credits the company’s creation to Brazil’s need

the Brazilian government in the 1960s. The company has

to generate technology, rather than depending on other

19,000 employees in more than 20 countries, with over

countries for it. “In Brazil we had a long-term project that

5,000 aircraft delivered globally. Brazil is the company’s

dates back to WWII and involved generating knowledge in

main client, responsible for 21 percent of its revenues.

aerospace, technology and science, rather than trying to

But as a region, North America is the most significant,

acquire technology. So the country went from books and

accounting for 48 percent of Embraer’s income. Sao Paulo,

academic knowledge and science to industrial capability.”

Botucatu, Gaviao Peixoto, Sorocaba, Taubate, Campinas and Belo Horizonte are all home to manufacturing sites

At the start, Embraer’s focus was military and industrial

in Brazil. Florida and Evora, Portugal host major Embraer

aircraft. Its first plane, the Bandeirante, a turboprop with a

facilities. Countries such as Mexico, France, Ireland, the UK,

capacity for 21 passengers, was intended for military use. A

Netherlands, United Arab Emirates, Singapore and China

request from the government led to the EMB 326 Xavante,

also host small facilities and offices.

a jet trainer and ground attack craft. The EMB 200 Ipanema, planned for agricultural use as a crop duster, and the EMB

400 Urupema, a glider, were among Embraer’s first models.

commercial aviation sales increased with 267 units

2014,

Embraer

delivered

208

units.

2015,

ordered for the E2. The year 2015 was also successful Today, the OEM participates in commercial aviation,

for the 70-130-passenger aircraft. Embraer sold almost

executive jets, defense and agricultural aviation businesses.

50 percent of the planes in this segment and was

Its commercial aircraft are divided into three families, the

responsible for 60 percent of deliveries. Unfortunately,

ERJS, E-JETS and E-JETS E2. The ERJS can accommodate

not everything is bright for Embraer. Overall aircraft

between 37 and 50 passengers, with ranges from 1,550Nm

deliveries hit a ceiling in 2009 and 2010. Since then,

to 2,000Nm. The E-JETS family accommodates between

the company has not reached the almost 250 aircraft

70 and 124 passengers for flights of 2,150Nm and 2,300Nm

deliveries enjoyed in those years. In 2016’s second

but is designed for longer trips with more passengers. The

quarter, the Brazilian company registered losses of

E-JETS 2 family is intended to replace the current E-JETS,

US$99.4 million, due to fewer deliveries in the year and

the first deliveries of which are expected in 2018.

higher operational expenses. Curado says that the 20082009 crisis was a big blow. “We felt the impact in 2009

Embraer is the third largest OEM in the world, behind

in terms of orders and have not yet recovered. However,

Boeing and Airbus. Embraer aircraft are preferred for

we have never been afraid of investing. We have

regional, short flights. United Express, Delta Connection, US

consolidated a respectable position in the marketplace.”

Airways Express, Virgin Australia and Lufthansa CityLine are among Embraer’s clients. In Mexico, Aerolitoral, TAR, and

“Embraer only exists because there is a solid foundation

Aeroméxico Connect are fleet owners of Embraer aircraft.

of knowledge: thousands of engineers and graduates over a period of 60 years. This is something unique in Brazil.

The executive jets division features seven different models,

It’s a model that worked: technology associated with the

designed to transport up to 19 passengers 4,600Nm. More

Brazilian spirit of entrepreneurship,” says Curado.

AIRCRAFT SPOTLIGHT

BOEING 787 DREAMLINER Efficiency through technological innovation is the principle behind the Boeing 787 Dreamliner. While the OEM has a diverse range of aircraft, the Dreamliner was designed to be a game changer. According to Boeing, the airplane offers unparalleled performance by reducing operational costs and increasing revenue potential in comparison to similar aircraft. It has a faster cruising speed, increased cargo space and therefore generates more revenue, improved fuel efficiency and reduced maintenance costs. Put simply, the 787 is designed to deliver a pleasant trip. It has the largest windows of any jet, the air quality is cleaner with high humidity levels to minimize jet lag and a smoother flight thanks to technology that counters the effects of turbulence. The Dreamliner, a lightweight, two engine wide-body, is most remarkable for the flexibility it offers airlines. As Boeing states, the 787 allows airlines to profitably open new routes according to passenger preferences. This aircraft diverts from the hub-to-hub business model and has permitted the creation of 100 nonstop routes around the world since 2011. The Boeing 787 has a primary structure made of 50 percent composites of carbon, aluminum and titanium and is powered by two GEnx advanced dual rotor engines developed by Rolls-Royce and GE. Its raked wingtips, laminar flow nacelles and low-drag empennage contribute to lower fuel usage, the most efficient among Boeing’s current fleet and 20-25 percent below that of the model it means to replace, the 767. Boeing states that since 2011, the 787 family saved airlines almost 7 billion pounds of fuel. It reaches Mach 0.85, similar to the fastest twin-aisle airplanes in use. Three models are available. The smallest, 757-8, has a wingspan of 60.17m and a length of 56.69m and carries up to 242 passengers in a two-class configuration. In the middle, the 787-9 has the same wingspan but almost three more meters in length with a capacity for 290 people in the same configuration. Its largest version will be available in 2018. The 787-10 shares the wingspan length of the 787-9 but measures 68.27m, providing space for 330 passengers. Since its launch in 2004 with an order from All Nippon Airways, the Dreamliner holds the honor of being Boeing’s fastest-ever selling twin-aisle aircraft. Over 60 customers globally have bet on this airplane, including Aeroméxico, which now owns nine Dreamliner 787-8s. As of Aug. 31, 2016, 1,161 total planes have been ordered and 455 have been delivered.

VIEW FROM THE TOP

MEXICO LARGEST LATAM MARKET FOR GULFSTREAM JOHN ORTEGA Vice President and General Manager of Gulfstream Aerospace’s Mexicali Site 48

Q: What makes the Mexican market attractive to

Unfortunately, the midcabin or midsize market as a

Gulfstream Aerospace?

whole was especially affected by the economic instability

A: Even though the first Gulfstream aircraft was introduced

resulting from the 2008 economic crisis. This market

to the world in 1958, it was not until 1974 that we delivered

segment is monitored constantly, since it offers unique

the first unit to Mexico. Since then, the fleet in the country

benefits for Gulfstream aircraft.

and in Latin America has grown steadily, although Mexico remains the largest market in the region with more than

The G280 received a performance upgrade in the fourth

90 aircraft.

quarter of 2015 thanks to a software upgrade. The aircraft’s improved software results in slower approach

Mexico offers several business opportunities that make

speeds, shorter landing distances and enhanced flight

the country an attractive destination for companies.

management system performance. We also have two new

Its geographical location is probably one of the most

projects in development, the G500 and G600. The G500

important factors. The country is a bridge between North

will enter service in 2018 and the G600 is expected to be

and Latin America and has strong commercial ties with

functioning by 2019.

Europe. Another important factor is economic stability. As of 2015, Mexico had the 15th largest GDP in the world.

Q: What is the role of Baja California’s manufacturing

The World Bank and the International Monetary Fund

plant in Gulfstream Aerospace’s value chain?

expect the same in 2016. Economic stability and growth

A: Gulfstream Mexicali employees play a significant role in

perspectives are crucial when choosing a business

the manufacturing process for our aircraft. Mexicali’s six

destination.

business units make electrical wire harnesses, sheet metal components, sub-assemblies and machined parts. Each

We selected Baja California as our host state because

is used in Gulfstream’s production of the models G650,

of its long history in aerospace dating back almost 50

G550, G450, G280 and G150. The site won the Shingo Prize

years. The supply chain proximity to California as well

for Manufacturing Excellence in 2009 for its focus on lean

as the presence of a high-quality labor force in the state

manufacturing and waste elimination. It has been named

make Baja California the Mexican entity with the largest

among the 100 Great Places to Work in Mexico for the past

concentration of aerospace companies. The highways

five years. In 2016, the facility was named the eighth best

connecting Mexico to the US, major cargo seaports and

place to work, which demonstrates our commitment not

railway services contribute to the state’s appeal for the

only to our customers but also to our employees.

aerospace industry. At Gulfstream Aerospace, we have implemented a Q:

How

has

Gulfstream’s

strategy

changed

continuous improvement culture in all our facilities.

accommodate the evolving private jet demand?

We encourage involvement from our employees along

A: The company’s main strength is its robust product

with the incorporation of lean tooling and new working

portfolio. The outstanding performance of Gulfstream

philosophies in all the processes on site. This encompasses

in the market is underpinned by superb airplanes,

manufacturing, engineering, business-support activities

unparalleled customer support, compliance with our

and management. We believe that involving all our

scheduled deliveries and the performance of new aircraft.

employees in our operations empowers them, since they

We continue to see plenty of interest from customers and

feel free to express and submit new ideas on how to make

the company enjoys a steady pipeline for all of its large-

their jobs easier and to foster a more innovative working

cabin and midsize aircraft. We have scheduled product

environment. Moreover, it contributes to transforming

deliveries of our G650 and G650ER models well into 2018.

their abilities, capabilities and knowledge.

VIEW FROM THE TOP

INNOVATION FROM THOSE WHO KNOW BEST: EMPLOYEES JOSÉ RODRÍGUEZ Director of Operations at Fokker in Mexico 49

Q: What makes Fokker’s Chihuahua plant stand out and

left the legacy to the next president of INDEX to continue

what made the state attractive to the company?

promoting human talent development and to increase the

A: Fokker has existed for 100 years and is now a business

percentage of national raw materials. The association must

unit of GKN Aerospace. On joining our Mexican operations,

identify which jobs most demand human capital and then

I set the objective of making this one of the best aerospace

supply the talent, depending also on which companies are

plants in the world by 2020. Our studies have shown that

considered key to the industry. As Director of Aerospace at

Chihuahua is abundant in human capital for the type of

INDEX, I ensure we work hand in hand with FEMIA to support

operations we manage, and the state’s culture favors an

national synergies between the Chihuahua, Baja California,

attitude of stability and hard work thanks to extensive

Nuevo Leon, Baja California and Queretaro clusters.

experience in the industry. There is more competition for employees in Juarez because of the automotive industry’s

Q: How is Fokker Mexico specifically contributing to the

presence, whereas there are fewer industries with which

consolidation of local industry?

we need to compete in Chihuahua. Of the 45 aerospace

A: We would like the supply chain to be stronger locally.

plants, 43 are clustered close to the state capital.

We have suppliers such as Tecmac and Aernnova in Chihuahua, Monterrey and the city of Queretaro. Our

In our Chihuahua Plant, our mentality is that offering

links with INDEX were partly responsible for our alliances

favorable conditions to our workers ensures the best

with these companies, as well as our acquisition by GKN

quality. This plant employs a Simple Case Initiatives plan

Aerospace that was completed in October 2015. We are

that opens the floor to suggestions from all workers. Three

open to alliances with other regions interested in using

hundred ideas have been implemented thus far using this

Mexican suppliers. Fokker’s personnel recognize the value

initiative. This means innovation comes from those who

of networking to create personal ties, which are proven to

know the processes best. Our Mexican employees are

lead to business possibilities.

creative and have improved areas that had not evolved in decades.

We purchase 50 percent of the parts we use in Mexico. Metal Finishing, Altaser and Tighitco are among our

To date we have focused on business jet operations. Our

suppliers, not only because we feel a dedication to Mexican

Mexican manufacturing is entirely for the export market.

manufacturing but also because it optimizes our overhead

We supply Cessna, Gulfstream and Honda with components

costs. Integrating Fokker reflects a strategic acquisition by

for its innovative HondaJet. The HondaJet is expected to

GKN Aerospace and for Mexico this means our different

be more efficient, to vibrate much less and the engines

areas of expertise complement each other and create a

will be integrated into the wings, all of which are very

stronger more complete offering for the aerospace industry.

contemporary so our team is excited to begin this project. Q: What are the short-term strategic goals for the Q: How is the company involved in training human capital

company in Chihuahua?

for the development of the aerospace cluster?

A: Our goal is to continue our stable growth. Close

A: We are part of the INDEX association, where I was

collaboration within a small team generated a comfortable

president until recently. INDEX is overseeing the rapid

working environment and helped keep costs down. We

expansion of Mexican industry, which nationally is growing

hope to remain localized to keep traveling and logistics

from small assemblies to producing entire cars, televisions

expenses to a minimum, especially as transport costs can

and aircraft parts. Manufacturing industries must continue

be greater in Chihuahua than in the center of the country.

to unite forces to remain competitive internationally, for

This is also partly due to the sheer size of the products we

which we need more professionals specializing in design. I

manufacture.

VIEW FROM THE TOP

LEAPING TO THE FOREFRONT OF THE INDUSTRY DANIEL PARFAIT President of Safran Mexico 50

Q: How have Safran’s Mexico operations evolved?

This plant will supply 100 percent of Boeing’s demand

A: Safran has been in Mexico for 20 years, having begun

for LEAP engines and 50 percent of Airbus’s market. The

in Chihuahua until we pioneered the aerospace industry

Commercial Aircraft Corporation of China (Comac) also

in Queretaro. The company has grown considerably in

chose these engines for its new aircraft.

the country. Our Mexican division ranks third worldwide after France and the US and this year we inaugurated two

Q: How would you describe the company’s commitment

plants in Queretaro and Chihuahua. Safran now has 12

to research and innovation?

plants in the country and the company is building a 13 ,

A: Safran has the second largest number of patents in

which will manufacture parts for the CFM LEAP engine

France, showcasing its commitment to innovation. We

developed in collaboration with GE, a relationship that

also have been recognized by Thomson-Reuters as one of

dates back to the ‘70s. With GE, we also designed the

the top 100 innovators in the world. Safran dedicates an

CFM56, which is the top-selling engine in history and in

unmatched 13 percent of its revenue to innovation across

present day aviation. Most 100-passenger airplanes with a

several areas from mathematics to supercomputers. We

central aisle have a CFM56 engine.

designed engines alongside Bull and are also researching composites and supporting the development of the

For the past 20 years, we have developed a close, trusting

National Center for Composite Materials and Aerospace

relationship with Mexico. In 10 years we have opened and

Technologies in Queretaro alongside CONACYT and

expanded 13 plants and are investing in strategic areas in

CINVESTAV. These are the materials of the future.

the country to meet high demand for our products. While we started in Chihuahua because of Labinal’s presence,

We have a drone program that in April this year beat

Queretaro caught our attention when the state launched

many multinational companies to win a contract with the

its Aerocluster and made us a competitive offer. The

French army. Our technology can identify objects up to

reception from both states has been excellent and the

8km away during flight. This capacity gives the drones

authorities have shown great interest, availability and

significant civil and defense applications, from agriculture

willingness to work alongside us.

to emergency services. We have also introduced these drones to the Mexican government.

Why

did

Safran

bring

its

CFM

LEAP

engine

manufacturing to Mexico?

To date, Mexico lacks a development base for drones, but

A: The CFM LEAP engine reduces fuel use by 15 percent,

now is an opportune moment to grow the drone industry.

emits 50 percent less pollution and is quieter than

They are highly sophisticated products, incorporating

comparable engines. This engine was constructed using

advanced and complex technology. It took Safran 30

composites assembled using a knitting technique that

years of research to achieve sufficient advances to excel

was developed in France in the 19th century, creating a

in drone manufacturing. We are still in talks with the

stronger and lighter engine. The demand for this engine

government to reach an agreement that will allow the

has been unprecedented and we now have over 10,000

long-term development of a Mexican drone industry.

orders. It is the engine of choice for the Boeing 737 MAX and the Airbus A320neo.

Which

other

innovative

technologies

Safran

introducing in Mexico? Given this demand, we needed a third plant to supplement

A: We are leaders in many areas. One in every four

our existing facilities in the US and France. We opened

helicopters in the world is fitted with our turboshafts.

bids to determine the location for this third plant and

About 600 helicopters have our engines in Latin America.

announced Queretaro as the winner in February 2016.

A recently incorporated, highly innovative area is our

Safran Identity & Security division, formerly known as

4,300 employees in Chihuahua who suggested 5,000 new

Morpho. This division uses Safran’s capabilities in biometric

ideas last year to improve manufacturing processes. In this

identification and authentication for the production

plant, more than 60 percent of the worforce are women,

of identity cards for several purposes, including the

This plant produces between 90-95 percent of the cables

production of passports for countries such as Chile.

for the Boeing 787 and 75 percent of those for the Airbus A380. Our Queretaro plant has won Safran’s innovation

The company’s technology also was used to register

award twice, demonstrating Mexico’s gradual evolution

India’s

from manufacturing to innovation.

population.

its

highest

the

division’s

technology registered 1 million people a day, granting identification to much of the population, especially those

Q: On which areas is Safran planning to focus in the near

in remote rural areas. The system tracks fingerprints

future?

and retinal scans and can be used in locations that are

A: The LEAP engine project will put us at the forefront of

heavily dependent on accurate and timely passenger

the aerospace industry for the following 20 years and will

identification, including airports.

contribute to the development of the Mexican aerospace industry. We also have an MRO for engines and landing

Q: As an industry leader, how can Safran contribute to

gear and several other projects in the pipeline. Safran

the growth and unification of the Mexican aerospace

prioritizes Mexico for its global growth as the company

industry?

is focusing more on organic growth. Thus, while we are

A: We are contributing through our participation with

not disregarding the possibility of acquisitions, we are

FEMIA. Mexico has a promising future in aerospace as

focusing on the development of our manufacturing plants.

the country is now consolidating its expertise. One of our greatest contributions to the local industry, beyond generating

employment

and

foreign

investment,

education. Safran supported the creation of the aviation campus at UNAQ, to which we donated one CFM56 and two landing gear sets for students to familiarize themselves with aerospace equipment and its maintenance. We also develop joint education programs with UNAQ, in which students learn theory at the university and get practical experience at our plants. We also send some of them to our plants in France with support from the Mexican government. We are forging a generation that will shape the Mexican aerospace future. Mexico must develop several areas to consolidate its aerospace industry. The most important is training, which is essential for the sector. Secondly, the consolidation of the supply chain is one of the greatest challenges the country is facing. Several initiatives address this problem, the Mexican-French Strategic Council proposed the creation of an aerospace fund to facilitate the introduction of French aerospace companies to Mexico. Medium-sized companies interested in expanding abroad tend to need financial aid to weather the first few years. They also need a guaranteed manufacturing volume to ensure they will remain competitive, toward which FEMIA is making advances. Finally, the collaboration with local and federal authorities at every step of the way is crucial for continued development. Mexico enjoys several advantages, including its location. The US and Canada are important markets for Safran and being in Mexico places us in an advantageous position. Mexico is also home to a formidable workforce. We have

AIRCRAFT SPOTLIGHT

CESSNA CITATION LATITUDE The Cessna Citation Latitude, the newest member of Cessna’s business jet family, strives to meet the same high expectations as its siblings at Textron Aviation. Initial deliveries suggest it is on its way. During the first seven months of the jet’s commercialization, the American company delivered 23 units, with Mexico receiving its first model in June 2016. The Citation Latitude offers a maximum range of 4,969km with two pilots and an average of four passengers. Thanks to its lightweight composite materials, the aircraft can reach a cruising speed of 826km/h. The plane also has short-runway capabilities, needing only 1,091m to take off. Garmin G500 avionics take center stage on the Citation Latitude’s flight deck. Designed to help pilots control the navigation, traffic, surveillance and communication systems, the flight deck also features three 14-inch flight displays that can function either independently or in multifunction mode. Pilots have options for personalizing the displays and can prioritize flight data presented on screen according to their needs or preferences. The Latitude also is equipped with LinxUs technology that performs real-time diagnostics of the aircraft’s condition. LinxUs works with the Central Diagnosis Maintenance system (CDMS) to monitor the plane at all times. For aircraft equipped with Garmin’s GSR56 connectivity tool, LinxUs Air reports flight problems via satellite and offers answers and suggestions in real time. The standard version of the Latitude offers auto throttles, flight management systems and transponders with ADS-B capability, in addition to the Synthetic Vision Technology. Measuring 18.97m long, the aircraft houses a 6.63m by 1.96m cabin that can accommodate up to nine passengers. It has 10 windows in the cabin and a bathroom that can be customized. The cabin’s interior colors also can be personalized and its standard Wi-Fi connectivity allows passenger to stay connected throughout the flight. Passengers also can use their mobile devices to control the aircraft’s cabin features such as temperature. The Citation Latitude has a direct operating cost of US$4.45 per mile, almost US$0.20 more than the Citation XLS but the Latitude offers more range than the XLS+. As a member of Textron Aviation, the Citation can be serviced at any Textron workshop. The Citation Latitude is Cessna’s latest submission to meet the needs of an efficient and modern aircraft fleet.

INSIGHT

A TALE OF TWO ENTITIES Mexico’s aviation industry is nascent but some established

air ambulance, flight inspection, training missions and

stories herald its potential. Call this one a tale of two

transportation of personnel and cargo.

entities: Chihuahua and Textron Inc. Cessna’s models are divided into three main product lines: Textron Inc., ranked 209 on Forbes Top 500 list of the

Citation, Turboprop and Piston. With more than 6,900

largest US companies, has units in aerospace, defense,

aircraft delivered, the Citation family, powered by a gas

industrial, technology and finance. The multi-industry giant

turbine engine with a ducted fan mechanism, is the largest

has entrusted Mexico, and particularly Chihuahua, with its

fleet of business jets flying.

two most profitable business units, Textron Aviation and Bell Helicopter.

In addition to its aviation division, Textron also excels in the helicopter business with its Bell Helicopter division.

The company’s location in the state allows it easy access to

These units are used for both military and commercial

the company’s largest market, the US, and also to a skilled

uses. Commercial helicopters include the 206, 407, 412,

workforce. “The company chose Chihuahua based on its

429, 505, 525, and Huey models, all of which promise

convenient location, time zone and most importantly, the

superior performance, combining a helicopter’s vertical

manufacturing expertise in the state,” says Luis Azúa, General

lift with broader flying range.

Manager of Bell Helicopter at Textron International Mexico. Similar to other Textron divisions, Bell Helicopter has Textron’s participation in the aerospace industry can be

important manufacturing facilities in Chihuahua. This

traced back to 1960 when it acquired Bell Aerospace and

facility produces helicopter cabins and harnesses, while

its largest business division, Bell Helicopter. Textron’s

performing small assemblies for the commercial line

penetration of the sector deepened in 1992 when it acquired

of Bell Helicopter. The success of the unit in Chihuahua

its Cessna subsidiary from General Dynamics Corporation.

has led to the establishment of offices in Mexico City to

In 2013, Textron announced its decision to purchase the

provide customer service to clients and to act as a sales

Beechcraft Corporation and its Hawker and Beechcraft

hub, not only in Mexico but also in Latin America.

brands, increasing its presence in the light-aircraft market. That acquisition was completed in March 2014 and the

Matt Hasik, Business Vice President of Bell Helicopter, says

company created Textron Aviation, a business division

the office in Mexico City contributes to Bell’s expansion

focused entirely on its aerospace business, with two main

efforts within the country, “serving as one of the company’s

lines: aircraft sales and aftermarket services, such as parts

regional sales hubs.” Located just south of the US, Mexico’s

sales, maintenance, inspection and repair services.

position provides enviable access to Bell’s largest market, the US and Canada. Out of Bell’s US$3.5 billion revenue in

“In 2015, North America alone generated 68 percent of Textron Aviation’s revenue”

2015, the North America region is responsible for US$2.73 billion, hence the company’s need to have key facilities located within the region. The international component of Textron Aviation and Bell Helicopter is embedded in its business nature. Worldwide,

Luis Azúa, General Manager of Bell Helicopter at Textron

approximately 11,700 people work for Textron Aviation

International Mexico

and 7,050 for Bell. Between both business units, almost 264,000 aircraft have been delivered in more than 170

Textron Aviation maintains Beechcraft, Cessna and Hawker

countries. Given its international reach, Textron Aviation has

as three separate brands, accounting for more than half

an unparalleled general aviation service network integrating

of all general aviation aircraft. Beechcraft commercializes

21 company-owned service centers, 60 mobile service units

six different airplane models, the King Air 250, King Air

and more than 400 authorized independent service facilities.

350i, King Air 350 ER, King Air C90GTx, Baron G58 and the Bonanza G36. The unit also has two aircraft for the

Even though Textron Aviation’s reach is global, its biggest

military, the T-6C Texan II and the AT-6 Wolverine. Except

source of revenue, just like Bell’s, is located on the American

for Beechcraft’s military units, all its aircraft are versatile

continent, accounting for 80 percent of the company’s

and can be used for several purposes such as executive

total revenue in 2015. North America alone generates 68

aviation, aerial survey or patrolling and surveillance,

percent of Textron Aviation’s revenue. In this context, it is

hardly a surprise that its primary manufacturing facilities

Plants 5a and 5b focus on manufacturing small details for

are located in North America, with manufacturing sites in

the sheet metal assembly and finishing needs such as heat

Wichita and Independence in the state of Kansas and an

treatments, epoxy primer and bond primer. Plants 6 and

additional plant in Columbus, Georgia. Its only primary

7 perform small and major assemblies of sheet metal for

manufacturing site outside the US is in Chihuahua.

the aircraft’s nose, cabin, fuselage, aft and wings, solely for Beechcraft products.

GROWING TOGETHER Mexico is no stranger to the aerospace industry. The

Textron

expertise developed from its position as a manufacturing

conglomerate, accounting for US$4.8 billion of the

hub for the automotive sector was the foundation for

parent’s total US$13.4 billion 2015 revenues. The result

establishing similar activities for aerospace. Of the seven

represented a US$200 million increase over 2014 as higher

aerospace OEMs with facilities in Mexico, five are located

productivity allowed more jet deliveries.

Aviation

plays

significant

role

for

the

in Chihuahua. The state’s cluster, the second largest in the country and one of the most developed, features

In this context, Chihuahua is key to Textron Aviation’s

manufacturing sites and advanced engineering operations.

operations. “We have seen a high level of quality and

The cluster’s triple-helix model unites the private sector,

craftsmanship from the country’s skilled workforce and

academia and R&D institutions and the three levels of

have great confidence in their ability to assume additional

government.

responsibilities in the manufacturing process,” former HBC Chairman and CEO Bill Boisture told Flight Global

Textron Aviation has a total of seven manufacturing sites

when Hawker Beechcraft opened one of its facilities in

in the state. Plant 1 assembles wire harnesses for Cessna

Chihuahua in 2011.

and Beechcraft products. One of the plant’s competitive advantages is its flexibility, allowing for the customization

For the past decade, Mexico has been Textron’s partner

of products when required in less than one production shift.

in growth. The country has seen its local industry develop

Plants 2 and 3 manufacture complete fuselages and wings

while Textron has seen its business evolve. As Azúa says,

made of composite materials, while Plant 4 is in charge of

the country offers more than just location. “Mexico is often

small and major sheet metal assembly for Cessna’s single

considered a low-cost country but this is no longer the

engines and jets. At this location, sheet metal assembly for

country’s sole advantage. Due to excellent human capital,

every part of the aircraft but wings takes place.

Mexico has exceled in many manufacturing areas.”

VIEW FROM THE TOP

HONEYWELL FINDS SWEET SPOT IN CHIHUAHUA CECILIO LÓPEZ Plant Director of Honeywell Chihuahua 56

Q: What is Honeywell’s strategy for Latin America and

Mexico in particular?

Chihuahua’s state government. We entered the country

A: Honeywell Aerospace is implementing a strategy that

at about the same time the Training Center for Advanced

focuses on several high-growth regions all over the world,

Technology

including Latin America, Asia and the Middle East. Of the

collaborating with the center to train our employees.

utmost importance for Honeywell, these zones represent

Subsequently, we began working with the Monterrey

approximately 55 percent of corporate sales outside the US.

Institute of Technology and Higher Education (ITESM)

Honeywell

began

(CENALTEC)

strong

was

collaboration

founded

and

with

began

and the Chihuahua Technological University (UTCh), In Mexico, technology is constantly evolving. Thirty

La Salle University and the Chihuahua Technological

years ago, the country only manufactured harnesses but

Institute and we continue to collaborate with these

the introduction of the automotive industry, mainly in

academic entities. Through these alliances, we train their

Chihuahua and Ciudad Juarez, has contributed to industry

professors to teach their students before they become

advances. Mexico was an appealing location for Honeywell

our employees and support them when designing the

due to the pool of potential workers, including a significant

institution’s syllabi. Some of our managers and engineers

number

teach at these institutions with the goal of raising the

well-trained

engineers.

Chihuahua

was

particularly attractive thanks to its machining excellence

general education level of the state.

center that guarantees a continuous supply of qualified workers in the city. Moreover, Chihuahua is close enough

Q: How does your collaboration with companies in the

to the border to simplify logistics.

sector help promote Mexican aerospace? A: We have worked closely with other institutions

Our Chihuahua plant manufactures turbine and auxiliary

including INDEX to attract more suppliers to the state.

power unit (APU) parts. We mainly produce rotary pieces,

We collaborate to establish homogenous standards for

such as blades, impellers, couples and gears and some

developing employees. Furthermore, our collaboration

static pieces such as gearboxes. Our four plants are home

with Zodiac Aerospace and Soisa Aerospace will benefit

to more than 1,400 machines. Two are exclusively dedicated

the entire industry. We teamed up to renew ITESM’s

to machining, one to chemical processes and the last is a

syllabus for their bachelor’s degrees in Mechanical

support center that manages design and repairs. Locally,

Engineering and Industrial Engineering.

we perform diverse types of milling, turning and any kind of machining process that may be required by the industry.

While Mexico qualifies as a low-cost region, our local facilities can compete with those in major economies.

Honeywell was the first company to invest in Chihuahua’s

To advance, we need companies that can supply our

aerospace industry and helped attract more companies

operations so we can acquire more certifications for

to the state. The growth of the aerospace sector was

aerospace production. Entering this industry entails a

planned by the local government and private entities.

certain level of risk as it demands a midterm investment

When a new investor plans to found a company in the

to obtain the necessary certifications. Nonetheless, it

state, a representative from Honeywell Aerospace visits

has been time-tested and represents lower risks than

to understand our experiences in the local economy.

some would believe.

Honeywell is happy to share best practices and strategies to develop human capital.

Aerospace needs investors who are willing to support it for a longer period than other industries. It is in Honeywell

Q: How has Honeywell Aerospace contributed to the

Aerospace’s interests to develop a local supply chain to

development of human capital?

reduce production times and costs.

VIEW FROM THE TOP

PLANE DESIGN FOR INDUSTRY 4.0 GUNTHER BARAJAS Vice President Mexico of Dassault Systèmes 57

Q: What drives changes in the aerospace industry and

testing. Our model creates reliable simulations to study

how is Dassault Systèmes helping shape those changes?

pieces and perform tests without building a single piece.

A: In addition to cost-savings for more efficient aircraft,

For an airline, this represents millions of dollars of savings.

changes in the aerospace industry are driven by passenger concerns and complaints in areas that range from jet lag

Q: How are you bringing the 3DEXPERIENCE closer to

to comfort. At Dassault Systèmes we want passengers to

budget-conscious SMEs?

experience a pleasant flight from the moment they step on

A: To make this technology more accessible, we are part

the airplane. Successful businesses focus on the customer

of the Mexico-France Council for Entrepreneurship and

experience and that principle is the core mission of our

Innovation. The council’s goal, among other objectives, is to

3DEXPERIENCE platform. This comprehensive platform

create a Mexican Innovation Center alongside the Ministry

compiles passenger feedback information from social media

of Economy and the National Institute of Entrepreneurs

and other sources and arranges the data for companies to

(INADEM). The center will make this technology available

use when designing future aircraft. Data processing can

to SMEs operating in several manufacturing sectors and

reduce the time it takes to develop an airplane and thus

increase their access to certifications and testing.

time to enter the market from years to months. Q: How is Dassault helping to usher in Industry 4.0? Q: Which segment of the aerospace supply chain can the

A: We are leaders in the global aerospace industry and

3DEXPERIENCE platform support?

in Mexico’s aerospace sector. The sector is implementing

A: Our clients range from OEMs including Airbus, Safran and

Industry 4.0 practices, which simplify manufacturing and

Boeing, to Tier 4 companies because the platform can be

communication. It is now possible to design a part and

used to optimize production throughout the entire supply

to share the design instantly all over the world without

chain. All aircraft in the world have used this software

exiting the platform. This improves offices’ communication

during design. What differentiates us from the competition

with their manufacturing plants. Mexico is gradually

is that our software is much more than a product lifecycle

turning into a critical manufacturing location, supplying

management (PLM) program. We are collaborating with

the main offices of major OEMs and Tier 1 companies. The

Safran in areas including 3-D printing and composites

country has qualified professionals but as more of our

design. Our software allows the company to optimize the

clients establish manufacturing centers in the country, the

use of materials and to incorporate the latest technologies,

need for local designers increases. Dassault Systèmes has

which translates into parts that are more solid and have

a network of PLM centers in Chihuahua, Queretaro and

better resistance to physical strains while weighing less.

Aguascalientes to train students to use these platforms for

This reduces fuel consumption and improves performance.

the aerospace industry. This network was created with the support of the Ministry of Education.

Q: What do plane developers gain from using the platform? A: The main benefit the platform provides is a reliable virtual

Q: What are your growth expectations for 2016?

universe of the aircraft and all the variables that affect it

A: We closed the second quarter of 2016 with strong

before it is built. This saves time and money as it removes

growth in Mexico, made possible by the expertise of our

the need to build prototypes of the entire aircraft and each

distribution network. This growth bolsters our certainty

individual part. Increasing window size, for example, may

the country has the capacity to continue developing high

seem simple but it represents a structural modification to

added-value manufacturing. Mexico is in a good position

the whole aircraft because it changes the tension across

to continue working with the rest of Latin America, acting

the rest of the fuselage. Thus, processes of this type require

as a logistics center for the region’s companies targeting

in-depth research, development and parts and structure

the US and Canada, and vice versa.

VIEW FROM THE TOP

CHIHUAHUA A CORNERSTONE FOR ZODIAC AEROSPACE BAPTISTE VALOIS Group Industrial Development Manager of Zodiac Aerospace 58

Q: How did Zodiac Aerospace’s business strategy

The country’s geographical location is another undeniable

balance internal growth with the main aerospace industry

advantage. Bordering Texas is positive for our operations

players?

because Zodiac Aerospace has one plant in Texas and two

A: Zodiac Aerospace started operating in Chihuahua in

in California that are being supplied by the Chihuahua

2006 supported by American Industries, who offered

site. Therefore, road logistics are very simple.

us shelter services. They have been a key partner for developing our Chihuahua campus to its current five

As we are about to celebrate our 10th anniversary in

plants and 3,000 employees. Our Chihuahua site is a

Chihuahua, we are proud of having grown from our

cornerstone of the group’s industrial capacity, directly or

first evacuation slide manufacturing operation. Adding

indirectly supplying all the big aircraft manufacturers as

product lines such as seat parts and subassemblies,

well as key airline customers.

interconnection harnesses and conduits, composite seat shells, cockpit lighting panels, seat actuation equipment,

The aerospace industry is unusual in that a large part

electric panels, lavatories, composite water and waste

of an aircraft is purchased directly by the airline from

tanks has been part of our strategy in Mexico to develop

Tier 1 companies, especially the engines and the cabin

in accordance with the market’s needs.

equipment. The passenger experience rests heavily on the inside of an airplane, as does baggage loading, unloading

Q: What effect has Zodiac Aerospace’s shrinkage in

and the experience of the inflight staff. Cabins have a

global profits since mid-2015 had on its Mexican plants?

marketable life of five to 10 years, aging much faster than

A: The effect of this drop was felt in Mexico. The group

the aircraft itself, which can operate perfectly for over 25

grew too fast. We need to stabilize equipment acquisition

years. Therefore, Zodiac Aerospace targets this market

and manufacturing to meet the highest standards but

with linefit as well as its cabin refurbishing offering.

our clients will always demand their orders as fast as possible. It has been comparatively easy to share

Q: How do your Mexican operations compare to other

resources across our operations in Mexico and to develop

countries with Zodiac Aerospace facilities in terms of

best practices. Our operations in Chihuahua have grown

ease-of-entry?

so rapidly that we can afford to focus our strategy on

A: We can compare our local operations to our sister

consolidation, lowering growth rates and perfecting our

organization in Tunisia, which employs 2,500 people and

common standards. At the group level we have taken a

was developed within the same timeframe. A long history

similar stance, developing the internal structure knowing

of industry in Mexico sets the foundation for aerospace

that we will inevitably need a sharing program between

companies to build on manufacturing activities that have

our various divisions. Operational excellence must be a

existed since the 1970s. Such a deeply rooted industrial

universal language within the group to meet a further rise

culture has manifested in plenty of transferable talent.

in demand.

This is drastically different from our journey in Tunisia where we had to train new recruits from scratch. Our

Zodiac Aerospace retained clients despite excessive

experience in Chihuahua was made even easier by the

demand that make deadlines more difficult to meet. As an

shelter services that we enjoyed for many years. Last year,

industry leader we can never shift focus off the customer

we transitioned from American Industries to become an

and must be committed to improving our service and

autonomous entity, Zodiac Aerospace Equipo de México,

products according to client requests. Our operations

and it has allowed us to begin the recruitment process

in Chihuahua are no exception. The company’s plants

for a Mexican general manager to oversee our Chihuahua

act as a display window for anyone who wishes to visit

operations.

Zodiac Aerospace. Any such visit is an opportunity for

us to gauge what is most important to our customers to

from Nadcap but the supply base is simply not ready

satisfy them long term. We always strive to deliver the

yet. While we can develop mechanical capabilities easily,

best product possible and on schedule.

finishing treatments are more complicated to find.

Q: How does Zodiac Aerospace support the growth of

Companies that are considering Mexico as a destination

the aerospace cluster and the industry overall?

must make the decision as part of a global strategy, as local

the pull factors go beyond cheap labor. Logistics and

universities to develop courses that are suited to our

activity maturity must be factored into the decision but

engineering needs and to train young talent through

if a customer asks a brand to install facilities in Mexico,

innovative projects at our facilities. The talent pool is as

we would advise this company to take the advantages of

important to us as the supply chain. While we prefer not

synergies with customers into account.

Zodiac

Aerospace

has

collaborated

with

to bring suppliers with us from other countries, the norms and certifications for the aerospace industry are highly

complex and sometimes leave us with no other choice.

been lucky enough to adapt activities or process

The company tries to source a Mexican supply base

improvements without any major hindrances. Our built-

when possible but supply chain development must be

to-suit infrastructure has grown from one to five buildings

exhaustive and therefore takes a long time. Low-volume

covering 55,000m2. We expanded our Building 3 by over

industries also struggle to attract partners that will invest

4,600m2 in 2016 to accommodate more evacuation slides,

long term in supplying them. There are many initiatives

lavatories and water and waste tank manufacturing. Our

in place to strengthen local industry via Chihuahua’s

Chihuahua site is an excellent asset for the group, hence

Aerocluster, especially in the MRO segment.

recent investments in its development.

Zodiac Aerospace does R&D in Mexico, especially for seating, and the company has won awards for its developments. A primary example is our engineering team developing technology for our customers to visualize seats in 3-D. Our local engineers also are working on innovations such as retractable seats to increase flexibility of cabin use and the Posture Seat, which automatically adapts to the passenger’s back position, even turning with their body as they speak to their neighbor. New levels of cabin personalization are becoming a reality. Zodiac Aerospace Equipo de México is investigating flexible seats that would facilitate alternative cabin space arrangements to accommodate varying numbers of passengers and luggage, for instance. Our Space-Flex Galley developed with Airbus allows airlines to adapt the amount of space they dedicate to either bathrooms or kitchen spaces. We also investigate ways to reduce weight on board, making seat shells very light while maximizing the space for each passenger’s seat. The value of such adjustments is felt by customers worldwide, who may spend long periods of time in airplane seats. There are numerous seat formations yet to explore. Q: What do you consider imperative to strengthen the aerospace supply chain in Chihuahua? A: Increasing the level of technicity in our products would help boost the quality that we can offer our clients. This would include high-tech and advanced materials as well as specific processes that would require certifications

Mexico’s

business

culture

flexible,

have

VIEW FROM THE TOP

AWARD-WINNING COMPETITIVENESS, TECHNOLOGY AND QUALITY JUAN CARLOS CORRAL Director General of ITP Mexico 60

Q: What does the Mexican division represent to ITP and

Thirty-nine percent of our employees are highly-qualified

to the state of Queretaro?

engineers but hiring more has not been an easy task. Mexico

A: Our branch in Mexico is the second largest after the one in

has an abundance of engineers with a profound knowledge

Spain. We have 654 employees divided into three different

of aluminum alloys structures and materials but specialists

divisions. The first and largest is ITP Ingeniería y Fabricación,

in more advanced materials, such as nickel-cobalt alloys, are

which designs and manufactures engine casings and seals.

rare. UNAQ has excellent facilities, but while its graduates

The second is Industria de Tuberías Aeronáuticas México,

specialize in materials for airplane structures, they have little

which manufactures engine tubes, and finally our MRO.

knowledge of super alloys. We are struggling to fill these

All our facilities have processes certified by Nadcap. We

positions as few individuals are qualified in those areas and

started with MRO services for the JT8D engine, commonly

they tend to be already working for our competitors. The

used in Boeing models 727 and 737, and the MacDonnell

main problem with training professionals in super alloys is

Douglas MD-82 and -83 models for fleets belonging to

that it is a long process.

Mexicana, Aeroméxico and SAS Airlines, among others. Q: How does ITP plan to fortify its MRO services in Mexico? Q: Which companies are the targets of ITP’s main design

A: To date we only provide MRO Services for the JT8D engine

and manufacturing capabilities?

in Mexico. Sadly, this engine is gradually being replaced.

A: Our engineering business designs parts for engine

Thus we have reduced this branch to 103 maintenance

modules, namely low pressure turbines and compressors.

employees and broadened our offering by generating

It also designs the structures between turbines. Among

local engineering and manufacturing divisions. We plan to

our main projects is the transportation trailer used to install

work with other companies in countries operating the JTD

the Airbus A400M engine. This unit is used in France,

engines until we are ready to start another program.

the UK and Spain and is fully manufactured in Mexico. The main clients for our design business are Eurocopter,

Q: What does th ITP's defense is division represent in

Hamilton Sundstrand, Honeywell, Aernnova, Alstom and

Mexico?

Rolls-Royce. We also repair Auxiliary Power Units (APU)

A: ITP Mexico is not currently manufacturing products

and test and repair components of the CFM56 engine. Our

or providing any services for the defense sector but we

manufacturing business tends to engines such as Rolls-

expect this will change. For instance, the TP400 program

Royce’s BR710 installed in the Gulfstream aircraft, in the

could be the first to provide MRO services to this sector

Boeing 787’s Trent 1000 engine, Airbus A380’s Trent 900

as these airplanes could be used by the Mexican Air Force,

engine, Airbus A330’s Trent 700 and the XWB used in the

the federal police and SEMAR. The Airbus A400M is

Airbus A350. We also work with Honeywell on Gulfstream’s

among the largest and most powerful aircraft in the world

HTF7000 and HTF7500 engines and Pratt & Whitney 814

as it can transport a Boeing CH-47 Chinook helicopter and

and 815, installed in the Gulfstream G500 and G600.

even several tanks. It can also take off from untarmacked runways and release loads at low altitudes. This plane’s

Q: To what extent have your manufacturing aptitudes

propellers measure five meters, has four engines with

developed in the past few years?

11,000hp each and a payload of 37 tons, making it the

A: We are planning to manufacture 230,000 rigid engine

most powerful turboprop aircraft in the western world.

and aircraft pipes this year, to become the US' number one pipe producer. Two years ago, we manufactured 5,000 end

The Mexican Air Force also wants to open a base in

fittings, last year we produced 61,000 and this year we will

Queretaro, which will make it a potential client Once we

manufacture 82,000. In two years we want to reach 500,000

are fully aware of its needs we intend to develop specific

tubes and from 200,000 to 300,000 end fittings per year.

programs and services that cater to it.

VIEW FROM THE TOP

‘ONE-STOP SHOP’ REDUCES RISK FOR OEMS JAVIER PÉREZ Director General of Aernnova Mexico 61

Q: Having operated in Spain, Brazil and the US, what

the two companies’ human resources departments or

attracted Aernnova to Mexico?

if another company offers an employee a promotion.

A: The industry boom began with Bombardier in 2006

This maintains healthy competition within the cluster

but Aernnova followed closely in 2007. We built plants

but we expect this will become more difficult to

in Queretaro after a year-long analysis, carried out when

maintain as the sector inevitably grows in Queretaro.

Aernnova was barely beginning to establish operations

We protect our human capital from high turnover by

internationally. Studies showed that out of 20 countries,

offering competitive employee benefits and ensuring an

Mexico and China were the best options for our envisioned

enjoyable work environment.

process of globalization. Although China was the cheapest option at that time, economic analyses showed that

Q: How would you evaluate the established supply chain

Mexico’s growth was more stable. Additionally, the largest

in Queretaro?

aerospace customers were in the NAFTA region and would

A: When we first decided to move to Mexico, we only

remain so for the foreseeable future so Mexico was the

planned to build an assembly plant but our analysis in 2007

ideal platform to target new commercial opportunities. We

showed the supply chain was not sufficiently established to

have seen stable costs and salaries first-hand, alongside a

avoid importing the majority of components from Europe

reasonable 3-4 percent rate of inflation.

or the US. To be more competitive, we had to strategically adjust our internal capabilities to manufacture components.

The ability to offer our customers an integral solution

Our second plant was established to produce detail

to their needs at competitive costs is vital. This means

components based on machining, sheet metal and surface

integrally managing either industrial transition projects

treatment technologies. Our cost-competitiveness has

or new product developments while minimizing risks to

won the appreciation of Bell Helicopter, Textron Aviation,

customers. The operations available at our site in Mexico

Bombardier and several other customers for simplifying

include assembly and manufacturing, more specifically

their purchasing process. For example, the cabin and tail

machining, sheet metal, surface treatments, supply chain

boom for Bell’s 505 Jet Ranger were constructed using

management and program management.

approximately 90 percent Aernnova-produced materials. The high percentage of internally manufactured parts

Q: To what extent have you collaborated with local

significantly reduced risks for Bell Helicopter.

educational institutions to develop aerospace specialists? A: We help with training programs at UNAQ, which are

Q: How have you contributed to the aero cluster’s growth

jointly developed with our staff. Each class includes

in Queretaro?

between 20 and 30 people and those who pass the

A: Aernnova was an associate founder of the Queretaro

course usually secure a job at Aernnova but continue

Aerocluster and of FEMIA so one of our functions is

with the training process during their first two months

to offer support to smaller companies by attracting

working at our plant. We also have collaborated with other

important customers to Mexico. Securing aerostructure

universities, including ITESM.

manufacturing contracts in Queretaro supports the growth of other companies that can provide peripheral

In contrast with other areas and sectors, in which

technologies or products we do not manufacture. This

operators and engineers may be trained by one company

includes pipes and tubing, harnesses and connectors.

and contracted by another, the Queretaro Aerocluster

FEMIA and the numerous aero clusters in Mexico should

enjoys a cordial understanding between members not to

promote suppliers of these goods to where companies

take resources from another company. This is respected

such as Bombardier, ITP, Aernnova, Airbus and Safran

unless there is previous direct communication between

need their services.

ROUND TABLE

MEXICAN R&D: GETTING THE WORD OUT Mexico is an ideal location to conduct research yet most

from the state, contrary to the balance of investment in

foreign investors continue to view the country mainly as a

developed countries.

manufacturing hub. University programs are training the talent of the

The government and local industry want to change that

future in collaboration with local companies through

perception and the transformation already is underway.

internships and other programs. Moreover, a hard-

Companies are using Mexico’s competitive advantages

working population by many accounts means that

to develop lighter and more resistant materials for the

Mexico has all the elements in place to establish a strong

aerospace industry as part of additive manufacturing and

presence in R&D fields. Experts in the field of innovation

composites, as well as new testing techniques to verify the

here give their take on what the country needs to excel,

quality of materials using florescent liquid, for instance.

and how they contribute to changing the face of Mexican

Strong government and private investment in R&D is

manufacturing from “value-for-money industrial hub” to

leading the charge, although the bulk of investment comes

“leading aerospace producer.”

Zodiac Aerospace performs R&D in Mexico, especially for seating, and the company has won awards for its developments. A primary example is technology for our customers to visualize seats in 3-D that our engineering team developed. Our local engineers also are working on innovations such as retractable seats to increase cabin use flexibility and the Posture Seat, which automatically adapts to the passenger’s back position, even turning with their body as they speak to their neighbor. Zodiac Aerospace has collaborated with local universities to develop courses that are suited

BAPTISTE VALOIS Group Industrial Development Manager of Zodiac Aerospace

to our engineering needs and to train young talent through innovative projects at our facilities. The talent pool is as important to us as the supply chain. Companies that are considering Mexico as a destination must make the decision as part of a global strategy because the pull factors go beyond cheap labor.

Growth can be secured through the development of new technologies so we invest 10 percent of revenue in R&D. We are members of the National Registry of Scientific and Technological Institutions and Companies (RENIECYT). Alongside our students, we are now developing intelligent racks that can keep track of inventory and notify distribution centers when supplies are running low. PhD students also are developing a hydrogen generator for Quasar106 to reduce

ELOY MÁRQUEZ Founder of Quasar106

fuel consumption in drones. The company is developing projects in several different areas to expand its business.

Major aerospace companies have internal design departments whose employees work full time designing aircraft and its parts. These companies cannot spare their workers for the optimization of racks, as it would not be an efficient use of their time. Therefore, Quasar106 can support their existing design teams and offer solutions for specific pieces, although we provide small and medium-sized companies with the entire design process if needed. In this way, our company supports several companies' design departments.

RAÚL EVANGELISTA Founder of Quasar106

MFCO does not manage its Mexican operations as a low-cost center. Here, we develop projects that are specific to the region or inaccessible for our US offices. The Mexican population with their impressive work ethic and cultural values of family, faith and friendship were a huge pull factor when we were evaluating which country would be ideal for our operations. Mexico held a lot of potential in innovation over the other low-cost manufacturing regions that we were

RENE ESPINOSA

evaluating, primarily thanks to the local workforce’s attitude.

Plant Manager of Metal Finishing Company (MFCO)

CENALTEC contributes to R&D in Mexico by developing the specialists that carry it out. By 2015, CENALTEC Chihuahua had trained 19,004 professionals, 4,204 of whom focused on the aerospace industry. Of these students, 95 percent are active in their chosen fields working for companies including Labinal, Kaman Aerospace, Zodiac Aerospace, Beechcraft, Textron International, Honeywell, Fokker, Tighitco, Arnprior Aerospace, Nordam, Manoir Aerospace and CAV Aerospace. By 2017, we want to fully familiarize ourselves with composites and start providing courses on them because a

ALBERTO SALOMÓN Director of the Chihuahua Campus at CENALTEC

growing number of companies use these materials. Cessna and Beechcraft helped us develop structural and sheet metal assembly programs and we worked with Fokker to develop a program called Training the Trainers. We generated similar processes with many other companies and the center’s advanced technology training was certified by Bell Helicopters, Textron International, Cessna and Arnprior Aerospace.

CIMAV Monterrey has developed composites that are equivalent to metals like aluminum, possess the same qualities but weigh much less and have applications within both the automotive and aerospace industry. A software development project we conducted with nanomaterials has seen electronic and magnetic properties inserted into materials that could be used by aeronautics companies, showing Mexican capacity to innovate and create new technologies. This is reflected in the government’s investment in R&D. In developed countries, the public-private composition of investment in science

JUAN MÉNDEZ Director General of CIMAV

and research is about 30 percent publicly financed and 70 percent private, whereas in Mexico, up to 75 percent of investment in science and technology is offered by the state. This shows the private sector relies too heavily on the government to fund research initiatives. Local industry must volunteer more funding toward establishing patents instead of acquiring them or paying royalties to innovating entities.

BAJA CALIFORNIA

Baja California is the 12th largest state in the country but it is the number one cluster for the aerospace industry. With over four decades in the sector, the state hosts approximately 80 aerospace-focused companies and accounts for US$1.8 billion of the US$6.6 billion in yearly exports. The border state has taken advantage of its geographic position, exporting almost two thirds of its aerospace production to the US. The remainder of its aerospace exports are directed to Canada, England, France and Germany. Already a magnet for aerospace companies, Baja California is aiming higher. By 2020, the state wants to be the main destination of outsourced high-value knowledge. By 2025, Baja California expects to become Latin America’s leader in outsourced high-value knowledge for fuselage systems and power plants.

Featuring interviews with the most representative companies of the state, the chapter details the inner workings of what has become a binational industry.

CHAPTER 3: BAJA CALIFORNIA 68

VIEW FROM THE TOP: Tomas Sibaja, Aerospace Cluster Baja California

VIEW FROM THE TOP: Ardy Najafian, Aerospace Alliance

INSIGHT: Baja California’s Recipe for Growth

VIEW FROM THE TOP: Loren Engel, GKN Composites

VIEW FROM THE TOP: Ossie Díaz, TACNA

VIEW FROM THE TOP: Cruz Maldonado, BAP Aerospace

AIRCRAFT SPOTLIGHT: Gulfstream G550 Jet

VIEW FROM THE TOP: Michael Lynch III, Techmaster

VIEW FROM THE TOP: Genaro Manilla, Coast Aluminum

VIEW FROM THE TOP: David Berruecos, Switch Luz S.A.

VIEW FROM THE TOP: Roberto Corral, Innocentro Aerospace

ROUND TABLE: Heartening Progress and Hopeful Plans

VIEW FROM THE TOP

CONSIDER THE PRESENT, LOOK TO THE FUTURE TOMAS SIBAJA Executive President of Aerospace Cluster Baja California

Q: What are the Aerospace Cluster of Baja California’s

A: The aerospace industry is present in 18 Mexican states

priorities for developing the industry?

and five entities are recognized by the Ministry of Economy

A: The state hosts business segments that have grown at

as having an aerospace vocation. Our cluster assists and

their own pace: defense, commercial aviation, the space

supports all initiatives, looking at the development of the

industry, drones, and MRO services. As a cluster, we must

aerospace industry across Mexico. We are working closely

concentrate on developing human capital specifically

with several clusters to share our expertise in best business

catering to the existing and future needs of the aerospace

practices, hence the collaboration between Baja California

companies within our reach. This industry in Mexico is

and the emerging aero cluster in Guanajuato.

predominantly manufacturing and assembly but we must invest in design centers to train talent in more complex

Rather than competing, Mexican aero clusters should

and challenging projects. Although there is a need

complement each other’s capabilities and states must

for technicians and aerospace engineers, mechanical,

find their niche. We have a close relationship with all the

industrial, civil and mechatronics engineers can all

existing clusters in different states such as Chihuahua,

contribute to the sector’s development.

Nuevo Leon, Queretaro and Sonora with the goal of working together toward the development of the

The second element we must prioritize is the development

aerospace industry in Mexico.

of a national supply chain. It is important to identify successful companies that could become aerospace

Q: What areas of opportunity should Mexico address to

suppliers but have not yet dabbled in this area. These

consolidate the aerospace industry?

companies usually have potential to become suppliers

A: The industry’s main goal is to guarantee aircraft

but refrain because they are unaware of the opportunities

safety. This is the hardest part to understand for other

or they think the certification processes are too long and

industries that look to build market participation based

resource consuming. For SMEs it is even more challenging

on cost reductions, rather than excellence through safety.

because they need more support to comply with

The aerospace industry needs an integral system that

certifications on their own. As a cluster, we must help SMEs

encompasses airports, certifications, MROs, infrastructure

access funds from the federal government and to find the

and many more elements that are part of our ecosystem.

appropriate aerospace advisors to guide them according

Hence, the need for constant communication between

to their niche. Our mandate is to increase national content

companies, the government, stakeholders and potential

through local suppliers because it will help the overall

investors.

industry in the long term.

opportunities to emerge.

Thirdly we must inform the public of our activities and

An important milestone for Mexico was the signing of

the benefits and potential business opportunities the

BASA between the Mexican and US governments. This

aerospace sector offers. The only way to attract new

agreement allows Mexican aviation authorities to certify the

investors and suppliers to the state of Baja California is

development of new procedures, designs, modifications

through communication and promotion of projects and

and revisions of products in our country before exporting

business opportunities within the cluster. Baja California

them to the world. BASA is the culmination of a 10-year

has been home to a prosperous aerospace industry for

effort since 2006 and it has accelerated the establishment

over 50 years but few are aware of our success.

of more than 300 aerospace enterprises in Mexico today.

Reliable

information

would

allow

new

The standardized regulatory framework in Mexico with Q: How does the Cluster collaborate with others

accepted international standards will facilitate global

emerging across the country?

industry growth.

VIEW FROM THE TOP

ONE VOICE TO SUPPORT GROWTH ARDY NAJAFIAN President of Aerospace Alliance

Q: What is Aerospace Alliance’s vision for the sector?

chance to share and participate in the projects created by

A: Aerospace Alliance’s main goal is to help maintain

the alliance. Mexico is an ideal location for many OEMs and

and support the growth of the state’s industry by

manufacturers, especially those from the US because it is

creating a single voice for our members. Their needs

close and operational costs are much lower.

include

investment,

development

qualified

local

human capital and suppliers. We also bring together

The Aerospace Alliance of Baja California was recognized

support organizations such as industrial parks, real estate

by SEDECO as the only official aerospace cluster for the

developers and shelters to help the sector generate

state of Baja California in March 2016. It benchmarked

opportunities for all players. There is important demand

other successful programs in Mexico and is certified by

for airplanes as major OEMs have a backlog of more

the European Secretary of Cluster Analysis (ESCA), an

than 10 years. This demand will create work and growth

international third-party organization. The Aerospace

opportunities for all subtier suppliers for many years. As a

Alliance

result, many aerospace companies are looking to Mexico.

industry, academia and the government to open a training

began

through

collaboration

between

the

center alongside the local Training Center for Work There are many interesting projects in the country such

(CECATI) for GKN in 2011. The center aimed to develop

as engine repairs, retrofits and renovating aircraft,

advanced CNC machining and basic CNC programming

including the Boeing 737 and Airbus A320, to reduce

capabilities. The training center attracted the attention

fuel, operating costs and emissions. A number of factors

of Honeywell, which implemented two different welding

such as geopolitical changes and global green initiatives

programs and UTC Aerospace introduced another for

have

compete

assembly. This association was the starting point for

and remain profitable. New technologies are being

made

these

projects

necessary

Aerospace Alliance. We later expanded by including other

developed to minimize operating costs and maximize

aerospace companies and the local support infrastructure

fuel economy. Airplanes are using intelligent systems to

such as industrial parks, as well as shelters, industrial

optimize performance and new engines can reduce fuel

promotion organizations and educational centers.

consumption by 30 percent. The positive environmental impact of lower CO2 and NOx emissions is invaluable.

Q: What collaborations allow the alliance to support talent development in Baja California?

Q: How does the alliance unite the needs of aerospace

A: Aerospace Alliance is focusing on developing key human

companies to promote local industry?

resources and strengthening the local supplier base. We

A: We are trying to develop a comprehensive image of the

collaborate closely with national and international education

aerospace sector in the state that reflects the real needs

institutions, such as we have a project with universities

and advantages of the region. There are 68 aerospace

from the US and Europe to develop non-ferrous materials,

companies in Baja California with an estimated workforce of

including titanium and composites. There are fantastic

more than 14,000 people. We all share the same challenges

projects to train future professionals for the aerospace

in terms of acquiring qualified people and obtaining

industry with partial financial support from CONACYT and

support from certified local suppliers. Our main objective is

since the creation of the alliance we have developed about

to help maintain, polish and grow the existing workforce to

eight projects and trained over 1,300 people.

reduce risk for companies operating here. We also share our experience with companies interested in coming to Mexico.

We plan to joining forces to complete the first state-

Our objective at Aerospace Alliance is to help companies

owned Training Center for Advanced Technology (ICAT) in

accurately assess risk and understand the opportunities

Mexicali and Tijuana. It is also necessary to align university

available to them in the region, as well as giving them a

programs geared toward aerospace.

INSIGHT

BAJA CALIFORNIA’S RECIPE FOR GROWTH Baja California has a lot going for it. Location, a multitude

Easy access to the Gulf of Mexico and the Pacific Ocean is

of industries, even a connection to the US energy grid.

one reason the state is home to Mexico’s largest aerospace

The state is not standing on its laurels, though. With a

cluster, which comprises 82 companies in Mexicali

healthy aerospace presence already in place, there is a

and Tijuana. According to Bonafante, Baja California’s

strong belief that its mix of ingredients is the perfect

aerospace industry represents 45 percent of the state’s

recipe for growth in the sector.

GDP. “We would like to consolidate the aerospace and medical devices industries here. In fact, the continued

Aerospace manufacturers considering Baja California

growth of these two sectors and their domination of local

as their host state will find a host of pros. These include

industry are probably unavoidable,” he says. The minister

low energy prices, a result of the state’s extensive solar,

recognizes that achieving excellence across all industries

and geothermal infrastructure for energy generation,

is an difficult task and that specialization would better

particularly in Mexicali. In addition to its own energy

aid their growth. For this reason, Bonfante says, Mexicali’s

supply, Baja California is the only Mexican state that forms

focus is to become the top city for aerospace while Tijuana

part of the US energy grid, connected to California via two

concentrates on medical devices and electronics, which at

lines in Tijuana and Mexicali. It also has a strong transport

120 companies is the largest industrial sector in the state,

infrastructure, including a connection between the San

a fact that should help bolster its aerospace endeavors.

Diego and Tijuana airports, the planned construction of a short-term railway that would link Tijuana to Tecate and

“I also see the aerospace industry playing a significant

a new airport being contemplated 20km from the port of

role in the city’s wellbeing as long as multinationals

Ensenada.

understand the benefits that working in Tijuana can bring to their operations,” says Rigel Navarro, CEO of the

These developments could lead Baja California to become

Economic Development Corporation for Tijuana. Cutting-

the optimal location for the manufacturing facilities of

edge technology is always needed within the advanced

companies that export to the NAFTA region while the

manufacturing

Ensenada airport’s goal is to become a central platform

production and delivery time and Tijuana’s strong

for trade with the Middle East and Asia. “The state can

electronics sector facilitates this. Advanced manufacturing

be more than just a logistics platform into the US,” says

in the state is shifting toward prototyping, first runs and

Carlo Bonfante, Minister of Economic Development for

product adaptation for new launches. A large number of

Baja California. “We can be the gateway to Asia as well,

startups and innovative firms in California are starting to

assuming we promote the state’s competitiveness and

consider Mexico as a more suitable hub than China for

create the relevant logistics infrastructure.”

their prototyping operations.

sector

reduce

costs,

inventory,

A third promising aerospace hub is located in Ensenada, which is placing its bet on research activities. “R&D is a priority for the city,” says Gustavo Morachis, the Economic Development Coordinator of Ensenada. “We are planning to create a technological park in Ensenada to work with the aerospace, agricultural and food industries.” Morachis also says the state intends to work alongside Mexicali and Tecate to become a logistics hub for all products moving in and out of the region. Through its seaport, Baja California can export to Asia, the US, Central Mexico and any other coastal port in the Pacific. The main goal in Ensenada is to improve its citizens’ quality of life and the increase in activity across all economic sectors is a means to an end, says Morachis. “We are fully aligned with Baja California’s regional aerospace strategy and have strived to strictly abide by the government’s agenda. Working together with all the municipalities in the state will give us the strength to expand globally within any industry.”

VIEW FROM THE TOP

TRADITIONAL COMPOSITES IN MEXICALI LOREN ENGEL General Manager of GKN Composites

Q: How has GKN Composites’ 2015 acquisition of Fokker

established presence in the area with a proven record of

Technologies impacted the company?

accomplishment. Mexicali also is more stable in terms of

A: Our two main business units, aerospace and automotive,

security than other locations. Expanding outside of Mexicali

have been successful in Mexico. In October 2015, we

would depend on the particular project and we would

finalized our acquisition of Fokker, a company that

explore other clusters where we already have a presence.

manages technologies that are of interest to raw material manufacturers, specifically thermal plastics. Thanks to

Q: To what extent has the Mexican workforce’s skillset

this acquisition, we have two aerospace plants in Mexicali,

met GKN Composites’ expectations?

one in Chihuahua and another in San Luis Potosi. In the

A: Although we have not experienced any problems

automotive division, our company has taken advantage

hiring engineering talent in Mexicali, our company trains

of the country’s cost structure and we have our largest

our entire workforce in the specifics of our operations.

operations in central Mexico. The market also has the

GKN's processes begin when we receive raw material to

bonus of being close to other automotive manufacturers

cut into kits. A tool operator then treats the material and

and customers in the US.

vacuum bags it before it enters an autoclave for curing. After the last step the material is stripped, trimmed,

We are now in talks with the Fokker team in Chihuahua

drilled, inspected and shipped back to the US. Throughout

to calibrate cost structures and to find new business

the process, the autoclave operators and the drilling and

collaborations, although the acquisition did not change

cutting machine operators require the most complex skills.

our plant or corporate division. We may soon see nondestructive testing, complex material Q: How has Brexit changed GKN's globalization strategy?

systems and machine trim and drilling in Mexico. These

A: It remains to be seen but we expect volatility over the

will require more skillsets but we are confident we can hire

next couple of years as the UK and the rest of the world

trained graduates from universities or technical schools. The

negotiate what the exit really means. In the short term, the

company is considering sending more sophisticated parts

uncertainty may cause distress in the British market. GKN

to be processed in Mexicali as budget and efficiency allow.

Composites will have to wait and see how the relationship with our largest aerospace customer, Airbus, works out and

Q: What can aerospace manufacturers learn from the

how this will indirectly affect the business. We will maintain

automotive industry?

an international focus but since most of our work in Mexico

A: GKN Composites finds the automotive division to

comes from the US, Brexit should not affect us drastically.

be ahead of the curve in lean deployment, scheduling and inventory adoption and supply chain management.

Q: Why did GKN Composites choose Mexicali for its

Both industries are distinct in scale and volume but

manufacturing plant instead of another location closer to

the aerospace industry can learn from automotive

the border?

manufacturing methods. Because they manage hundreds

A: The collaboration here between businesses, the industry,

of thousands of parts per year, the automotive sector has

all branches of government and the education system is

adopted disciplined and rigorous processes, whereas 200

impressive. It has a level of pro-business attitude that I have

parts per year is a high volume for aerospace.

never witnessed in the US. The transparency makes it easy to operate in Mexicali and Baja California. GKN Composites

Our aerospace facility also operates in a shelter and it

is a traditional company that strives to manage risk by

could learn from the surrounding automotive companies

expanding in areas we understand. We chose Mexicali

about issues that are associated with being a Mexican

because another division of the company already had an

manufacturing entity.

VIEW FROM THE TOP

EXPERIENCE, KNOWLEDGE ARE DIFFERENCE MAKERS OSSIE DÍAZ Operations Director of TACNA

Q: How deeply is the shelter involved in Tijuana’s

A: The impact has been overwhelmingly positive because

aerospace industry?

the current dollar to peso exchange rate is beneficial for

A: We have two aerospace clients including a manufacturer

manufacturing. Strategically, we also can capitalize on

of airplane valves that is targeting an 80 percent increase

our position near the US as regulatory changes will make

in personnel. Working with this company was among the

manufacturing less competitive north of the border.

more complex projects we have handled due to its need

Companies there will look to Mexico to find efficiencies.

for highly qualified employees, including CNC operators

One of the reasons companies move from the US to Mexico

and programmers. We consider their introduction to the

is to save money on labor costs, logistics and processes.

state to be one of our greatest successes. The company’s expansion will require additional qualified labor and the

Due to our success, we are running out of space in

development of internal programs to meet its expectations.

Tijuana. This is not just the case for our enterprise. The entire city is near capacity so we are working with

TACNA has over 5,000 employees and wants to become a 10,000-employee shelter in the short term

different government institutions to generate strategic solutions to this problem. The local government also has made significant educational changes that give students more flexibility to combine school with work. This is an opportunity that many have gladly taken as they need not choose between building their academic resumes and economically supporting their families. The necessary

The second aerospace company is a motor manufacturer

skill set for these workers has changed dramatically. Years

for the US Defense Department. Its introduction to the state

ago we were looking for regular assemblers but now

required solid two-way communication to accomplish the

companies are looking for specialists in more complex

transition on time and to avoid delays on purchase orders

processes.

from their final customers. This transfer was a challenge logistically because it was necessary to videotape the

Q: How has TACNA’s recent growth shaped the shelter’s

entire process, train people accordingly and take on new

expansion plans?

staff in Tijuana. Customs presented a hurdle because it was

A: Over the past few years, we have grown 200 percent.

necessary to tag every single piece of equipment and its

So far, we have 32 clients and almost 3 million ft2 in several

serial number. The production line could not be closed for

manufacturing facilities across Tijuana, Tecate and Ensenada.

more than three or four days waiting for customs because

While there were plans to expand to the south of Mexico, for

that would lead to substantial financial losses. To complete

the short term we will focus on the state of Baja California.

this transfer, we had to divide the process into different phases. We disassembled the line a week before, placed it

Q: What makes the company’s management team

on a truck and sent it on a Friday. On Monday, the machinery

attractive to potential clients?

arrived at the Tijuana plant and the production line was

A: TACNA is a privately owned business that has simple

ready to continue operations that same week. While it took

management operations, with only four people running

considerable effort, it was a very successful transfer thanks

the shelter. Limiting the number of managers facilitates

to TACNA’s experience in many manufacturing sectors and

direct interactions with clients on a daily basis. If a client

my own knowledge of the manufacturing environment.

needs help with anything they can contact me directly. We receive 10-15 leads every month and currently have

Q: What impact are currency changes and local government

about 15 potential clients. We also provide legal advisory

policies having on TACNA and Tijuana's industry?

services to our 30-plus clients.

VIEW FROM THE TOP

FINISHING TOUCHES ATTRACT ATTENTION CRUZ MALDONADO President of BAP Aerospace

Q: What is Tijuana’s role in the overall BAP Aerospace

Q: What are your expectations for this year and which

strategy?

new processes is BAP aerospace incorporating?

A: Tijuana offers many opportunities because it is

A: As of mid-2016, we had grown 53 percent and we

strategically located in the region of Baja California,

forecast a yearly growth of 134 percent by the end

only five minutes away from the US border and we are

of 2016. We expect this increase because of the new

surrounded by companies working in the same industry.

processes that are being installed this calendar year, for

The location makes BAP Aerospace de Mexico a viable

which customers are already waiting. For instance, we

and vital link in the local supply chain.

are adding a nondestructive testing department that will initially offer fluorescent liquid penetrant inspection.

When BAP Aerospace came to Tijuana, there were no

Companies in the region do not have access to this service.

aerospace-focused metal finishers operating in the

The situation forces them to either use no-bid contracts

region. Established companies in the state asked us to

or to pay to ship parts to the US tfor testing, bring them

bring our quality and expertise from our Los Angeles

back to Mexico for inspection and export them to the

facility. Many of them were clients that already were

US after completion. The lack of nondestructive testing

sending parts to Mexico from our plant in Los Angeles,

in the region adds a large amount of unnecessary costs

Barry Avenue Plating, which has been in business since

and time to the process, which reduces competition and

1947. Our passion for exceptional service and quality has

makes manufacturing less attractive.

been the factor that helped us thrive and expand our operations into Mexico.

Q: What are your strongest characteristics and what is the next step to consolidate this plant?

Q: Who are your main customers in Tijuana and how do

A: Most of our clients are well acquainted with our name

you attract them?

and our Los Angeles plant was recently recognized as

A: Most of our customers are local but we also have

one of the top metal-finishing shops in North America.

some in areas like Queretaro, Guadalajara, Juarez and

Our reputation for superior quality precedes us and

Hermosillo. We even have a client in Canada that has

attracts clients. We have the advantage of having clients

been using our services for the last couple of years. The

that are closely acquainted with the company thanks to

company also serves customers that are in the process

our facilities in the US. Other local shops in the area are

of moving their operations to the Baja region. They

not as open to catering to companies in the aerospace

send us parts from their US plant while their local plant

business and so they are not as well known in the

acquires enough experience to begin manufacturing

industrial community.

in the region. Our approvals include Lockheed Martin, UTAS Aerospace, Gulfstream, Eaton Aerospace, Parker

Our approach to quality makes us unique in the state.

Hannifin and Cessna, Cubic Defense and Encore Interiors

Even though we work for several industries, we instill

among others.

in all our employees the notion of a solid standard of quality, regardless of the end user. We take great pride

Eaton Aerospace is one of our largest customers, both

that we were the first company in the state to obtain the

in Mexico and in the US. Six years ago they approached

Nadcap accreditation for quality systems and chemical

us and expressed their need for a company like ours that

processing less than a year after opening. With this in

had enough expertise and prestige to help strengthen the

mind, we continue to evaluate and plan the next stages

local supply chain. Since we saw an abundance of growth

of growth and the development of our company to

opportunities in the aerospace industry, we decided to

accommodate the needs of the aerospace industry in the

open a local plant to support that growth.

Baja region as well as the rest of Mexico.

AIRCRAFT SPOTLIGHT

GULFSTREAM G550 JET After more than 10 years on the market, the G550 is still a favorite due to its efficiency and nonstop flying range. The two Rolls-Royce engines that power the craft provide it with more thrust than any other business jet. Part of the Gulfstream Aerospace business jet family, there are more than 450 planes in service. The G550 can fly up to 12,501km at 0.885Ma. This means the aircraft can easily connect Toluca with nearly all of Europe, South America or West Africa without stopping to re-fuel. The 43ft long cabin offers 12 possible configurations that can accommodate up to 19 passengers. Depending on the cabin’s layout, it can fit beds for seven people in addition to a private stateroom and a resting area for the crew. The aircraft also features a conference area and entertainment space. For art lovers, users have the choice of locating a full-size gallery either at the front or aft of the plane. The standard version G550 offers a wireless network, satellite

communication,

iridium

phone

and

multifunction printer in the same credenza as the wine cooler. To make the flight even more agreeable for passengers, the cabin has low-altitude pressurization and advanced sound suppression techniques. In the cockpit, pilots have access to the PlaneView avionics platform developed jointly by Gulfstream and Honeywell. Four displays and advanced vision equipment such as the Gulfstream Enhanced Vision System (EVS) on standard versions carry an option for the Synthetic Vision-Primary Flight Display (SV-PFD). The EVS captures clear images of runways and surrounding terrain when pilots' vision is reduced by weather conditions, while the SV-PFD offers 3-D terrain graphics even in conditions of zero-visibility. The deck also features the Gulfstream PlaneConnect system that automatically transmits reports of the aircraft’s condition to technicians on the ground so repair services can be ready when the aircraft lands. Though it was introduced in 2004, the G550 is continuously upgraded. Today it features the Future Air Navigation System (FANS-1) and the Controller-Pilot Datalink Communication (CPDLC), both of which help the pilot maintain communication with air traffic controllers. The

Automatic

Dependent

Surveillance-Broadcast

(ADS-B) also is included so the aircraft’s position can be determined via satellite.

VIEW FROM THE TOP

JUMP INTO AEROSPACE RAISES GAME MICHAEL LYNCH III President of Techmaster

Q: How has the aerospace industry matured in the years

Calibration is our most popular service, especially in

Techmaster has been operating in Baja California?

Mexicali. Our technology also is increasing our visibility.

A: The industry has evolved dramatically in the state.

We were the first enterprise to import a laser that is used

Tijuana’s

and

on penetrator warheads, for example. If we want to keep

communication equipment but now we have more

focus

was

originally

growing we need to identify other opportunities in the

manufacturing

manufacturing sector.

industries,

assemblies

electronics and

sales

mechanical equipment. Several aerospace companies are introducing their manufacturing processes to the state,

Q: How has being in Baja California helped Techmaster’s

reflecting the trend we have witnessed over the years.

consolidation? A: The technical level of our workers has played an

Baja

California

has

interesting

long-term

projects.

important role. Mexican workers’ skills are far superior to

Tijuana’s aerospace cluster in particular is very active and

those available in Asian countries. We are satisfied with

new enterprises are looking to settle in the city. These

our operations here, evidenced by the fact our local office

companies are also targeting Mexicali. A project has

serves as a marker for all Techmaster branches in the US,

been set to assemble a complete airplane in the city. If

setting quality and performance standards. Techmaster

successful, this will attract even more enterprises to the

is located in a part of the world that enjoys excellent

region. Techmaster has supported the development of the

technological standards so we are primed for an upturn in

area’s aerospace industry with offices and laboratories in

economic momentum.

Tijuana, Mexicali, Ciudad Juarez and Monterrey. Most of our calibrating services are for our customers based in

At first, we were concerned that Baja California’s reputation

Tijuana and Mexicali.

for high crime would hurt the industry, discouraging new enterprises from moving their production to the country.

Q: What impact has aerospace had on the company’s

Fortunately, we have not heard of any enterprises suffering

direction?

from security-related problems. Nonetheless, we must

A: Techmaster decided to break into the industry after

make an effort to improve the state’s image.

Eaton Aerospace switched their production from the US to the north of Mexico. We realized that if more aerospace

Q: What further steps need to be taken to ensure the

companies were considering constructing facilities in

company’s continued growth?

Mexico we had a good market opportunity.

A: Our goal is to provide training and guidance throughout the buying process and offer services that

Before entering the sector, our company focused on

complement each other, such as equipment sales and

medical calibrating services. We concluded that to be

calibration services. Only these actions will allow us to

taken seriously in aerospace we needed to train our

provide better customer experiences. Importantly, we

personnel, to update our equipment and to be certified to

need to keep investing in training in line with company

the highest quality standards including Nadcap.

growth to ensure our employees become progressively more productive.

Techmaster’s participation in the sector has contributed to

Aerospace

We also plan to expand our laboratories and offices

represents around 70 percent of our business in Mexicali,

the

development

the

business.

because demand has outgrown our facilities. Techmaster

though in Tijuana the percentage drops to 20 percent. In

provides services for many cities, hence our need to invest

Mexico overall, aerospace represents 35-40 percent of

in labs in different areas of the country. Queretaro, a city

our total sales.

with a growing aerospace business, is our next stop.

VIEW FROM THE TOP

ALLOY SUPPLIER TARGETS MATERIALS GAP GENARO MANILLA Director General of Coast Aluminum

Q: How is Coast Aluminum confronting the lack of local

enough raw materials as needed. The aerospace industry

raw material providers in Mexico?

represents about 30 percent of our clients in Baja California.

A: We decided to establish our company in Mexico to target this market gap. We want to be our clients’ partners,

People generally talk about the high standards required

to allow them to focus all their attention on manufacturing

for the aerospace industry but the medical industry, which

their products while we focus on providing the inventory

has an important presence in Baja California, also requires

they require. By operating under this business model, we

high standards. Aerospace demands more certification

help them become more competitive and save money on

processes, however. Companies like Boeing and Airbus

the costs of importing raw materials.

need to certify our providers before we can work with them. In the past, aerospace companies worked directly

We have facilities in Ensenada, Tijuana and Hermosillo.

with suppliers to develop the correct alloys that we would

Ensenada and Tijuana’s distribution centers serve the state

then deliver. We are in the middle of the chain, transporting

of Baja California using our own fleet and the Hermosillo

materials to the final client. At Coast Aluminum, about 90

facility caters to Sonora. We employ our own fleet in

percent of our materials are made in the US to the highest

this state too, but if we need to send material to other

quality standards and certified there. The remaining 10

Mexican states such as Chihuahua, Jalisco or Queretaro,

percent accounts for specific materials that are shipped

we typically outsource transport services.

from South Africa or Europe. Unfortunately, we do not have any Mexican providers as aluminum production consumes

We have entertained the idea of establishing facilities in

a lot of electricity. An interesting project in Mexicali to

the central Bajio region, which has shown exponential

generate electricity did not get off the ground but this

growth during the past few years. The company could have

would be an area of opportunity for those interested in

opened five facilities this year to respond to demand but

investing in Mexican aerospace.

we are trying to grow sustainably. Coast Aluminum plans to open a plant in the central state of Queretaro, which

Q: To what extent has FEMIA supported your growth and

is a particularly interesting market and suits our objective

that of the aero cluster?

to continue expanding into locations close to our clients.

A: We have enjoyed excellent year over year growth in

We would like to be present in the main industrial clusters,

2016. The entire state has benefited. FEMIA has helped us

namely the Bajio region and the states of Nuevo Leon,

strengthen our networking with key local players, playing

Jalisco and Chihuahua because proximity to the companies

intermediary to link companies with solutions. Though we

we work with allows us to be more competitive.

have not directly received government support to expand in Mexico, FEMIA refers potential clients to us when

Q: How does aerospace differ from other industries?

someone needs the type of material that we offer. In fact,

A: Aerospace is an interesting market with long-term

many aerospace players help each other across processes

contracts. In other industries suppliers can face difficulties

and also share materials so the federation’s input is a

when products change due to innovation or are taken off

valuable support for the entire industry.

the market altogether. The aerospace industry rarely suffers such drastic changes during the manufacturing process. The

Our company must continue to offer excellent customer

only potential risk is that aerospace companies could expand

service to the aerospace industry. The quality of our

their portfolio to include more airplanes, which ultimately

products and our service has gained us the reputation in

generates more business. This stability makes the sector

the region as an industry standard. This will allow us to

attractive to Coast Aluminum. Companies need quality

reach new businesses and strengthen relationships with

support, encouraging us to rise to the challenge of providing

our clients long term.

VIEW FROM THE TOP

LOCAL MAKER SWITCHES ON NEW OPPORTUNITIES DAVID BERRUECOS General Manager of Switch Luz S.A.

Q: How has Switch Luz/Electro-Mech Components

increase our prices since this would inevitably impact

evolved thanks to its relationship with Boeing?

airline prices. We have to walk a very delicate line between

A: Our experience in aerospace dates back to the 1980s

costs and pricing. Fortunately, we have not been affected

when we began manufacturing different types of switches,

negatively by the increase in the US dollar exchange rate

especially electromechanical switches. We started working

since our operational costs are in the national currency and

with Boeing and benefited from growing and evolving

our sales prices are in US dollars. We have maintained our

alongside them, although we can manufacture switches

price competitiveness and are actually benefiting from the

for different applications.

current exchange rate, at least in the current year. On the other hand, the cost of materials such as polycarbonates,

We now work with Boeing, and we have projects with C&D

aluminum, brass and electronic components has increased,

Zodiac, among other aerospace companies, to manufacture

so our overall cost is level.

components for Embraer, Mitsubishi Aircraft Corporation and Sukhoi aircraft to name a few. Our collaboration with

Q: What is the scope of Switch Luz’ business operations

Boeing opened new business opportunities and we are

in the aerospace industry?

beginning to collaborate with an Airbus distributor, which

A: Even though we participate in other industries, our main

has shown interest in performing more manufacturing

business is in the aerospace sector. Seventy-five percent

operations in Mexico in the near future.

of our production is for aerospace and the remaining 25 percent is dedicated to heavy machinery, medical devices,

How

has

the

development

Boeing

the

relationship

company’s

supported

manufacturing

broadcasting, buses, taxis, firefighter radios and many more applications.

competencies? A: Our team of representatives is in direct contact with

We design and manufacture switches with high-added

engineers from Boeing and other OEMs, for whom we

value for the avionics sector and we perform a high-mix

manufacture custom-made switches. After so many years

low-volume production. Switch Luz has the capacity

working with them, we have developed relationships built

to manufacture around 2,900 different parts, including

on trust and they continue to consider us for new projects

molding, CNC machining, die stamping, conventional

and product improvements.

machining, solder and assembly operations. We have competitors in the US, Germany and Japan but they also

We provide top-quality products. For two years in a row,

produce different kinds of switches.

we have obtained the Performance Excellence Award, for which we had to overhaul our manufacturing process,

Q: To what do you attribute your growth in 2016?

reassess the company’s quality standards and provide new

A: Switch Luz is a small company, focused on human

training courses to our collaborators. Switch Luz/Electro-

quality. We allow employees to grow intellectually and

Mech Components successfully obtained the AS 9100

personally. We have a high employee-retention rate, which

certification. We are audited frequently because being

means our staff feel comfortable with us and they have

Boeing’s suppliers obligates us to constantly re-evaluate

developed their professional careers with us. Our team

and improve our quality standards.

totals 46 people, whom we regularly provide with growth opportunities. We have two factors for success: our people

Q: How is Switch Luz managing the increasing costs of

and the experience of operating in Mexico for 50 years.

aerospace components?

This experience in different manufacturing eras allows us

A: Manufacturing products for the aerospace industry is

to keep the best practices from each generation and face

very expensive. We have been asked by Boeing not to

the future in an integral manner.

VIEW FROM THE TOP

MAKING A PLAY IN GLOBAL ARENA ROBERTO CORRAL Vice President and General Manager of Innocentro Aerospace

Q: What steps has Innocentro Aerospace taken to grow

support the aerospace industry in California. We supply

its international operations?

Airbus in Herborn, Germany, three divisions of Zodiac

A: Alongside our partners in Phoenix, we created Innocentro

Aerospace in America and we expect to begin working

LLC two years ago to commercialize Mexican products

with a fourth division in the Czech Republic. We also work

internationally and we have since introduced many parts

with many of Boeing’s aircraft platforms, with product

to global markets. While we have several divisions, we

design that includes insulation blankets, mechanical parts

focus on aerospace consulting, component engineering

and seating structure carpentry.

and production of technical publications for aircraft, train and automotive components. We have offices in Canada,

We recently participated in the Crystal Cabin Awards in

the US and Mexico but our offices in Mexicali offer many

Hamburg, a contest organized by a German organization

advantages, so we plan to include new projects here.

interested in innovating aircraft interiors, and presented a new composite cabinet concept, grabbing the attention

The company has grown through constant investment

of many potential buyers. We work with many national

and by developing processes to improve productivity,

and international airlines, and also serve the Mexican

including the installation of metrics activities and an

Presidential airplane hangar.

operations system. It started as Volare Engineering in 2001 to supply the aerospace industry in Mexico and the

Q: How would you describe the local and federal

US and was restructured to weather the 2009 crisis, a

government’s support of the sector?

move that has been instrumental in our recovery. Today,

A: The local government and industry are committed to

we are selling at pre-crisis levels but operating with half

the aerospace industry’s growth. FEMIA, of which we are

the workforce due to increased productivity and the

a founding member, signed a goodwill agreement with

implementation of better operating systems. We also

the Malaysian government to exchange information in

expanded in areas such as the interior of landing gear

the aerospace industry and their Minister of Economic

and other pieces. We have the capacity to double our

Development visited to discuss an economic deal. In 2015,

production and are expanding our competencies, looking

we took part in the Fit for Partnership program created

for long-term projects. To restructure, it was necessary to

by the German Embassy, INADEM and COPARMEX. Two

acquire the ISO 9001-2008, which we are upgrading to

months later, we signed an agreement at the German

ISO 9001-2015. Innocentro Aerospace has the AS 9100

embassy in Mexico with the Mexico-Germany Businessmen

certification for aerospace and defense systems.

Association (EMAAC), which incorporates SMEs from all economic areas in both countries. SMEs represent 83

Q: How does Innocentro Aerospace promote itself in the

percent of job sources for Mexicans.

international arena? A: Our team attends major international events including

While Mexico supports the aerospace global value chain, we

the Paris Air Show, Farnborough International Air Show,

are still far from developing a Mexican airplane. Many years

the ILA Berlin Air Show and the Aircraft Interior Expo AIX

ago the country implemented many regulatory policies to

in Hamburg. We also participate in national initiatives to

strengthen its manufacturing industry and international

strengthen local industry.

trade. While these policies made the country an attractive manufacturing center it did not succeed in generating an

Q: Who are your main clients and how do your various

entire supply chain. Mexico has enough resources to promote

facilities cater to their needs?

and support the industry’s growth, integrating suppliers

A: Our facilities in Mexicali manufacture aircraft interior

that meet all regulations from airworthy agencies, quality

components for major OEMs, Tier 1s and their suppliers and

systems, industry standards and customer requirements.

ROUND TABLE

HEARTENING PROGRESS AND HOPEFUL PLANS The goal of all companies is to add the greatest amount

in the supply chain. Those that are growing in Mexico in

of value possible to any given product. Most advances

electronics, metal mechanics, composites and shelter

from Mexican industry players revolve around operations

manufacturing services discuss their plans for expansion

such

and expound on the reasons behind their success.

additive

manufacturing

processes

that

imply strengthening pieces, moving away from the simple manufacturing in which the country has already

This diffuses any thought that the country is not ready for

established its prowess.

aerospace processes and augments the overall sentiment that local industry is fully capable of receiving further

Here, forward-looking company leaders comment on plant

investment, diversifying into new segments with new

expansions, investment in production lines and talent

clients and becoming an integral part of global aerospace

development to improve their products and participation

production.

There are many opportunities here for aerospace suppliers like GKN Composites to serve aircraft manufacturers. Since coming to Mexicali, we have doubled in volume each year and this year promises to be consistent with 2015. Our plant started operations with 80,000ft2 and we only occupy half the building. We expect our operations to expand into the rest of the building by early next year, depending on which products enter our local plants. There also is the opportunity to build more facilities should demand grow enough to merit an extension.

LOREN ENGEL General Manager of GKN Composites

In the past few years, we have grown 200 percent. TACNA has 32 clients and almost 3 million ft2 in several manufacturing facilities across Tijuana, Tecate and Ensenada. We also are evaluating the possibility of expanding to Rosarito and Mexicali. While there were plans to expand to the south of Mexico, for the short term we will focus on the state of Baja California. We have over 5,000 employees and want to become a 10,000-employee shelter in the short term. We plan to continue growing in the aerospace sector and will expand our presence in this industry to represent 25 percent of our total operations.

OSSIE DÍAZ Operations Director of TACNA

We want to expand our business with more aerospace companies such as Airbus by 2017. Until now, our growth has been intertwined with Boeing’s. This is positive since we can count on a minimum growth rate but we would like our operations to diversify within the industry. However, we need more support from the government to attract more international corporations to the country. The federal government has made several efforts to improve Mexico’s image abroad and its strategy has been somewhat successful. But if the country wants to attract more foreign direct investment and become the preferred place of operations for several large

DAVID BERRUECOS General Manager of Switch Luz S.A.

companies, it still needs to implement fiscal reforms that promote investment. The fiscal reform of 2013 reduced our competitiveness, especially because our administrative costs rose due to increased bureaucracy.

We have enjoyed excellent year over year growth in 2016. The entire state has benefited from similar growth. Mid-2016, we were up 30 percent compared to 2015. We increased the number of shifts to meet our orders last year and have extended working hours and invested in more storage space, more equipment and more employees. It is unclear why we are enjoying such growth but we speculate that production lines are returning from China after having left Mexico and discovering that market conditions are less stable elsewhere.

GENARO MANILLA Director General of Coast Aluminum

Techmaster has registered solid growth rates in the past few years. In 2015 alone, we saw a 15 percent gain in sales and we expect a double-digit increase this year. Our equipment sales have risen 20 percent compared to 2015, which shows we are on the right track. These growth rates suggest the business is solid but to keep growing we have to improve the added value of our products and services. The aerospace industry raised our game and today we work with Eaton Aerospace, Parker and Esterline among others. The aerospace sector holds us to higher standards, which has helped to improve the quality of our products.

MICHAEL LYNCH III President of Techmaster

CHIHUAHUA

Chihuahua’s name has become synonymous with advanced manufacturing. The joint efforts between private companies, academia and government, best known as the triple helix model, have paid off, boosting Chihuahua’s capabilities and reputation. Today, the state’s five OEMs and 37 certified suppliers manufacture aerostructures, harnesses, turbines, seats, slides and rafts, aero parts and sheet metal, composites, interiors and high-precision machining. The aircraft parts manufactured in Chihuahua are incorporated into aircraft belonging to 12 OEMs and used by more than 60 airlines. Quality manufacturing has become one of the state’s distinctive traits, which would not be possible without the Chihuahua’s true talent, its human capital. Around 3,900 engineers and 1,500 technicians graduate every year from its 59 universities and 65 technical schools.

This chapter provides insight on the industry in Mexico’s largest state. With interviews from government representatives, OEMs and suppliers, Chihuahua’s strengths and business possibilities are on full display.

CHAPTER 4: CHIHUAHUA 86

VIEW FROM THE TOP: Xavier Hurtado, Ministry of Economy of Chihuahua

VIEW FROM THE TOP: Rene Espinosa, Chihuahua Aerospace Cluster

VIEW FROM THE TOP: Aldo Plata, Kaman Aerospace

ROUND TABLE: Weak Links in the Supply Chain

VIEW FROM THE TOP: Álvaro Aguilar, L-3 Crestview Aerospace Chihuahua Operations

VIEW FROM THE TOP: Rene Espinosa, MFCO

VIEW FROM THE TOP: Nicolas Maillard, Lisi Aerospace

VIEW FROM THE TOP: Ramón González, Chandler Industries

VIEW FROM THE TOP: Alberto Salomón, CENALTEC

VIEW FROM THE TOP: Juan Méndez, CIMAV

VIEW FROM THE TOP: Sergio Mancinas, FabLab

VIEW FROM THE TOP: José León, Quasar106

Eloy Marquez, Quasar106

Raúl Evangelista, Quasar106

100

PLANT SPOTLIGHT: Zodiac Aerospace Chihuahua

VIEW FROM THE TOP

TAILORING CHIHUAHUA TO THE AEROSPACE INDUSTRY XAVIER HURTADO Promotion Director of the Ministry of Economy of Chihuahua

Q: What government plans are in place to contribute to

Some of the state’s advantages are the close integration

the development of the aerospace industry?

between all members of the industry, its specialized

A: Most aerospace companies have very long decision

labor force and its privileged location. We are closely

processes, thus we are reviewing these long-term plans

collaborating with the aerospace cluster and academia

to understand their status and to follow up. At the same

through a triple helix model, which has been well received

time, we are planning to bring Tier 3 and 4 companies

by the industry as it shows a unified front. The aerospace

to support OEMs in the region. We have recognized the

industry requires a highly specialized skillset that is

need for certain highly specific processes, including

difficult to find anywhere outside the state. Chihuahua

machining, plastic injection, composites, forging and

also has a high-tech training center, CENALTEC, that

casting, all of which must be certified by each individual

tailors educational programs to address the aerospace

OEM. This is a challenge for the industry because OEMs

industry’s needs.

need these suppliers so that the whole region can continue growing. The focus on attracting OEMs to the

The state also is in a privileged location near the border

state must now shift toward suppliers.

as most aerospace parks in Mexico are being built to support companies in the US. We can provide interested

We have already introduced a few companies that

companies with a competitive infrastructure and fiscal

perform specific processes, such as metal finishing and

incentives based on the amount of investment that a

heat and surface treatments. This allows local aerospace

company is willing to make and the labor they would hire

companies to avoid having to send components outside

locally. We can often offer tax exemptions on payroll,

Mexico to acquire these processes and bring them

council tax or construction permits. However, most

back afterward for final treatments. This back and

Mexican states offer similar incentives, so the deciding

forth increases a piece’s overall price and reduces the

factor for an interested company is the established

region’s competitiveness. It would be ideal to establish

industry awaiting them in the region.

new companies that can introduce several processes at a time.

Q: How are you balancing competition and collaboration with other clusters in Mexico?

Q: How do you identify and convince these companies

A: From the outside, it may look like we are competing

to come to Chihuahua?

with other clusters but this is not the case. Each state

A: We attract companies with a partner strategy. As

has distinctive strengths and we can complement each

part of the government, we can facilitate a supplier’s

other. Under FEMIA, Mexico will be able to compete

establishment in the state but we cannot choose

as a single cluster with the rest of the world, instead

companies for the industry. Therefore, we talk to Tier

of dividing efforts across different state clusters. This

1 companies and OEMs to identify the suppliers they

means that members of different clusters can embark

need. To convince these companies we have a series of

on commercial missions together and suggest a location

promotional materials to show the advantages the state

according to a company’s plans or even suggest several

can offer. Most importantly, we simplify all the processes

locations if the potential company has clients in two or

involved with entering the country because we fully

three different states.

understand what these companies are looking for. We usually invite them to visit for a few days and introduce

Q: How problematic has it been for foreign companies

them to our educational institutions and procurement

to adapt their manufacturing processes to Mexico?

professionals and show them how we can simplify the

A: I do not think it is troublesome. Foreigners may have

internationalization process throughout their journey.

the impression that the process is very complicated if

they are unaware of the state’s strengths. Once these

first time that academia and the industry are working

companies become aware of Chihuahua’s capabilities

together to achieve this and now other regions are

they may even change their plans to include more

interested in emulating the model. To implement this

processes. Some companies have said that certain

project, we have collaborated closely with many companies

processes achieve better quality standards in Mexico

including Safran and Zodiac, and other institutions such

than in the US. This is because many processes have

as the French Embassy. Safran, for instance, has made an

been performed in the US for a long time and as they

important investment toward the creation of laboratories

are transferred to Mexico, companies can optimize them

for these purposes in the Technological University of

with newer practices and technologies.

Chihuahua (UTCh). We are still working with human resource representatives to attain an updated picture of

Q: What strategies has the government implemented to

the industry’s needs and align them to the curriculum.

support the aerospace industry’s development?

Thus far, having created a database of all the graduates in

A: The aerospace industry is important to the state,

the state, companies can easily access the information to

although in labor force it is, by nature, a small sector

identify potential employees.

in comparison to other manufacturing industries. To be specific, the aerospace industry employs 10 percent of

Q: What is Chihuahua’s plan to grow and consolidate

the automotive industry’s workforce in Chihuahua.

aerospace in the state? A: To attract more suppliers to the state, we are focusing

All the members of the aerospace industry have asked

on suppliers of larger pieces. We have to identify them,

ourselves what we have to do to fully assemble an

convince them that Chihuahua is the place to be and team

aircraft in the state. We performed an analysis of the

them with partners that possess the correct certifications.

state’s capabilities to develop a road map to reach that

We are targeting both Mexican companies that are

point. This plan went beyond suppliers and processes to

interested in developing an aerospace division and foreign

contemplate the labor force’s necessary skillset. Local

companies interested in entering the Mexican supply chain.

companies informed us of their status, medium-term

Integrating a company into the aerospace industry is a

plans and what obstacles they have identified that impede

steep learning curve but there are several success stories of

them achieving these goals. We took that information

Mexican companies that developed an aerospace division,

to the Ministry of Education (SEP), which integrated the

such as Soisa Aerospace and Altaser Aerospace.

program Rutas (Routes). While we already worked with universities and technical institutes, through Rutas we

While many companies focus on the state’s abilities to

developed different technical programs for high schools

machine components, Chihuahua also has a strong design

based on the information acquired from the industry.

division. For instance, Safran employs 300 engineers in

The first generation of these students, who specialize in

designing for their local and international operations and

quality and maintenance, will graduate this year.

Zodiac, Honeywell and Textron have design divisions in Mexico. This area is still growing in Mexico and many

To date, we have several educational institutions with

companies are now using CATIA software, which often

specific programs for the aerospace industry. This is the

surprises foreign visitors.

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MORE TO OFFER THAN JUST GREAT LOCATION RENE ESPINOSA President of Chihuahua Aerospace Cluster

Which

primary

characteristics

differentiate

the

A: The aerospace industry in Chihuahua has attracted over

Chihuahua Aerospace Cluster from other aerospace hubs

US$1 billion in foreign direct investment over its history and

in Mexico?

in 2015, it exported over US$1.5 billion. The cluster is now

A: We complement the Mexican aerospace industry with

comprised of 45 companies, five of which are OEMs, and

diverse expertise. Manufacturing operations in the state

has implemented a strong triple helix model. We worked

started over 50 years ago in Ciudad Juarez, followed by

closely with the government, including the Ministries of

Chihuahua City 10 years later. Chihuahua became the

Economy and Education, to develop a comprehensive

first state to house a company that manufactured wire

technological road map in 2013, plotting the cluster’s

harnesses for the aerospace industry. This company

abilities to set up a growth plan. We will implement this

was later acquired by Safran Labinal, which led to its

up until 2023. This map will show us what we still need to

exponential growth and it now supplies over 40 percent

acquire and which companies we must incorporate into

of worldwide demand for aerospace wire harnesses.

the cluster to consolidate the industry in the state.

Chihuahua Aerospace Cluster has developed a wide

The country’s northwest region is growing the fastest in

range of processes in the past years, including expertise

aerospace but it faces challenges, such as the mountain

in aerostructures, sheet metal, machining and composites

range that separates us from Sonora and the difficult

thanks to the companies established in the state, including

transport links with this state. Customs and logistics have

Textron Aviation, Honeywell, Bell Helicopter and others.

presented a problem because companies find highway tolls

Over 70 percent of the sheet metal structural parts that

and import and export taxes to be prohibitively expensive.

Bombardier buys in Mexico come from the aero cluster in

Nonetheless, all local operations in the aerospace industry

Chihuahua. Zodiac Aerospace started operations in Mexico

are expanding and attracting the attention of aerospace

with two plants and now runs nine diverse business units

giants such as Boeing. The state can provide a wide set

in five plants, plus a joint venture with Embraer, called EZ

of services, products and solutions for the entire industry.

Air. The state also supplies to Airbus, Boeing, HondaJet

For instance, Textron Aviation is manufacturing a plane

and Bell Helicopter, among many others.

here exclusively using composites.

The state’s location is frequently mentioned as a strategic

Q: How is the cluster attracting OEMs such as Boeing?

advantage but this blanket statement does not show the

A: We have a strong promotional division through

entire picture. Companies have to analyze what they need

companies such as American Industries and INTERMEX,

from the region as a whole. Chihuahua has many different

which has been one of the largest motors for the industry

services that cater to the needs of companies interested in

for the past five years. All the companies in the state also

entering the country. The state has a strong vocation and

are committed to its promotion, approaching it as a team

tradition in manufacturing and experience in engineering

effort. Companies in the state are integrated and possess

and design, sheet metal, machining, aerostructures,

complementary

processing and heat treatment, interiors, evacuation

participation from several industry players.

capabilities

new

projects

imply

systems, wire harnesses and other components. It is important for all companies in the cluster to show their

While attracting other companies is important for us, it

abilities so that newcomers can analyze whether local

is a higher priority to take care of companies that are

industry suits their needs.

already located in the state. A greater success than simply attracting many new businesses would be for every single

Q: How does the cluster appeal for governmental and

company that enters the state to stay long term and grow

private sector support?

sustainably.

Q: What are the greatest challenges aerospace companies

A: The state has a training center for machining and every

face in the state?

other process that a company may consider necessary,

A: The challenge of acquiring human capital and suppliers

called CENALTEC. This center has trained people for

is the first hurdle faced by aerospace companies in Mexico.

all local companies, including Fokker GKN, mainly on

One of the state’s greatest strengths is our triple helix

aerostructures, welding and high-precision machining.

model, targeted at providing qualified individuals for

CENALTEC saves companies time and money to acquire

emerging aerospace companies. Through this model, we

qualified technicians. Chihuahua also has respected

have managed to close the gap between the classroom

universities that train engineers. La Salle University, for

and the facility, which was a first for education in Mexico.

example, has an engineering design program, which

We had found in some cases that academic curricula did

caught Safran’s attention. While other states may have

not match the needs of the industry. Local universities

created entirely new universities to train engineers and

were generating a significant number of engineers

technicians, with admirable success, we decided it would

but overlooking qualified and specialized technicians,

be more efficient to build on our existing university

which aerospace manufacturing companies need in high

network.

numbers. Newly arriving international entities would often need to make large investments to train the necessary personnel. To address this problem, we joined an alliance called Rutas, established by a youth organization and an employer’s association. The goal of this alliance is to develop training programs. We helped modify the first 270 hours of course time to satisfy a series of industry needs, including quality systems, maintenance and assembly. The goal is to modify 720 hours out of the entire program. The second significant problem for the industry is the consolidation of its supply chain. The aerospace industry is rigid due to all the necessary certifications that require substantial investment and time. While processes may seem long and complex, some local companies, such as Soisa Aerospace, have been successful. To support these companies, we bring together different players. -in

The aerospace industry in Chihuahua has attracted over US$1 billion in foreign direct investment over its history and in 2015 exported over US$1.5 billion

December 2015, for example, we held a workshop with TechBa in which we connected startups with companies

Q: What specific steps is the cluster taking to consolidate

that have been successful in the state to promote and

the local aerospace industry?

share best practices and policies.

A: The cluster is committed to the construction of an MRO at the Roberto Fierro Airport, which will locate all the

We have identified several continuing needs. For instance,

necessary processes, technologies and experience in the

Chihuahua still needs a local casting and forging supplier.

region. Another goal is to continue strengthening our high-

The state has the largest high-precision machining center

precision machining operations. There are several projects

in Latin America in Honeywell Aerospace. It has over

in the state that show off our machining capabilities but

1,100 CNC machines that manufacture turbine parts and

we need to expand this area through the development

blades but the company outsources all its casting and

and attraction of more machining workshops. We

forging needs to other countries. Mexico faces an inverted

must also focus more on composites, which is the next

pyramid, meaning that the country has a significant

challenge that the Mexican industry must overcome. Some

number of OEMs but lacks a strong supplier base. In other

companies have developed expertise in this area but tend

economic sectors, such as the automotive industry, once

to use it exclusively for internal operations. It is necessary

an OEM is established suppliers flock to the surrounding

to develop a strong supply network for these materials.

area. Aerospace is different as the companies capable

Finally, we must develop avionics. The state is home to

of attracting suppliers are mainly Tier 1s. The state also

important electronic and telecommunications companies

needs a series of distribution centers for all tooling and

and it is one of the strongest regions in the country

machining companies here.

housing companies that could participate in this niche. It would be beneficial for the state to start using these

Q: How is the cluster actively contributing to improve its

entities to develop avionics and other telecommunications

talent offering?

products needed in the aerospace industry.

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WILL HELICOPTERS BE ASSEMBLED IN CHIHUAHUA? ALDO PLATA Plant Manager at Kaman Aerospace

Q: How has Kaman Chihuahua evolved to meet the

parts, so it is an internal client transfer. Kaman is in the

requirements of aerospace companies in Mexico?

process of manufacturing a helicopter. Since we also

A: We opened Kaman Chihuahua because the industry

act as an OEM, we are our own customers. The parts

needed it. OEMs want to work with local suppliers

we manufacture for our clients are sent to Jacksonville,

as often as possible so when enterprises such as

where a large-scale assembly takes place, after which the

Bombardier, Cessna and Beechcraft started moving

structure is sent to the client. However, our helicopter is

their operations to the country we identified an

being sent to Connecticut after Jacksonville, where the

important business opportunity. Beechcraft was our first

final assembly takes place and flight tests are performed.

client and after working with Bombardier we started to expand our client base. Having decided it would be best

In the long term, we hope to manage final assemblies in

to move production of all sheet metal to Chihuahua, all

Chihuahua. However, the city needs to make adjustments

Kaman divisions now purchase sheet metal from Kaman

in preparation. Obtaining certifications from the US

Aerospace.

government will become necessary in the near future, as well as encouraging local supply chain growth because

Q: What manufacturing services do you offer your OEM

almost 90 percent of the materials we use are imported.

clients in the aerospace industry? A: We work directly with Bombardier, Boeing, Triumph and

Q: What new technologies and processes is the industry

Mitsubishi. An exciting project we are working on involves

implementing to increase its competitiveness?

an internal transference of Kaman operations from the US

A: We constantly upgrade our equipment to the newest

for Sikorsky, which would be our first military product.

technologies and we are committed to the constant training of our employees. Staff members are grouped

Sikorsky presents a challenge since we are the first

in work cells to specialize in selected processes. These

company to manage military products in the sheet metal

work cells have increased our productivity and have

industry. Working with military products implies the

upgraded our product quality. Our improved productivity

company’s security levels must increase by 200 percent.

is boosting our presence in the whole Kaman Group. We

Security not only implies more guards but training people

represent 25 percent of Kaman Integrated Structures and

in new processes and securing a supply chain that complies

Metallics’ operations. This year we can manufacture 3,500

with specific military requirements. We had to build a

different parts but we expect to make 5,500 different

special, isolated engineering area with controlled access.

parts by next year. Most of our production is for export as

In addition, we have had to obtain Export Administration

our only local client is Bombardier Queretaro, for whom

Regulations certifications, which have almost the same

we manufacture around 13,000 pieces per month.

requirements as the ITAR certification. Q: What strategy is Kaman Aerospace implementing in its Q: What activities from Kaman Integrated Structures and

plant in Chihuahua?

Metallics’ operations are being diverted to Chihuahua?

A: In 2016 we expanded our plant from 35,000ft2

A: Kaman has been operating in Chihuahua for only five

to 60,000 ft2. Our goal is for this plant to work at full

years but in a short period of time we have managed to

capacity and to make further inroads into the assembly

increase the plant’s capacities. Besides sheet metal, we

arena. New products resulting from our Mitsubishi

work on machined parts, extrusion and sub-assemblies.

contract and the adoption of Boeing’s assemblies will

We grow according to our clients’ needs. For instance,

move us from low-complexity to medium-complexity

for Sikorsky we will manufacture fuselage parts. Our

assemblies, building up to more complex processes. A

headquarters in Jacksonville manufactures the Sikorsky

second plant in Chihuahua is also in our long-term plans.

ROUND TABLE

WEAK LINKS IN THE SUPPLY CHAIN After talent procurement, “the second most significant

new investors and ultimately consolidate its position in

problem for the industry is the consolidation of its

global industry, Mexico’s need to strengthen its supplier

supply chain,” says Rene Espinosa Terrazas, President of

base is emerging, including raw material and material

Chihuahua’s Aerospace Cluster.

treatment suppliers. This will permit greater inclusion of Mexican products in final products and boost innovation

Companies evaluate the possibility of entering a new

and industry growth,

country based on available resources as well as potential profitability. Any hassle that can be avoided for the

Several industry representatives highlight this and here,

investor is a bonus, explaining why many companies

key players at varying levels of the supply chain discuss

enter new locations with their entourage in tow.

the challenges faced by manufacturers in Mexico and

Importing suppliers from a company’s home country is

possible strategies that could help suppliers strengthen

costly and time-consuming, however. To open doors to

the weakest links in the supply chain.

The consolidation of the supply chain has been a significant challenge due to the nature of the products we manufacture. We require exotic metals and super alloys that are not manufactured in Mexico. Our main operations in the state are in forged metals and castings materials that have largely had to be imported. This has meant that we are not growing as fast as we would like, due to difficulties in sourcing materials. There are plenty of opportunities for interested suppliers to grow alongside us. While a large company such as Honeywell can attract a supplier to the cluster alone, a smaller company may be unable to do so with the

CECILIO LÓPEZ Plant Director of Honeywell Chihuahua

small potential volume they would manage. Several small companies may rally together to attract larger enterprises through FEMIA.

We import such large quantities of raw materials from abroad that we are heavily dependent on customs lead times. Aluminum, titanium and aerospace-rated steel are simply not available in Mexico, and they are integral to aerospace operations. Tier 1 companies, like L-3 Crestview, are not yet performing such advanced manufacturing in Mexico and it is unlikely that suppliers will begin preparing for such until an OEM requests they begin using composite technology. Machining and bonding for composites would be the next logical innovation to introduce.

ÁLVARO AGUILAR

These types of materials offer distinct advantages in terms of reducing weight in

General Manager of L-3 Crestview Aerospace Chihuahua Operations

aircraft.

Airbus recently opened a plant in the US, which can use the existing supply chain in Europe. However, to reduce production costs the company will need to generate a local supply chain in North America. Boeing is in a similar situation and the company has a strong supply chain in the US, where production costs are two to three times higher than in Mexico. Thus we are seeing an increasing number of requests from the US. Our expertise and certifications are compatible with those in the US but aerospace companies are facing a lack of raw material suppliers in Mexico. The local supply chain lacks heat and coating treatment providers with

NICOLAS MAILLARD Plant Manager of Lisi Aerospace

necessary certifications such as Nadcap.

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PUNCTUAL DELIVERY WITH ZERO DEFECTS ÁLVARO AGUILAR General Manager of L-3 Crestview Aerospace Chihuahua Operations

Q: To what extent has L-3 Crestview penetrated the

different equipment. For these reasons, even clients based

Mexican aerospace industry since starting here in 2014?

in Canada consider our products to be better value than

A: Despite being such new arrivals in the area, we still

those they can obtain from other regions.

managed to land an unexpected contract during this time with an important Tier 1 client. Separately, when L-3

Q: What areas does Chihuahua need to develop to

Crestview began operations and started researching new

consolidate its role in the domestic industry?

clients, we closed a deal early on with Lee Aerospace.

A: The primary goal should be to facilitate raw material availability in Mexico because we import such large

Lee Aerospace also verified our site was up to standard

quantities from abroad that we are heavily dependent on

and acknowledged our expertise before concluding

customs lead times. Fortunately, customs processes and

that the quality we manage was second only to the

temporary imports of raw materials run like clockwork so

competitive prices we could offer. This is thanks to our

we are subject to few delays. Punctuality, added to our

location, expertise and the support from our main plant in

engineers’ experience, guarantees quality and has defined

Florida. Our enterprise closed 2015 with a small production

much of our success. The next step for L-3 Crestview will

quantity for the aerospace industry but that production

be manufacturing with composite materials but for the

was approved with zero defects and delivered on time.

moment only Cessna, Honeywell and other OEMs have set up plants to produce technology for aluminum, titanium

L-3 is well known in the US and we had 25 visitors to our

and aerospace-rated steel.

site in Mexico – in some cases they came to audit our installations. The AS 90100 certification was awarded

Q: What do you foresee in the short-term future of L-3

to the company just six weeks after request. A handful

Crestview in Mexico?

of customers have shown interest and we have three

A: Machining and bonding for composites would be the next

confirmed clients for whom we have begun production,

logical innovation to introduce. These types of materials

through one of which we indirectly supply Boeing.

offer distinct advantages in terms of reducing weight in aircraft. Having already made an important investment in

Q: What are L-3 Crestview’s manufacturing capabilities?

machinery and been rewarded with orders from important

A: We offer sheet metal operations, namely CNC machining

aerospace companies, our confidence in the local industry

parts, and routing, cutting and forming sheet metal for

has been boosted enough to plan future innovations here.

aircraft structures. We are not always made aware of what the piece is for but we know they can be used for

Consolidation of the plant will be finalized after just two

fuselages, interior parts, wings, cockpits and structural

years of operating, toward the end of 2016. Such an

parts. The newest planes are being made in composite

impressive feat is the result of working with important

metals but there is still plenty of demand for aluminum

clients and that has helped us to build a self-sustainable

and other metal forming for parts.

site. We hope that this plant with continue to attract attention from other divisions of L-3. While we were

There are no more than 10 aerospace aluminum mill

expected to sit on the baseline for growth and learning,

companies in the world. Those that are closer to the

we have surprised our branches outside of Mexico with

end user tend to secure contracts with OEMs very easily.

our innovations. Now, Chihuahua is perceived as much

Careful planning and preparation help us avoid logistics

more than just a low-cost operations site. Its growth will

hurdles and delays when moving items across the border.

contribute greatly to that of the global brand. Therefore,

Overall, our competitiveness is evident, even for the cost

possibilities are on the horizon for this site and for local

of parts that need to be machined several times and with

Mexican talent to develop entire aerostructures.

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A FAMILY AFFAIR IN CHIHUAHUA RENE ESPINOSA Plant Manager of Metal Finishing Company (MFCO)

Q: What drove MFCO’s decision to establish in Mexico?

collaborate to help them obtain their certifications in

A: MFCO’s interest in Mexico began in 2005 after Beechcraft

advance, for whichever product they want to bring to

started operations in the state. The Babst family, MFCO’s

Mexico. Our growth is linked to strategic relationships with

founders and owners, analyzed the possibility of expanding

OEMs but MFCO has several other advantages, including

operations into Mexico. During the deliberation process,

the size of its tanks and infrastructural capacity.

we were in close collaboration with Beechcraft in Wichita, Kansas to ensure the decision also suited its interests.

The company has found new projects to develop in the country. We are collaborating with Boeing, Beechcraft,

MFCO is the largest family owned aerospace finishing

Bell Helicopter, Bombardier, Cessna, Mitsubishi, HondaJet,

company in North America that offers heat treatments.

Zodiac, Embraer and UTC. MFCO’s reputation precedes

When we established operations in Mexico, the company

it worldwide and our important participation in the local

focused on paint applications and chemical processing.

aerospace cluster and in global summits helps us generate

This included coatings, primers, chemical conversion,

new partnerships. At this point, we also are beginning to

anodizing and nondestructive testing (NDT). We now have

cultivate relationships with companies in other states.

clients all over Mexico, mainly in the city of Chihuahua, Saltillo, Monterrey and Queretaro that supply major

Q: What new processes will help MFCO grow its business?

OEMs. This is MFCO’s fifth facility, after its three sites in

A: We have several business units that manage heat

Wichita and one in Wellington, Kansas, and that is part

treatments, NDT, steel, aluminum and composites. We

of the reason MFCO holds more Boeing special process

have developed new NDT instructions alongside Boeing

approvals than anyone worldwide.

and our engineering division is working closely with OEMs to understand their steel chemical processing

Q: What advantages did Chihuahua offer for the

needs to build on our strengths in aluminum processing.

company’s first international facility?

We are also developing shot peen capabilities, which is

A: At the time, many OEMs were looking for manufacturing

an easy process because each shot peen operation and

alternatives outside the US and Mexico sharing a border

machine must be designed for each specific project. These

made it the logical location. Other advantages included the

processes will open the door to future projects.

manufacturing and engineering vocation in the Chihuahua area and the presence of companies that provide soft-

Q: What are your strategies for expansion and to weather

landing services to foreign companies. All human capital

increasing competition in the state?

was acquired locally thanks to the experienced labor force

A: MFCO is looking for solid business opportunities to

in other industries. While the aerospace industry is very

expand our operations to other areas in the country,

distinct, this accumulated expertise is invaluable.

potentially in Queretaro. MFCO is now exclusively focusing on the country because we want to consolidate

Q: What cabilities and advantages are unique to MFCO?

our operations here before expanding to other areas. We

A: The key to success as an aerospace supplier is the

certify close to 3,000 pieces a day, from small pieces

number of OEMs and Tier 1 companies that have certified

to large parts for wings, in a single shift operating at 70

the company and MFCO excels in this particular area. We

percent capacity. Our goal is to satiate this facility.

are a strategic partner for OEMs such as Beechcraft, Bell Helicopter, Cessna, Boeing, Honda Jet and Bombardier

We have learned from the aerospace industry that

because they understand the key to growing their supplier

competition is good and could benefit the region.

base in Mexico is to link the diverse certifications in different

Therefore, we hope to create a strong network with other

finishing and coating procedures in one evaluation. We

companies and bring new projects to Mexico.

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PLANT ACQUISITIONS EYED FOR GROWTH NICOLAS MAILLARD Plant Manager of Lisi Aerospace

Q: What are Lisi Aerospace’s expectations for its Chihuahua

in Chihuahua. But these pieces require a heat treatment that

plant and the industry?

is unavailable in Mexico, forcing us to send the pieces to be

A: Lisi Aerospace, a world-renowned business that specializes

treated in the US and then to import them back into Mexico.

in fasteners for the automotive and aerospace industries,

It would be ideal to have a local company with this expertise.

has been undergoing a diversification process for the past five to six years involving our transition from fasteners to

One of the reasons we are here is the support we received

structural components. The company’s goal is to grow

from Chihuahua’s government and it is necessary to maintain

through the acquisition of plants dedicated to component

these state initiatives to continue attracting companies and

manufacturing, followed by commercial growth to increase

investment. In my opinion, the government has to invest for

our market. This plant is part of that diversification strategy

another five to 10 years to strengthen the local supply chain.

and manufactures exclusively structural component pieces,

Lisi Aerospace is part of the local aerospace cluster, which

mainly for Airbus and Boeing braking systems. Our branch

has greatly supported the company by training personnel

in Chihuahua has grown 25 percent every year on average

and could train even more professionals by collaborating

since 2010 and operates with the same quality and safety

with the government. To reach our 5 percent growth target

standards as our plants in France.

we need operators, technicians and industrial developers, without whom our growth would be hindered.

Global industry will require approximately 3,500 aircraft in the next 20 years

Half of Chihuahua’s population is under 25 years of age, meaning that we will not be short of human capital in the next 10 years. In contrast, our plant in France is facing difficulties hiring personnel because the cost of labor is too high for basic production.

While this plant is still small in terms of production, Mexico is gaining importance in the global aerospace market as

Q: What new technologies does Lisi Aerospace plan to

OEMs, such as Airbus, Boeing and Safran have shown

introduce to its local facilities?

interest in manufacturing in the country. Therefore, having

A: Our core competency is machining steel, titanium

a fully installed plant in the area before these companies

and aluminum. We will expand in this area and continue

arrive is advantageous, establishing our position ahead

developing machining processes. Though we do not

of other suppliers. Our number of clients and production

plan to introduce new technologies, we want to develop

capacity will continue to increase because the global

new manufacturing processes and increase the types of

industry will require about 3,500 aircraft in the next 20

pieces manufactured in Chihuahua, possibly delving into

years. We are confident that up to 30 percent of the

motor parts.

pieces for those aircraft will be manufactured in Mexico by that time. Lisi Aerospace’s operations are prepped to

One of our competitive advantages is that we are using

support Airbus and other OEMs, which will increasingly

pieces forged in France that already hold the necessary

use suppliers from Mexico and Canada.

certifications and are trusted by clients, while we also have the benefits of low-cost local production. Lisi Aerospace

Q: What needs to be done to close the supply chain gap?

plans to develop new products with new clients. We are now

A: We manufacture torque tubes, which handle the airplane’s

working almost entirely for Safran and would like to expand

braking energy. This piece is critical to the aircraft because

our customer base. At the beginning, we struggled to

it would be unable to brake without it. We forge these parts

convince clients in France that Chihuahua had the suitable

in France and some of their components are machined here

skills to supply them but now this is clear to them.

VIEW FROM THE TOP

MACHINING COMPANY DIVERSIFIES AND GROWS RAMÓN GONZÁLEZ General Manager of Chandler Industries

Q: What is Chandler Industries’ value proposition for the

our machinery to our clients’ needs. We work with steel,

aerospace industry?

aluminum, stainless steel, brass, nickel, titanium and super

A: Chandler Industries consists of six different facilities

alloys, with tolerances of 0.0002in. Stainless steel dominates

manufacturing and developing parts for the aerospace,

our operations but we want to focus on aluminum, which

defense, medical and industrial markets. We operate

is a more solicited material in the aerospace industry. The

under ISO 9001, ISO 13485 and AS 9100 regulations

plant can manufacture parts from scratch. Current clients

and specialize in machining and sheet metal. Chandler

for this plant include Zodiac Aerospace, Honeywell and

Industries has grown quickly, to US$64 million in 2014

Rosemount. Our facilities have a lot of room for expansion,

from US$12 million in sales in 2009. The oil crisis of 2015

84 percent of the current floor space to be exact, and we

impacted our strategy so we are diversifying our business

will continue to expand at our clients’ request.

into aerospace. Our core competencies are precision machining, namely milling, turning, electrical discharge

Q: How has Chandler Aerospace Chihuahua managed to

machining and precision sheet metal fabrication, which

grow so quickly in so little time despite expected hurdles?

encompasses laser cutting, complex forming and Nadcap

A: One of the reasons we opened this plant in Chihuahua

welding, as well as other integrated services, specifically

was the support of one of our main clients at the time,

heat treatment and nondestructive testing.

Emerson. However, due to problems faced by the oil and gas industry the predicted projects were reduced to 40

Chandler Eaton,

Industries

Parker,

works

Raytheon,

with

Boeing,

Ducommun

Honeywell,

percent of the original plan. To be successful in the state we

Incorporated,

had to take advantage of our industrial expertise and invest

United Technologies, ITT Exelis, Bae Systems, Lockheed

in areas that were strongest locally, such as aerospace.

Martin and the US military for the aerospace industry. Our strategies include creating a facility-based customer

To enter the aerospace industry, we had to create a

service to establish lasting relationships with our clients.

quality system. Starting with a single machining cell, new

The company’s competitive advantages include our

contracts led us to incorporate two more cells to develop

complete inventory, which we call our supermarket. This

150 parts in-house, 99 percent of which were immediately

allows us to supply parts in only 24 hours. We are invested

approved by clients. We ended 2015 with three cells and

in implementing lean manufacturing and have skilled and

a lathing process but by mid-2016 we will have expanded

prepared operators.

to 10 manufacturing cells. We hope to start 2017 with two more to fill 60 percent of our building’s capacity and close

Q: What are the highlights of Chandler Industries’ new

the year at 100 percent capacity.

plant in Chihuahua? A: This plant focuses on machining for the industrial and

Q: What strategies are you implementing to expand your

aerospace markets and began production in 2014 with 14

operations in the state?

employees in an area of 31,000ft . The plant is still growing

A: We are turbine suppliers for Zodiac Aerospace,

and we expect to double our staff in a few months. In

Honeywell, Parker Aerospace and Emmerson. To develop

November 2015, the International Body Certification

our client base we are collaborating with the local cluster

successfully audited us, registering Chandler Industries in

and participating in B2B events in Mexico City, Ciudad

the OASIS database, which includes all AS 9100 certified

Juarez and Queretaro. We have encountered few problems

suppliers for easy access by OEMs. Our local capabilities

acquiring raw materials for the industrial market but this is

include nine CNC multi-axis Vertical Machining Centers

not the case for the aerospace industry, as the materials

(VMC) and seven CNC Lathes with live tooling but we will

have to be certified. For that reason, we are importing all

soon receive three more lathes and will continue to adapt

materials for aerospace production.

VIEW FROM THE TOP

COMPANIES TO PUBLIC SECTOR: TRAIN PROFESSIONALS ALBERTO SALOMÓN Director of the Chihuahua Campus at the Center for Advanced Technology Training (CENALTEC)

Q: How has CENALTEC developed its training services

A: CENALTEC is a pioneer in the training of highly skilled

since its creation?

professionals because its structure grants it the flexibility

A: CENALTEC was founded as an initiative by Chihuahua’s

to adapt programs rapidly to specific needs, allowing

government to support the local manufacturing industry

graduates to adapt to any workforce with ease. Companies

by enhancing the competitiveness of local workers

actively participate in content definition, length of the

through cutting-edge technology programs. At the time

training courses and evaluation systems according to their

of its creation, foreign companies establishing in the

needs. This reduces recruitment costs and eliminates the

state reported a lack of human capital for their local

need for training abroad. Clients can even choose to have

operations and requested the help of the government

the training on-site with their own equipment.

and educational institutions to help prepare more technicians and operators. The center’s first campus

CENALTEC trained 4,204 aerospace professionals by

began operating in Ciudad Juarez in 2000 and a second

2014, 95 percent of whom are active for companies

opened in Chihuahua in 2006.

including Labinal, Kaman Aerospace, Zodiac Aerospace, Beechcraft, Textron International, Honeywell and Fokker.

aerospace

companies

started

arriving

We have trained teachers for the ITESM, Tec Milenio

Chihuahua, demand for these educational services kept

University, Chihuahua Technological University (UTCh),

increasing. Honeywell, for instance, predicted demand for

Chihuahua

about 1,000 machining technicians but could only recruit

Autonomous University, and technical colleges across

about 50 in the state. They flagged the problem and

the country.

Technological

Institute

and

Chihuahua

together we started developing a model to provide them with the technicians they needed. To date we have trained

Q: What training courses are most in demand in the

between 1,300 and 1,400 technicians.

aerospace industry? A: The industry needs expertise in aerostructures, sheet

Cessna and Beechcraft helped us develop structural and

metal assembly, lean manufacturing, design software,

sheet metal assembly programs and we worked with

structural assembly and machining. English language

Fokker to develop a program called Training the Trainers.

and a comprehensive knowledge of quality standards,

Fokker brought three highly experienced technicians to

certifications and aeronautics also are essential for

train our instructors for four months and we trained 150

industry participants. CENALTEC’s current courses cover

of their technicians. Once satisfied with the result, Fokker

electrical wiring, sheet metal assembly, fuselage parts,

certified our operations and we continue training their

airborne electrical systems, NDT, Autocad, Catia V5,

personnel to this day. We developed similar processes with

Mastercam, Nx, Solidworks, maintenance, CNC machining,

many other companies and have been certified by Bell

mechatronics, plastic injection molding, plastic extrusion

Helicopters, Textron International, Cessna and Arnprior

and welding, among many others.

Aerospace. Our training courses are also certified by Eindhoven Regional Opleidinge Centrum (ROC), Kenteq

Our programs are convenient for the industry because they

and NIMS and are recognized by the European American

are much shorter than those of conventional educational

Society of Mechanical Engineers (ASME), the local

institutions and our curricula can be adapted to any

Ministry of Education (SEP), the Ministry of Labor and

company’s schedule without needing approval from the

Social Welfare (STPS) and several academic institutions.

federal government, a process that can take up to one year. All our programs are financed by interested parties but we

Q: How does CENALTEC support the development of the

can offer these companies very competitive costs as those

local aerospace industry?

are also subsidized by the federal and state government.

VIEW FROM THE TOP

CHANGE IN RESEARCH MENTALITY MUST BE INTERNAL JUAN MÉNDEZ Director General of CIMAV

Q: How has CIMAV contributed to the development of the

Mexico in last place in science and technology investment.

domestic aerospace industry?

If we hope to compete with Toulouse and produce

A: CIMAV is a public research center operating under

advances such as those generated by Embraer, we must

CONACYT’s umbrella. The center focuses on advanced

at least double investment and branch into areas that

materials. These include polymers, nanoparticles and

generate more value.

composite materials with a wide range of applications in several industries, including aerospace. The center

In Mexico, the private sector relies too heavily on the

researches material science, the physics of materials,

government to fund research initiatives. Local culture does

metallurgy and corrosion. We can also provide diverse

not lend to Mexican companies creating their own research

particle

microscope

centers but we must transform this way of thinking. As we

services. Our scientists run institutional projects, financed

characterization

and

electron

show companies how they can benefit from investing in

by entities such as CONACYT, the European Union and

research, the mentality will shift to focus on its long-term

the US Air Force. Thanks to these projects, CIMAV has

value. Foreign direct investment will not fill this gap so the

developed composites that are equivalent to metals like

change must be internal and state motivated.

aluminum, possess the same qualities but weigh much less and have applications within both the automotive

Q: How does CIMAV ensure its study plans prepare

and aerospace industry. A software development project

students to cater to industry needs?

into nanomaterials has seen electronic and magnetic

A: We offer five postgraduate programs. Students can

properties inserted into materials that could be used by

study material science, energy and the environment and

aeronautics companies.

nanomaterials. Our curriculums are created according to international tendencies. We are in the process of

Moreover, CONACYT’s Program to Stimulate Innovation

requesting a national laboratory to research metamaterials,

(PEI) manages MX$4 billion (US$235 million). CIMAV’s

which are invisible, undetectable materials. This is the

researchers can tap those funds to acquire equipment and

latest technology and nobody in Mexico is working on

paid personnel. CIMAV has the second largest number of

research of this type but moving toward these trends is

grants contracted from this program. PEI grants awarded

necessary to keep up with international competition. We

to our center totaled 177 in the last six years, catering to

can look to universities such as Stanford, Yale and MIT as

various industries. About 40 were targeted at aerospace.

inspiration for how to lead sector development.

Our ongoing relationship with the University of Toulouse

Q: In what ways does the center guarantee the quality of

in France supports the Mexican cluster and we provide

its services to local industry?

emerging industry experience for PhD students. The

A: We manage three main sustainable activities. Our

industry in France is more advanced than in Mexico,

fundamental research, training of graduates with MScs

which has primarily developed aerostructures, but we can

and PhDs in specialized activities and our support of

learn from this partnership to move beyond creating an

the industry have led us to obtain ISO and Mexican

airplane’s shell. Divided into sections by cost, 40 percent

Accreditation Entity (EMA) certifications in 80 percent of

of an airplane is its avionics and electronics, the motors

our centers. We also were awarded an extended version

account for 30 percent and the remaining percentage is

of the Nadcap certification. Centers are generally certified

the fuselage, generating the smallest amount of added

for 12 months, but our impeccable facilities provided

value. Mexico’s research funding is well below the OECD’s

the assurance needed to secure an 18-month credential.

recommended minimum of 1 percent of GDP reinvested in

Having seen a rise in requests since January 2016, we are

R&D and its spending of only 0.5 percent of GDP places

acquiring more equipment to satisfy demand.

VIEW FROM THE TOP

DESIGN LAB TO DEVELOP METAL-MECHANICS SOLUTIONS SERGIO MANCINAS Director of FabLab

Q: What is FabLab’s goal for working in the aerospace

We offer engineering, design and product development

industry?

services, digitalization of files in 2-D and 3-D, specialized

A: FabLab is an advanced manufacturing laboratory created

technical assistance and design support during product

through a Department of Economic Development initiative.

configuration changes. We have designed several tools

The industry realized it needed a center that could provide

for the aerospace industry including high-precision tools

high-tech machinery that was unavailable to SMEs. The

used to attach an airplane’s tail. These pieces are installed

department saw great potential for local manufacturing

with a laser tracker and therefore must be extremely

in Chihuahua and applied for and received MX$15 million

precise. Our clients range from small companies to large

(US$882,000) from the EU to create this laboratory, which

companies such as Zodiac Aerospace, Fokker, TIGHITCO,

started operations in 2014. FabLab’s objective is to support

Soisa and Kaman Aerospace. FabLab also is developing a

SMEs to generate high added-value products and services

new project with Lisi Aerospace for torsion tubes.

using state of the art technology, supporting the different sectors of the metal-mechanics industry.

Q: What are the main problems aerospace companies face and how have you helped to solve them?

Due to the extensive growth of the aerospace industry in

A: A significant problem faced by companies transferring

the state, from this year we are focusing on the sector, which

to the aerospace industry from other areas is to acquire

now represents 60-70 percent of our clients. Our goal is to

the necessary certifications, which requires several tool

be essential to the development of the state, generating

upgrades and comprehensive documentation. We also

products under an open manufacturing plan. Today, we

faced a similar problem and now we are supporting

design and manufacture tools, prototypes and the first

companies to generate this documentation as well as

samples of pieces. We are manufacturing production

providing them with alternative solutions. Our experience

pieces for some of our clients but we only have the installed

in the aerospace industry allows us to identify client

capacity for low volumes of pieces. This laboratory is part

needs and even to solve problems they did not know they

of MIT’s FabLab network, a web of laboratories operating

had. Our clients can be confident that products will be

worldwide for the creation of prototypes.

manufactured perfectly to their specifications.

Q: What are FabLab’s capabilities and who are the lab’s

Q: How do you plan to consolidate FabLab in Chihuahua?

main aerospace clients?

A: Our goal is to increase our number of projects and

A: Our equipment includes a ROMER Absolute Arm, which

revenue until FabLab becomes self-sustainable. We are

is a portable measuring arm that permits 3-D visualization

planning to acquire the AS 9100 certification during 2017,

and modeling, point cloud inspection and reverse

which will allow us to provide full manufacturing services

engineering, allowing us to provide a comprehensive

to the aerospace industry. To position the company we

range of metrology services. We also have a high-speed

plan to be present as FabLab at the IMEX event, then to

LVD Pullmax 520 press that can cut aluminum, steel and

continue supporting SMEs with new part development.

stainless steel sheets up to 6mm thick at a velocity of 128m/

Finally, we plan to strengthen our links to academia

min. This unit manages a series of complex operations. The

and organizations including the National Chamber of

lab also has an LVD Bending Machine, which has a laser

the Transformation Industry (CANACINTRA) and the

that automatically corrects angle and calculates spin and

aerospace clusters. We plan to acquire more machinery,

the necessary pressure to bend any material. Finally, we

including a laser to work with sheet metal. Later, we want

have a vertically integrated machining center, the DMU

to acquire routers that can cut composites and eventually

50 Ecoline, which machines five faces of a piece without

include Swiss-type lathes, lathes with live tooling and CNC

moving it.

machining centers with five to seven axes.

VIEW FROM THE TOP

José León (JL), Eloy Marquez (EM) and Raúl Evangelista (RE), Founders of Quasar106

TAILORED ENGINEERING SOLUTIONS

Q: How does Quasar106’s value proposition complement

and the lower-cost outdated processes of smaller Mexican

Chihuahua’s aerospace industry?

companies. We provide quality at reasonable prices and keep

JL: Quasar106 was created to develop tailored solutions

strict documentation of processes to ensure accountability

and to optimize the equipment that manufacturers were

and transparency. Our design process gives clients an idea

already using. Many companies were adapting existing

of the final product to reduce manufacturing errors.

equipment to their needs but store-bought equipment often lacks essential characteristics. We can work with a

When

wide range of materials to provide precise solutions.

manufacturing to Mexico, they bring their most important

foreign

aerospace

companies

bring

their

equipment but they often forget minor support pieces RE: The aerospace industry requires extremely specialized

such as racks, conveyors and workstations, so they buy

products and materials. We built our own workshop

them locally from major retailers. These products are not

because we realized we could manufacture 80 percent

tailored to their needs and more often than not reduce

of our best-selling products by ourselves, which allowed

efficiency and thus competitiveness because most local

us to optimize costs. Aerospace companies frequently

manufacturers lack a design department. Our digital design

employ milling and machining experts but are often

process enables us to provide perfect finished products

unable to provide personalized solutions because of

the first time, while other suppliers may have to return

the time and focus it requires. Local shops seek serial

several times to make adjustments, resulting in lost time

manufacturing contracts instead of work that requires

for the final client. This process is complex as our racks can

personalized attention, making it harder for companies

have upward of 50 parts and all of them fit to specification.

that use advanced manufacturing techniques to find partners. As Quasar106 has all these processes and

Q: What steps is Quasar106 taking to consolidate while

advanced knowledge in materials, engineering and design,

remaining competitive?

we can bridge this gap.

JL: Having begun as a design center, we had not invested greatly in manufacturing. However, we are entering

Q: How has Quasar106 tackled the reluctance of

partnerships to begin manufacturing different pieces. We

companies to incorporate new suppliers?

are undergoing the ISO 9100 certification process, which

JL: It has been hard to approach new companies but

we expect to complete by mid-2017. To optimize our

our former clients’ recommendations have allowed us

internal processes, we are developing internal Enterprise

to expand. We believe our competitive advantage is our

Resource Planning (ERP) software and implementing

specialization in the aerospace industry, which was a happy

quality standards that have to be in place for at least a

accident because the industry happened to be in need of

year for to get the ISO 9100. Our next step is to be ISO

our help at the time we began targeting them. Design and

9100 and 14000 certified and to acquire the Nadcap

formal documentation of tailored solutions is vastly needed

certification that will allow us to manufacture aircraft parts.

in all levels of aircraft production and we are here to help. RE: We plan to expand our personnel and equipment, Q: What is the company’s share of the market?

acquiring CNC machines and a 3-D printer, while increasing

EM: At this point it represents 70 percent of our market.

our capacity to work with metals that are more specific to

Our goal is to be the middle ground between the high-cost

the aerospace industry, such as titanium. Our goal is to

state of the art technology of foreign aerospace companies

eventually manufacture aerospace parts as a Tier 3.

PLANT SPOTLIGHT

100

ZODIAC AEROSPACE CHIHUAHUA Zodiac Aerospace has worked in the aeronautics business for over 100 years but the group took until 2006 to establish operations in Mexico. In only 10 years, Zodiac’s operations in the state of Chihuahua have climbed from one to five plants and infrastructure now covers 55,000m2. In the same period, Zodiac has become embedded in the heart of Chihuahua’s aerospace manufacturing. Chihuahua’s site began its operations producing different evacuation systems such as slides. Eventually, the facilities expanded and other group activities were incorporated. In 2015, the corporation Zodiac Aerospace Equipo de Mexico was created and as of today it runs nine different business units. The Evacuation Systems’ unit comprises the production of several inflatable safety products such as evacuation slides, life rafts, life vests and flotation equipment for helicopters. Zodiac’s Interconnect business unit is in charge of designing and manufacturing components used for protecting and managing wires, either for static or dynamic applications. Zodiac’s water & waste aero system also has operations in the state and is responsible for manufacturing cabin systems and equipment such as toilets, airstairs and vacuum waste integration systems. Its lighting solutions target the production of technologies for deck light plates and control panels, among other components. The aero electric unit manufactures flight deck equipment and power distribution systems. The seats, seat shells and actuation system divisions can also be found in the Chihuahua site. The inflight innovations business unit focuses on generating entertainment inflight solutions through the RAVE SDU touch-screen. Zodiac’s operations in the state are not limited to manufacturing. The company has collaborated with local universities that develop courses to suit the engineering needs of the aerospace industry. The company also carries out R&D activities in Mexico, particularly for its seats unit. Zodiac’s facilities in Chihuahua employ nearly 3,000 people in three of the company’s most profitable business areas. The latest 4,600m2 expansion opened in August 2016 and demonstrates that Chihuahua has become a cornerstone to the group’s industrial capacity.

101

NUEVO LEON

Nuevo Leon’s strong manufacturing capabilities and knowledge industry are reflected in its economic performance. The state generates 8 percent of Mexico’s GDP and is responsible for 11 percent of all Mexican manufactured products. Though it is fifth in the national aerospace industry, the state is expected to climb the rankings sooner rather than later. One of Nuevo Leon’s particularities is that most aerospace companies here are funded with Mexican capital. To promote the growth of the industry, its aerospace cluster has developed a strategy that aims to integrate local suppliers into the sector. The 6,000 engineers that graduate every year from the state’s universities and education centers will help Nuevo Leon accomplish its goals of becoming the most important hub in Latin America for civil aviation MROs and the most important R&D center in the country for advanced manufacturing and design by 2020.

The perspective of Mexican companies established in Nuevo Leon regarding the challenges they face and the opportunities the state offers is the prime focus of this chapter. Growth expectations and the possibility of making Nuevo Leon the most important aerospace hub in the country are discussed.

103

CHAPTER 05: NUEVO LEON 105

106

VIEW FROM THE TOP: Pauline Medori, Monterrey Aerocluster

Carlos Ramírez, Monterrey Aerocluster

108

VIEW FROM THE TOP: Samuel Peña, State of Nuevo Leon

109

VIEW FROM THE TOP: Carlos Ramírez, TECMAQ

110

VIEW FROM THE TOP: Alejandro Silva, Renishaw Mexico

112

VIEW FROM THE TOP: Fernando Ramos, Exova de México

114

VIEW FROM THE TOP: Edgar Escalante, AEISA

115

AIRPORT PROFILE: ADN

116

VIEW FROM THE TOP: Xavier Cabello, Avianet

117

VIEW FROM THE TOP: José Carrera, Aerovitro

118

VIEW FROM THE TOP: Everaldo López, Mimsa

119

VIEW FROM THE TOP: Kees Bleijenberg, Full Service NDT

120

VIEW FROM THE TOP: Diego Martínez, Dylo

121

VIEW FROM THE TOP: Eduardo Álvarez, Avihel

122

RESEARCH SPOTLIGHT: CIIIA

124

ROUND TABLE: Time to Nurture Nuevo Leon’s High Potential

VIEW FROM THE TOP

BOLSTERING SUPPLY CHAIN A TOP PRIORITY

Pauline Medori Former Director General of Monterrey Aerocluster

106

Carlos Ramírez President of Monterrey Aerocluster

Q: What do you consider to be the role and strengths of

We are not targeting OEMs, as there is not enough volume

the Monterrey Aerocluster?

to justify the introduction of one into the state, we must

CR: Nuevo Leon has strong manufacturing capabilities,

concentrate on the smaller companies in the supply chain.

technical support and qualified human capital. Our goal

There has been talk of assembling a complete airplane in

is to attract foreign aerospace companies into the state

Mexico but that will not happen until local industry expands.

to invest and generate the necessary infrastructure. We

Although we have not had the state’s governmental support

do this by promoting the state’s numerous infrastructural

that other clusters such as Queretaro, Baja California or

advantages, including proximity to the border, existing

Chihuahua have had, Nuevo Leon’s companies have made

infrastructure,

extensive

experience

several

progress independently and are convinced that the cluster

manufacturing

industries

and

suppliers.

association will help them to accomplish further growth.

with

numerous

The cluster itself is unable to sign contracts with new companies but it can facilitate this process through

PM: Besides the supply chain, the cluster and its academic

business-to-business

state

institutions developed a strategic map for the next five

government and academia, we are creating initiatives

years that aims to strengthen commercial linkage, increase

to attract aerospace companies to the state. Locating

promotion and positioning and generate qualified human

and introducing new companies into the state, either

resources. The plan will help the standing of four existing

as manufacturers or as commercial offices, is one of

sectors, seamless forged rings, assembly, machining

our main activities as a cluster. Nuevo Leon has not yet

and MRO services. So far five local MRO workshops

reached its peak in the Mexican aerospace sector. We are

are certified by the FAA, one of which is providing

slightly behind other clusters in Mexico and growth will

maintenance to United Airlines’ fleet and it previously did

come with considerable effort.

the same for American Airlines. In the past we had the

meetings.

Alongside

the

vision of becoming the largest aerospace cluster in Latin PM: What differentiates our cluster is that 95 percent

America but for now we will concentrate on generating a

of our companies are Mexican and 80 percent of the

strategic market for these four areas.

products manufactured in Nevo Leon are destined for exportation. Another of our greatest strengths lies in

Q: What is the cluster proposing to encourage the growth

our support companies. HEMAQ provides machine tools

of the local industry?

and two testing laboratories, Metalinspec Laboratorios

CR: We must be on the same wavelength as the state’s

and Exova are essential parts of the supply chain. In

government to create value that will bring foreign

other regions, when an OEM or a Tier 1 enters the state,

companies to the state. We are aware of the main

companies lower down the supply chain follow it. But

challenges of the sector, especially financial limitations,

in Nuevo Leon these support companies are ready and

and we need the support of the state’s government to

waiting for OEMs.

develop the aerospace supply chain and to improve quality systems.

Q: How is the cluster encouraging the industry's development?

PM: The cluster operated four projects with Nuevo Leon’s

CR: We must increase the added value of our companies

government to develop local suppliers, train human

and the best way to do so is by consolidating the supply

capital and to help 45 companies acquire certifications.

chain. with Tier 2 and 3 companies. This is a strategy we

Before the cluster was established, the state government

are implementing alongside the state’s government and,

created the Citizen Council for the Aerospace Industry

although it will be difficult, achieving it will permit the local

in Nuevo Leon that met every three months from 2003

aerospace industry to grow tremendously.

onward to develop a regional strategy for the sector. The

council incorporated representatives from companies,

Q: To what extent would you consider it beneficial to fuse

universities, technical schools and the local government

this cluster with others near the border?

and became the Aerospace Cluster of Nuevo Leon in

CR: It is important not to dismiss the strengths and capabilities

2009. As the base of our cluster, our advantage over other

that each cluster possesses individually. Each cluster should

states is that this council brings much more experience

utilize its own strengths to face market challenges.

than many of the other cluster associations. PM: Coahuila, which is very close to Nuevo Leon, does Q: How are you approaching other clusters to promote

not have a cluster but its few aerospace companies are

collaboration and the growth of the sector?

incorporated into ours. We do not see much competition

CR: Determining the largest cluster in the country is

between clusters as the aerospace sector is still very young.

we must ascertain whether importance depends on

Now, it is fundamental for the clusters to collaborate to

companies, employees, revenue, members, sales or

achieve further development and healthy competition.

production numbers. But clusters are not taking the added value that each company provides to the supply chain

Q: In what ways do universities collaborate to strengthen

into consideration. Aerospace clusters in other countries

human capital in the state?

have a complete supply chain established near each OEM

PM: To cite successful projects, a diploma on composite

but this is not yet the case for Mexico. OEMs established

materials

in Mexico acquire most raw materials, components and

University of Nuevo Leon (UANL) has received considerable

services from abroad.

interest and investment, as composites are of the utmost

that

designed

with

the

Autonomous

importance for this industry. UANL also has generated a PM: Some experts are discussing the advantages of

program alongside Airbus to train pilots, mechanics and

making Mexico one large cluster, instead of having

crew in light of the fact that VivaAerobus acquired more

several clusters in different states. Toward that goal we

than 58 Airbus A320neos three years ago. This new training

began a collaborative project with Chihuahua in which

center is already open in the Research and Innovation

we will merge our strengths to balance our deficiencies.

Center in Aeronautics Engineering of the UANL and will

Chihuahua does not have the laboratories and services

feature a new flight simulator that is expected to arrive in

that we have in Nuevo Leon but Chihuahua has more 100

2016. While the state is in fifth place in employment for

percent aerospace-focused companies in its cluster.

aerospace industries, Nuevo Leon is in third place for R&D.

107

VIEW FROM THE TOP

STATE GROWS THROUGH NATIONAL ENTERPRISES SAMUEL PEÑA Deputy Minister of Investment and Industrial Promotion in the State of Nuevo Leon

108

Q: How is Nuevo Leon supporting Mexican companies in

our country so our presence at global events provides the

the aerospace industry?

stage to put our state’s competitive advantages on display.

A: Unlike other states, the growth that Nuevo Leon is experiencing is thanks to the presence of national

Q: Which areas should Nuevo Leon prioritize to strengthen

companies, rather than foreign ones. Almost 90 percent of

the industry?

the enterprises that participate in the aerospace cluster are

A: Training human capital is one of our priorities.

funded by Mexican capital. This particular characteristic

Nuevo Leon provides the best possible education to

differentiates our operations from other states, where local

its population. While the state works with technical

companies are competing directly with global corporations.

schools and universities to make sure our human capital is practically trained, we need to find more working

The companies located in the state are expanding

opportunities. Private companies play an important role

rapidly but their growth cannot be compared to that of

in training employees. For example, when Monterrey Jet

global enterprises. The state needs to work with local

Center had difficulties finding specialized mechanics

corporations, to get them in shape to compete with

for their planes, they implemented an agreement with

any company in the world. The state government works

Alvaro Obregon Technical School to ensure the students

closely with Nuevo Leon’s aerospace cluster, promoting its

there were being taught the skills needed to work in the

activities and business opportunities.

aerospace industry. Textron performed a similar exercise with a training program targeting the development of

Q: What strategies are in place to promote the state’s

national enterprises, for which it chose companies in

aerospace sector?

Nuevo Leon, believing the state had the most potential.

A: The government made a mixture of federal and state

the

Local companies must keep working to obtain certifications

amount has increased, the process for obtaining the

funds

available

companies.

Although

such as the AS 9000, and AS 9100. The cluster also needs to

funds can be complex for SMEs. As a state, we can

continue generating cohesive promotional efforts. With 14

support the development of this unique sector but the

manufacturing enterprises, seven MROs and five suppliers,

federal government needs to become more involved

it has managed to promote the industry as a whole.

in promoting the industry, by adjusting regulations for example. The requirements for entering the industry

Q: What are the next steps the government needs to take

can be overwhelming. The DGAC and the Ministry of

to support the industry’s consolidation?

Communications and Transport need to promote the

A: In Nuevo Leon the aerospace industry has not even

BASA agreement and encourage business opportunities.

started to display the potential it could achieve. The government can help by standardizing and providing

Unfortunately, Nuevo Leon has few foreign aerospace

certifications to the aerospace industry, helping local

corporations, making it harder for us to attract new

enterprises get accreditations for the sector.

companies. However, we are working with other clusters, performing

the

Attracting new enterprises also is a priority. Having an

promotion of the state. Nuevo Leon is fifth in Mexico for

feasibility

studies

and

working

OEM in the state aids in this process and our MRO industry

number of companies and jobs generated in the aerospace

has succeeded due to national demand. The state lacks

sector but we have set more ambitious targets. To boost

neither human capital nor infrastructure and anything the

the state’s image among global aerospace industry players

industry might need we can produce. Our work simply

we made an appearance at the Farnborough International

needs to focus on making it easier for entrepreneurs and

Air Show. Many new aerospace companies are interested in

businesses to invest in Nuevo Leon.

VIEW FROM THE TOP

SUCCESSFUL ALLIANCES HELP BUILD TRUST CARLOS RAMÍREZ Director General of TECMAQ

Q: How did the company consolidate its expertise in the

growth. However, 2015 was an exception. The oil and gas

aerospace sector while operating across a number of

industry affects the entire market and TECMAQ saw a 25

industries?

percent reduction in sales. Nevertheless, with 80 machines,

A: TECMAQ has focused its efforts on providing CNC

we have the resources to grow. We are simply looking for

machining parts for 16 years. We did not begin targeting a

partners to supply.

specific market but a need for specific machining parts. In the milling and turning area we have grown from only four

TECMAQ expects to reach 22-25 percent production for

machines to a total of 80 machines.

the aerospace industry in five years. The Fokker project will allow us to grow up to 9 percent by the end of 2016,

Our entrance into the aerospace segment happened in

putting us on track to reach our goals five years from now.

2005 when we were invited to participate in a project with Honeywell and the state government. We became

We began production for Fokker in mid-2016 after

suppliers for Honeywell and subsequently held a 3 percent

getting everything in place but new processes are always

share in the aerospace segment, which also led to the

difficult to integrate. The other companies in the cluster

state government inviting us to take part in the oil and gas

do not specialize in machining parts and products and

industry. We have gained machining expertise in the last

the development of these parts pushed us to install the

12 years that can be applied to the aerospace industry and

required equipment and to develop new areas of expertise.

we retain capabilities in aluminum structures.

Ideally, we always plan to have a smoothly operating assembly line ready for when we start production, as was

We have adapted because in contrast to oil and gas,

the case for the Fokker project. We can then offer the

aerospace requires longer turnaround times between

same services to other companies.

the quotation and the purchase order and between a part approval and a production approval. Our decision to

Q: What are your expansion ambitions, for example into

remain in this segment hinged on the value that Tecmaq

other materials?

can add to the material, which is about 25 percent of the

A: In the future we will consider producing higher-

final price.

tolerance parts but that will require more specialized equipment and expertise. Subsequently, should an

The Fokker deal to supply parts for the HondaJet was

existing client or supplier require us to diversify into

another opportunity for us. The project in which we would

different materials, we could expand the business.

eventually make over 80 different parts for the HondaJet,

While our main focus is on the Fokker project, we are

was launched in December 2014 and challenged us to

also talking to MD Helicopters with a view to working

develop the complete supplier base for the US, Sonora

with Tier 1 and 2 companies in the US. We also are in

and Chihuahua as well as the HondaJet project. To enter

discussions with Frisa, which is considering creating

the aerospace sector we have made a heavy investment

higher quality machining operations following requests

in equipment, which shows we are serious about the

from its clients.

expansion of our operations in this industry. To attract more customers in the wake of the Fokker Q:

team

project, the Mexican supply chain needs to grow from

implementing to boost the company's growth in the

What

targeted

strategies

TECMAQ's

hardware through to raw material. We are still an infant

aerospace market?

supply base but, fortunately, the aerospace sector is not

A: In the past we have achieved up to 100 percent growth

expected to fluctuate as much as the oil and gas industry.

per year, dropping no lower than 20 percent year-on-year

Indicators point toward the consistent growth.

109

VIEW FROM THE TOP

METROLOGY EXPERTS TAKE ON ADDITIVE MANUFACTURING ALEJANDRO SILVA Director General of Renishaw Mexico

110

Q: What are Renishaw’s top priorities for the aerospace

for every project but it does complement traditional

division?

manufacturing.

A: Renishaw can provide unique services in industrial metrology such as Revo, a 5-axis measurement system that

For some operations, additive manufacturing is much more

can measure an infinite number of points and is 10 times

expensive than conventional processes and, depending

faster than any other system on the market. This translates

on the material used and the process, 3-D printing can

to an increased throughput in terms of measurement, a

increase prices two to fourfold.

reduced operations cycle and essentially results in the analysis of more parts.

Many companies are investing considerably in R&D and some manufacturers are joining forces with technology giants,

We are also active in additive manufacturing, an exciting

such as Apple and Google, to develop a new 3-D printing

area for the aerospace industry. Additive manufacturing is

program that will even provide color. 3-D printing has existed

beneficial for this industry as it generates pieces with the

for over 20 years but it is only beginning to gain ground in

same structure as other types of manufacturing practices

the manufacturing industry. Today, 3-D printing still requires

but it can eliminate unnecessary weight. The ultimate

a certain level of programing knowledge but it will eventually

goal is to reduce a piece’s weight while keeping the same

be simplified, perhaps in the next 10 to 20 years.

resistance and even increasing strength by reinforcing essential areas. Additive manufacturing also provides

Q: What role would Renishaw like to play in bringing 3-D

unique manufacturing capacities because some parts

printing into the mainstream?

cannot be made with machining.

A: Renishaw is generating several additive manufacturing solution centers around the world. We plan to eventually

Renishaw and many other companies are producing a

have offices in Asia-Pacific and the Americas, including

large number of prototypes using additive manufacturing

Chicago, Dallas and Canada in the short term and

and developing testing. Even Tier 1s and aerospace

hopefully a new branch in Mexico in the future. Our goal

giants such as Airbus and Boeing are betting on

is to develop solutions to bring 3-D printing closer to our

additive manufacturing and they have generated many

clients by generating friendly and easy-to-use methods.

R&D initiatives. For instance, the Airbus A350X is an experimental

many

New technologies are being developed with different

different materials, some of which are made with additive

aircraft

being

developed

with

materials. For instance Renishaw has developed 3-D

manufacturing. Reducing the weight of parts will increase

printing processes with stainless steel, cobbled chrome,

fuel efficiency, aerodynamics and cost effectiveness,

titanium and aluminum, among others. We must fully

which provide advantages for airlines and passengers as

understand our customers’ operations to help them

well as the defense sector.

improve their parts through metrology or design. Our objective is to generate and localize production centers to

Q: How is additive manufacturing being used in

bring these new technologies into each region.

production processes at the moment? A: Renishaw offers design freedom to allow companies to

At Expo Manufactura 2016, the annual manufacturing

develop their own weight reduction strategies. Reducing

exposition, I presented the Renishaw AM250 and the

weight is ultimately more cost efficient and greener for

recently launched RenAM 500M. The latter is a 3-D

the aerospace industry but at this point the technology

printing machine designed for the manufacturing industry

is more expensive than other alternatives. 3-D printing

that automatically recycles unused powder as many times

has not yet reached a point where its use is convenient

as possible. It also is much faster than its predecessors,

presents a lower initial cost and is useful for both R&D and

world without compromising accuracy. Another product

manufacturing.

gaining momentum is the equator system, which many companies have next to their production lines to increase

Q: How are the automotive and aerospace industries

their throughput.

pushing additive manufacturing? additive

We also offer a new spring system, which consists of a

manufacturing. General Electric in the aerospace industry

scanning system inside the machine tool to scan blades

stands out for its investments and BMW in automotive.

and rings at high velocities. These tools will be useful for

The latter’s ultimate goal is to make components lighter

the emerging MRO industry in Mexico, which we believe will

specifically for electric cars, a trend that is pushing the

continue growing in several locations, including Queretaro,

industry to become more energy efficient. Additive

Tijuana and Mexicali. These areas are expected to generate

manufacturing will allow companies to create lighter and

12,000 jobs and over US$12 billio inn the next few years.

Both

sectors

are

heavily

investing

stronger automotive parts but it is still in a development stage because new powders, materials and processes

Q: What are Renishaw’s short-term objectives for growth

have to be developed to make this industry cost efficient.

in Mexico? A: We have invested considerably in local infrastructure

At this point, our strategy is to bring our clients closer

and we will begin to collaborate with local academia and

to additive manufacturing. We cannot take over the

research centers to generate our solution centers. We are

design and manufacturing of their products because the

investing to increase our presence and expect to expand

aerospace industry is strictly regulated and held to high-

our market in 2016.

quality standards. Our test products are highly accurate and our additive manufacturing allows us to further

We hope that by the end of the year, or the beginning

improve accuracy but our core business remains our

of 2017, we can move into our new facilities in Nuevo

metrology area, in which we are the industry standard. In

Leon, which will provide full on-site subsidiary support

fact, our clients refer to their probes as “the Renishaw”

for our entire Central American market. These facilities

even when they are not from our brand.

will introduce our full production capabilities in additive manufacturing to Monterrey and allow us to display

Q: What new technologies is Renishaw introducing to the

our entire product line in industrial metrology, medical,

market?

mining, marine and scientific research. This location will

A: At this point R&D and additive manufacturing are driving

concentrate on offering our broad range of solutions to

the industry but industrial metrology has always been the

our customers in the automotive and aerospace sectors.

pillar of Renishaw. We are a worldwide reference especially in probe heads, engaging systems and calibration systems

We are also planning to increase our Mexican workforce

for quality assurance. These will be our drivers for success

by 35 percent in comparison to our number of personnel

in 2016. For the aerospace industry we are actively

in 2015. This exemplifies the UK’s involvement in

promoting Revo and our specialized software, which can

strengthening the Mexican aerospace market, which is by

scan blades 10 times faster than any other machine in the

far one of our largest markets in Latin America.

111

VIEW FROM THE TOP

WIDE NETWORK HELPS GROW TESTING NICHE FERNANDO RAMOS General Manager of Exova de México

112

Q: How did Exova start working with Boeing?

available to clients even if we do not have the facilities

A: While testing the FPI Hamilton for Noranco, the

in Mexico. We have several locations in the US and

company asked what we would need to do to obtain

Canada that we can offer as part of our network and can

Boeing’s

guarantee a very fast turnaround despite transportation

approval.

Noranco

was

eager

begin

testing Boeing parts in Monterrey to avoid the costs

times for items to locations outside of Mexico.

incurred from sending them to Chihuahua. We had to work closely with Noranco and with Boeing for the

Our costs are more competitive than those of our

certification because we are fairly independent from

competitors and we are global experts. The company’s

our US counterparts. Exova’s offices in the Chihuahua

excellent technicians and knowledge can satisfy specific

location receive support from 100 laboratories in the US

customer requests.

but in Monterrey we are much more isolated. Q: What proportion of your business and forecasted Boeing audited our processes and personnel and in

growth

represented

December 2015 it approved our facilities for mechanical

metallurgic testing?

and nondestructive testing (NDT). This approval helped

A: To date, the ratio is 60:30:10 of mechanical,

us gain another contract with Noranco for Boeing and

nondestructive

opened doors to more clients such as Senior Aerospace,

expanding at an unprecedented rate, as one of our

which is based in Saltillo. We are the only company in

customers requires a growing number of parts to be

Mexico that has Boeing’s approval. Anyone in the supply

tested. In this area, we are actually taking business from

chain that is interested in securing sales to the OEM

our competitor.

and

mechanical,

metallurgic

testing.

NDT

and

needs to look into working with us. Another company based in Monterrey was sending parts to our laboratories while their partner in Houston had been sending parts to be tested in Pennsylvania.

Exova has grown 15-20 percent per year since 2011

We pointed out that we could test those parts here in Mexico and it would be more cost-effective for them to send all their materials to our Monterrey facilities, which they started doing. We have the strongest competitive positioning in NDT and have expanded our abilities in that area, especially to process more efficiently. Exova is confident it will gain ashare in all these segments. As the aerospace industry expands, our growth is inevitable.

Q: What is the scope of Exova’s testing abilities for Mexican manufacturers?

Q: What should potential clients know about Exova’s

A: Several laboratories can perform mechanical testing

value proposition?

and alternative labs can manage NDT. Exova can offer

A: The most important aspect of our value proposition

both as well as metallurgic testing, which makes testing

is being positioned as a top international company in

much simpler for our clients. We also have the advantage

Mexico, which can serve clients effectively, backed

of having a network of laboratories in the US, Canada

up by our global technical support network. Our only

and in Europe, making chemical and composite tests

disadvantage compared to anyone located in Queretaro,

Baja California or Sonora is distance. For this reason, we are considering opening new offices in Queretaro or Chihuahua to offer face-to-face services. Being able to offer quotes in person via direct communications with our laboratories here would be advantageous. Q: How does the company measure client satisfaction? A: Aerospace is a particularly important industry and Exova is interesting because it has grown between 15-20 percent every year since I entered the company in 2011. We have not only increased sales, we have reinvested profits in equipment and in training human capital. Our staff now totals 40 people in Monterrey and every aspect of our company has grown. Our quality metrics show that even bottlenecks that existed when I joined the company have improved considerably. Client

satisfaction

can

measured

on-time

deliveries, which have stayed at 95 percent for the last two years, and by complaints, which have also remained low. To gauge customer satisfaction, we also measure our share of a client’s products that are sent for testing. While previously we would receive 70 percent of a client’s total parts, we now receive 92 percent. We have very few competitors and benefit from a longterm exclusivity contract with one client. About 80 percent of our business is tied to two main clients, so we are very dependent on their longevity and growth in the market. We would like to attract existing companies in Mexico to work with us to diversify our client base and safeguard our company's development. Q: What are the company’s main goals for Monterrey and its focus on aerospace? A: The strategy for 2016 is to grow within the aerospace industry so we can offer services to more Mexican companies that require testing approvals in the clusters in Queretaro, Chihuahua and Sonora, as well as the five aerospace companies we serve in Monterrey. In 2017, we plan to branch out into different industries such as automotive and pharmaceuticals. In the past, we were so focused on satisfying our clients that we did not consider developing a sales department. This changed due to market demand and now we have plenty of personnel and equipment. At the beginning of 2016 we hired two new people, including a new business development strategist. They help spread the word about our company and competencies. We have given them the target of doubling Exova’s sales and attracting new clients. This year specifically we hope to grow 20 percent. We also need to make additional investments to continue expanding the company.

113

VIEW FROM THE TOP

MONTERREY SUPPLIER BRINGS NDT TO MEXICO EDGAR ESCALANTE General Manager of AEISA

114

Q: What led AEISA into the aerospace industry from its

impression that Mexico only had low-skill manufacturing

traditional market?

abilities but having detected the country’s potential for

A: We were drawn to the industry because of the sector’s

advanced manufacturing, several companies now are

exponential growth and the stability generated by long-

investing in training programs here.

term projects. The area represents 5-10 percent of our market and we expect this proportion to continue

Q: Which new areas does AEISA plan to develop?

growing. AEISA began catering to the oil and gas sector

A: Our niche is NDT for component manufacturers, which

and gradually entered others including aerospace. We

requires special Nadcap certified processes. Today many

started operations in Monterrey and Nuevo Leon and

of these tests are performed north of the border, which

afterward expanded our main offices to Mexico City,

causes logistical difficulties for any company that depends

Queretaro and the Bajio region. Our offices in Monterrey

on them. Introducing these special processes to Mexico

supply our clients in the north, from Chihuahua to Sonora.

solves this problem, presenting an excellent opportunity

To cater to the aerospace industry we opened offices

for AEISA. We commercialize NDT equipment and provide

first in Guaymas, then in Sonora and Chihuahua and this

maintenance and repair services for all the equipment we

expansion won us clients such as Frisa. We plan to open

sell. The company plans to begin testing services and we

another office in Queretaro, a flourishing state.

are analyzing the market to determine which are most in demand. As we work with MROs, the only priorities are the

We have the advantage of representing renowned

DGAC and FAA certifications.

international brands and catering to a highly specialized market niche, nondestructive testing (NDT). Our main

Our second middle-term plan for aerospace is to open a

clients are Tier 1 component manufacturers. We work

new office, for which we are evaluating Mexicali, the Bajio

with OEMs including Eurocopter, Honeywell, Safran

and Tijuana. We have few clients in the latter city as it is

and their suppliers. AEISA caters to airlines, particularly

in direct competition with companies based in San Diego.

Delta Airlines, Aeroméxico and their MROs, which include

To become key players in that market, we need to have

TechOps and Mexicana MRO. We also work with private

presence in the state.

aviation airlines that outsource NDT. We also will focus on obtaining the AS 9100 certification. Q: What support has AEISA received from FEMIA and

We were the first fully Mexican company to obtain the

the Nuevo Leon Aerocluster?

AS 9120, which certifies us as suppliers for the aerospace

A: FEMIA and the clusters supported our entrance into

industry but we will need to upgrade to AS 9100.

the industry by providing information through their networking sessions, putting us in touch with several

Q: What are Monterrey’s advantages and disadvantages

manufacturers and helping us to identify potential areas

as a center for aerospace?

for growth. The associations also have encouraged local

A: Monterrey entered the aerospace industry much

manufacturers to expand their operations nationally and

later but it has many advantages, including its location,

internationally. As our clients grow, we grow.

qualified human capital and strong supply chain.

Mexico’s aerospace industry has thrived in the last few

Disadvantages primarily arise from it being a very

years thanks to joint efforts from the industry, the cluster

expensive

and FEMIA. While aerospace companies operated in the

advantages, it does not yet house any OEMs because

country before 2000, the sector only took to the skies

real estate is less competitive than those built in other

in the last decade. Foreign manufacturers once had the

Mexican locations.

location.

While

Monterrey

has

several

AIRPORT PROFILE

ADN: EXECUTIVE CLASS Twenty kilometers north of Monterrey sits Del Norte

day fuel truck for jet fuel and a two-day fuel truck for

International Airport (ADN). No commercial flights are

AvGas. Single-point refueling also is available.

regularly scheduled and few pleasure travelers make their way to Mexico via this gateway. It is exclusively used for

The airport strives to maintain good relations with

executive and corporate aviation. It also is the second busiest

authorities so that trips through customs and immigration

private airport in Mexico. Only Toluca, which supports Mexico

are as smooth as possible. It has a customs area run by

City International Airport, gets more executive traffic.

the Ministry of Finance and immigration area run by the federal government. Navigation Services for Mexican

ADN is run by OMA, a group that operates and

Aerospace (SENEAM) and Dispatch have offices within

administrates international airports in 13 cities in central

the airport to allow the drawing of flight plans. Also within

and northern Mexico. The airport has two runways

the airport is the Center for Research and Innovation in

measuring 5,049ft and 6,260ft and a 260,000ft2 ramp for

Aeronautics (CIIIA), part of the Autonomous University of

takeoff and landing. Runways 2, 11 and 20 have Precision

Nuevo Leon. CIIIA undertakes research and development

Approach Path Indicator (PAPI) lights and Runway 20

for the aerospace industry, such that proximity to the

has Runway End Identifier Lights (REIL) to guide pilots

airport is fitting and useful for its students and research.

into ADN. Military personnel, certified security guards, closed-circuit cameras and access control ensure the

DGAC, a department of the Ministry of Communications

safety of passengers and personnel.

and Transport, has an office at ADN. This is particularly convenient for enterprises requiring paperwork to be

The airport’s six anchored FBOs, Aero Corporation

completed on site and for undergoing civil aviation

Azor, Avianet, Aerolíneas Ejecutivas, Asertec, Jetmach

processes. DGAC is responsible for ensuring aviation

and Transpaís Aero, have the rights to perform services

contributes to sustained and sustainable growth, job

at the airport ranging from aircraft rental, aircraft

creation and wellbeing in Mexico. For this reason, ADN

maintenance, flight instruction, fueling and hangar

counts its presence at the airport as a competitive

storage. Along with five ground trucks, ADN has a three-

advantage over other private aviation locations.

115

VIEW FROM THE TOP

CREATING NETWORKS TO GROW ALONGSIDE ADN XAVIER CABELLO Director General of Avianet

116

Q: How has executive aviation in Monterrey helped the

highly business-oriented, which is visible in the traffic

growth of Del Norte International Airport (ADN)?

flow being highest midweek.

A: ADN has grown enormously thanks to a cultural shift toward corporate air travel instead of trips for pleasure.

Q: How is Avianet positioning itself among the many

Executive aviation users, including corporations and private

private aviation companies in ADN?

owners, once prefered to own their aircraft but the costs

A: Avianet provides personalized attention because our

involved were too high to be a convenient solution. The

customers are observant and notice the small details

model of joint ownership has become increasingly popular

about the aircraft and the services we provide. We do not

among private aviation companies and has many benefits,

invest much in promotion because the sector operates

including reducing operational costs. Small aircraft are a tool

by word-of-mouth. Once we gain their trust, clients often

for corporate travelers as they allow individuals to make four

prefer to remain in the same FBO.

or five trips a day, which is not possible with commercial aircraft. This is common among business owners with

All companies working out of ADN operate as a community

companies spread over a large distance or across the border.

wherein all members work together. For instance, there is no single MRO that provides all the necessary services so

The airport is different from every other in Mexico as it is

we work with all the MROs at the airport. Our collaboration

the only exclusive one for private aviation and has many

extends to many different areas, most significantly with

advantages for private users, including increased security.

training. These programs are usually too expensive for

Both the local police and a Mexican army base are located

a single company but costs can be distributed among

next door. ADN underwent a comprehensive renovation,

the members of the airport community through a third

which included its terminal, landing track, signaling and

party such as Avianet. Although initiatives like this have

the control tower. It now offers a significant number of

not worked with the local aerospace cluster, they are

advantages, including the existence of DGAC’s regional

successful when implemented among our members.

offices at the airport. About three years ago, the airport’s

The aviation industry involves many brands and DGAC

permit was renewed for another 50 years.

demands our personnel be trained in every single one, making costs prohibitive at times.

Q: How does the profile of users influence ADN's operations? A: ADN does not handle commercial aircraft unless weather

Q: What are the main challenges Nuevo Leon is facing

conditions make International Mariano Escobedo Airport

and how are they influencing growth expectations?

unavailable. It focuses exclusively on private aviation. About

A: Nuevo Leon is facing a period of safety concerns.

80 percent of the aircraft in ADN belong to private owners

While the situation improved slightly a few years ago, it

and the other 20 percent to a private aviation company,

is worsening again. Even so, many foreign companies are

which generates 80 percent of the overall income.

still betting on the state, such as Johnson Controls and Home Depot, which often visit Nuevo Leon. We also are

Because of this focus ADN does not have seasons with

receiving a significant amount of traffic from Central and

higher occupancy unlike other airports. Its occupancy

South America because companies still see potential in

is higher during specific events related to business or

the state. The state will increasingly become safer thanks

leisure. Monterrey is characterized by its many business

to the many companies that are keen to invest in Nuevo

events, which bring thousands upon thousands of

Leon. Monterrey, as an industrial hub, is significant for the

executives from various industries. The airport is used

economic development of Mexico. Between 14,000 and

for many international trips, mainly expats living in the

15,000 trucks travel daily to and from the border via Laredo,

US who visit their companies in the city. Monterrey is

which is the largest entry point for merchandise to Mexico.

VIEW FROM THE TOP

GLASS LEADER DIVERSIFIES INTO MRO SERVICES JOSÉ CARRERA Director General of Aerovitro

Q: How has Aerovitro evolved to adapt to the changing

Our diverse clientele is a product of our competitiveness.

business climate over the past years?

All our prices are in Mexican pesos rather than US dollars,

A: Vitro was founded in 1909 but Aerovitro did not officially

which makes the current exchange rate a positive for our

come into being until 1990. Still, our relationship with the

business and our clients. We provide quality services with

aviation industry stretches back to 1966, the first time

honest and transparent practices and fair prices.

an airplane was registered under the company’s name. Recently economic conditions affected our operations

Q: What are the advantages of being established in

so we realized that we could offer more benefits if we

Monterrey rather than in Toluca?

specialized in maintenance, leading to the decision to drop

A: Monterrey is the third biggest city in the country and

our air taxi services. Investing in training and installations

the Del Norte International Airport (ADN) has the second

to become an MRO became our priority.

most executive aviation activity. Monterrey always has been characterized by its industrial profile, being the first

Our MRO services began because we perceived numerous

place companies think about when they think of industry

enterprises in the state in need of a reliable workshop

in Mexico. The biggest educational centers in the country

that could provide maintenance for their airplanes. It

also are in Monterrey. Therefore, the combination of its

was an opportunity for us to work toward becoming

industrial profile with an excellent educational offering

certified by the DGAC and by the FAA. Since receiving

makes Monterrey the best option for doing business.

these certifications, our abilities have increased. Today, we are an authorized service facility for Bombardier,

Promoting Monterrey’s image as a center for executive

a service center for Daher and Quest Aircraft and a

aviation is crucial. The security-related issues we have

Honeywell warranty service center. We represent Rockwell

faced in the past have not constrained our growth but it is

Collins for installations and modifications and Artex as a

necessary to improve the city’s image in media. The aero

programming and battery replacement center. We have

cluster is a good first step for promoting our image and

been growing every year as we gradually become more

several OEMs working in the state are helping us to boost

specialized through certifications.

Monterrey’s industrial reputation.

Q: How has Aerovitro diversified its services offering?

A: Aerovitro offers several services to different clients, all of

considering the rapid growth of the industry in the city?

whom are extremely important to us. However, our alliance

A: Our plans include opening our brand to the

with Bombardier is the biggest business contract we

international market as our next step and we are focusing

manage and it is definitely our biggest client. We provide

on attracting clients from the southern US, Central and

maintenance services for their Learjet and Challenger units.

South America. Promotion is a short-term goal but in the

What

are

Aerovitro’s

short-term

expectations

future we would like to jump into commercial aviation in The rest of our business is diversified through different

collaboration with OEMs.

areas of expertise. In avionics, we mostly work with Honeywell and Collins, whereas our maintenance services

Expanding our clientele is our goal although we are not

for Daher and Quest are focused on their turboprops.

yet diversifying our business to the rest of the country.

The OEMs that work with us like the fact that most of our

Executive aviation will continue growing and consolidating

suppliers are their own manufacturers, ensuring the quality

and as key players in the segment we will help this

of all the parts we use. OEMs and influential companies

continue, focusing on innovating within the Nuevo Leon

make up an important part of our business but we also

cluster. Monterrey’s workforce is honest and hardworking

provide services for smaller enterprises.

and that will ensure this industry thrives.

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VIEW FROM THE TOP

MACHINING ITS WAY INTO AEROSPACE EVERALDO LÓPEZ Director of Operations at Mimsa

118

Q: What prompted Mimsa to enter the aerospace sector?

has just obtained an additional certificate for handling

A: Mimsa testing the water in the aerospace industry

3-D aerospace designs and we are developing an internal

was made possible by the company’s versatility, evident

quality system to act as a standard for all our production.

in our inclusion of machining and CNC services, inverse engineering,

repairs

and

maintenance

services

and

To work in aerospace we must maintain certain standards

welding machinery. We are a 100 percent Mexican

and meet several requirements. Developing a strong

company focused on supplying manufactured goods to

presence in the business takes many years and we are

the industrial sector. The aerospace industry is unique

willing to work hard to make Mimsa a household name

in that it never stops growing regardless of economic

among aerospace companies. As part of our long-term plan,

conditions. This is particularly interesting because the

we would like to split Mimsa in two and have a specialized

industrial sector is usually the most affected when

division for aerospace.

economic crises hit or the exchange rate is unstable. But whenever the economy is struggling, all industries reduce

Q: What challenges have you faced entering the industry?

their production except aerospace, which runs projects at

A: The nature of the industry exponentially increases the

all times and always needs suppliers.

challenges we have to overcome to succeed. Among the obstacles is locating skilled personnel as well as the

At Mimsa, we are not completely focused on aerospace,

necessary equipment and software. Having experienced

we work with diverse industries. Many companies produce

workers is necessary so we can complement their skills with

and manufacture parts for aircraft. We decided to focus

our knowledge. The aerospace sector is in constant growth

on the less limited segment of machining aircraft parts

and it always needs investment. Participating in the industry

and tools for production, such as aerospace fixture

would be much easier if we had support and funding from

manufacture, with stainless steel and thermic treatment

the government to participate in more complex projects.

or aerospace mold manufacturing for helixes. We started working with aerospace clients in 2012 and obtained

There are many positive aspects to balance the challenges.

our first certification in 2014. This certification allows us

In Queretaro, there is plenty of collaboration between

to participate in manufacturing processes and we are

private companies and academia. We received support

confident that in the future we will also be part of the

from the aerospace cluster, for example. When we were

design process, especially since many of our clients have

first trying to enter the industry we approached them and

already asked us for product designs.

asked for recommendations. The cluster’s support was vital to our breaking into the industry.

Q: What strategy is the company following to increase its presence in the industry?

Q: What is the next step you need to take to consolidate

A: Aerospace represents 2 percent of our sales with regards

in aerospace?

to the parts we manufacture directly for aircraft. Machine

A: We want our aerospace business to take shape so

manufacturing for aerospace companies increases this

we need to continue learning from what we are doing.

percentage but we have to work on getting more clients.

Investing in new technology is a priority, especially in more

We work with Safran, Snecma and Boeing.

CNC machinery. Mimsa has many things to offer the sector. We are used to meeting urgent delivery times demanded

For Snecma, we manufacture machines but we are hopeful

by the industrial sector and we are confident we can thrive

it will contract us for the production of specific parts in

in a demanding sector such as aerospace. As a Mexican

the near future. We want to ensure we comply with the

enterprise, funded with Mexican capital, we are determined

industry’s requirements before expanding. The company

to play a leading role in the aerospace sector in Mexico.

VIEW FROM THE TOP

FAA CERTIFICATION EXPECTED TO BOOST OPERATIONS KEES BLEIJENBERG Director General of Full Service NDT

Q: What segment of the market does Full Service NDT

investment for the company since we have to provide

target?

the infrastructure as well as train the new additions to

A: Full Service NDT started with a different focus and only

our workforce. We are working toward recruiting a fully

began working on aerospace projects seven years ago. We

trained staff and keeping turnover low. A specific goal is

detected that markets such as Mexico and the US were in

to double our existing operations in Toluca.

need of our services, so we concluded it was important to obtain DGAC’s certification. In the past, we used to

The company also is investing in new technologies. Our

perform sporadic inspections on airplanes but only on

X-ray operations will get an upgrade because we are

behalf of a workshop. After we obtained our certification

acquiring digital equipment. We also are developing a new

as an aeronautics workshop, we began various inspections

service not yet on the market related to ultrasound phased-

for all aircraft.

array technologies. The combination of our workforce with our state of the art technology makes us the best in

Our services are targeted at aircraft that are already flying,

the market. We try to offer the most competitive prices

not at the assembly stage. The X-ray service is the most

possible and the latest technologies.

requested, for which we receive a request almost every day. Our inspection methods for nondestructive testing

Q: Has your location limited the company’s reach?

(NDT), which include industrial ultrasound, inspections

A: Full Service NDT is based in Monterrey and this location

with magnetic particles and borescope inspections, are

has not limited our reach. We serve clients throughout

performed by specialists. These professionals are trained

the whole country. Our core business is private aviation,

for over two years according to NAS410 standards and are

though we have worked sporadically with Aeroméxico.

qualified to make critical decisions regarding the aircraft.

Major airlines such as Aeroméxico and Interjet perform their own nondestructive tests but we sometimes work

Full Service NDT works primarily with MROs, Monterrey

with them to relieve backlogs.

Jet Center being one of our largest partners. We have an agreement with the FAA and with Monterrey Jet Center

The aerospace industry carries weight in our business as

that allows us to perform inspections on aircraft from the

it represents around 25 percent of our total operations.

US. Our other clients include Asertec, Aerovitro, Hawker

The oil industry accounts for another 25 percent and

Beechcraft Services and Volaris.

automotive for almost 15 percent. The remaining 35 percent is dotted across general industrial processes.

Q: How does Full Service NDT expect to increase its market share?

Q: What developments have sculpted the state of the

A: We expect the FAA certification, which we should

aerospace industry in Nuevo Leon?

acquire in 2017, to boost our aerospace operations. At Full

A: The development of the aerospace industry has been

Service NDT, we believe that rather than trying to extend

rather slow. Full Service NDT is part of the aerospace

our business’ scope to OEMs directly, participating in the

cluster in Nuevo Leon. Although the cluster is very active,

US private aviation market will expand our operations. To

its member companies have to be even more dynamic.

our knowledge, no other company in Mexico specializes

Human capital in the state is well prepared but not quite

solely in nondestructive testing with the FAA certification.

enough to meet our level of expertise. While technical schools are preparing students, we still have to provide

We are also working toward opening a second office in

extra training to our employees, especially regarding

Toluca but this will be linked to our obtaining the FAA

language skills. Our staff must understand English and the

certification. This new office represents an important

specialized industry terms we use.

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VIEW FROM THE TOP

LOCAL LOGISTICS READY TO BREAK THROUGH DIEGO MARTÍNEZ Commercial Director of Dylo

120

Q: From a logistics point of view, what are Nuevo Leon’s

for all companies but creating a specific platform for each

main infrastructure needs and capabilities?

individual sector makes a significant difference.

A: Nuevo Leon has sound road infrastructure but air transportation is hampered by the limited number of

Our main strengths are in sea and aerial transportation,

international flights out of Monterrey International Airport

while our largest challenge is acquiring human capital and

and airlines here generally use smaller aircraft that do not

financing as we grow. We also need to increase our presence

have enough cargo space. The airport lacks the capacity

in Mexico where there is a great deal of competition.

to support large aircraft. This limits our ability to transport pieces over 250kg, forcing us to transport those by road to

Q: Why are Third Party Logistics (3PL) not more popular

Mexico City. Another alternative is for companies to transport

in Mexico?

their products by road to a port or to a different airport.

A: 3PL is less popular because most foreign companies that enter Mexico already have well-developed logistics

This is not the case in other cities. Guadalajara has grown

plans. Even those that do not operate their own logistics

considerably due to the food and electronics industries.

have strict guidelines that force them to use a predefined

These sectors contributed to the growth of the city’s

company. Many of these companies do not realize that

airport and its international aerial connectivity. Monterrey’s

international logistics companies are unaware of the local

infrastructure has resulted in local companies traveling to

economic environment, legislation and processes to which

Houston to transport goods on larger aircraft, especially in

they need to adapt. Large logistics and transportation

the case of the oil and gas industry.

companies may work smoothly in other economies but can end up being unprepared for Mexico. It can lead to subpar

Several companies are unaware of this possibility. Greater

services that may impede the growth of the companies for

communication regarding the area’s infrastructural options

whom they work. Local companies are better acquainted

would greatly benefit local manufacturing companies by

with Mexico and its characteristics.

generating a more effective supply chain. Q: How can Dylo and other companies take advantage Q: What are Dylo’s main strengths and challenges as a

of their regional knowledge to increase their client base?

local logistics business?

A: Local logistics companies can provide the same

A: We realize that each industry has unique demands

coverage as international businesses at similar prices. We

and most companies already have well-defined routes

adapt efficiently to the needs of foreign firms yet we are

and processes. The aerospace sector requires lean

often overshadowed by big names. The problem can be

delivery times in comparison to other sectors. Dylo is in

solved by approaching companies directly.

an excellent position to support the industry because we are the only Mexican member of the Aerospace Logistics

Not having offices in their countries can complicate the

Group, an international association whose goal is to

process because foreign companies are often unwilling to

address the sector’s needs.

switch from their established providers. It is difficult to create new relationships with clients because they have many

Dylo’s goal is to consolidate by focusing on three areas.

companies to choose from and we are not well known yet. To

The first is human capital because our employees are our

attract potential clients, the most effective strategy is to offer

most valuable asset. The second area of opportunity is

a cost-savings solution. We must to understand the company,

our finances, which can be improved with more discipline.

its processes and sector to ensure satisfaction. In some

The third step is to generate different platforms in various

cases, alliances can be created with foreign transportation

industries. Many logistics companies use a single model

companies, which is beneficial for both parties.

VIEW FROM THE TOP

FAMILY COMPANY ADDRESSES HELICOPTER MARKET NICHE EDUARDO ÁLVAREZ Operations Manager of Avihel

Q: What market opportunity attracted Avihel to the

workshop’s capacities to service a greater number of aircraft

Monterrey aero cluster?

models and creating alliances to increase our market share.

A: Avihel grew alongside private aviation in Monterrey. When the company was created, there were few helicopters in the

Q: What new business areas is Avihel developing?

city but the private aviation sector has grown enormously.

A: We are developing an avionics workshop and

We work with both the public and the private sector,

incorporating new aircraft models. As we invest in

having expanded significantly over the past two decades.

increasing our capabilities for turboprops, we plan to keep

My father started this business from his experiences with

a similar focus on rotorcraft and jets as the market for

Protexa, which is now part of Grupo Lomex. Shortly after

both is growing steadily. We also will increasingly focus on

Protexa moved its helicopter maintenance operations to

leasing helicopters. We are renting a single helicopter from

Ciudad del Carmen, there was an opportunity to continue

a sister firm, with plans to continue expanding this area.

providing these services in Monterrey. We began working

Avihel wants to develop a small helicopter fleet to take

exclusively for one Bell Helicopter model and now we work

advantage of our maintenance abilities. Helicopter leasing

with five models and three Airbus Helicopters models.

is not common in Monterrey but because the city has some security concerns, some individuals are turning toward

Q: What marketing techniques figure in Avihel’s client-

helicopters as a safe alternative for medium distances. We

growth strategy?

also are seeing significant interest from the mining and

A: Clients in Monterrey are hard to reach through social

crop-dusting industries. Helicopters are versatile and it is

media and magazines so recommendations mostly come

possible to adapt ours for almost any mission.

through word-of-mouth. This, of course, takes more time because it is necessary to build a good reputation first.

Tourism is strong in Mexico so we analyzed the possibility

While we have clients located across the entire northern

of leasing the helicopter in Quintana Roo, but the saline

region of Mexico, we have offices only in Monterrey. This

environment close to the sea results in a significant rise in

has not been a problem as clients can bring their helicopter

maintenance costs to repair corrosion. It was better for us to

here or we can travel depending on the service.

keep it in the north though we are still evaluating this move.

Working in Monterrey has many advantages, including

Q: What are your plans regarding certification and how

proximity to the US, allowing us to import parts faster.

can that help your growth?

Customs can sometimes be a problem as their processes

A: We are certified by DGAC and plan to obtain FAA

often take several days, during which time an aircraft is

certification to attract a larger number of US companies.

grounded. The federal government, meanwhile, supports

The FAA certification will strengthen our abilities and

aerospace manufacturing, mostly for small parts, but

market. In Monterrey there is only one other workshop

there is no support for aviation. For all Mexican workshops

certified by the FAA so we are certain that obtaining it will

and maintenance service providers, it would be greatly

improve our profile among potential clients.

beneficial for the DGAC to streamline their processes to reduce wait times and the significant costs that ensue.

Private aviation has grown considerably in Monterrey and Del Norte International Airport (ADN) has now become

Q: How does the exchange rate impact Avihel’s business?

one of the most important airports in Mexico for executive

A: A more expensive dollar forces our clients to space out

travel. The city receives many business travelers from

maintenance services and to limit their flight hours, which

international destinations in North and South America.

reduces the number of repairs and check-ups they need.

Nuevo Leon has the strongest industry in the country and

To deal with the reduced volume, we are increasing our

as long as it keeps growing so will private aviation.

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RESEARCH SPOTLIGHT

CIIIA The Autonomous University of Nuevo Leon (UANL) is contributing to the development of the aerospace industry in Mexico. Its Research and Innovation Center for Aeronautics Engineering (CIIIA) is a state of the art facility that contributes to the training of aeronautic engineers. CIIIA has 15 laboratories that excel in aerospace tests, structural dynamics and aerodynamics. In addition to the laboratories, the center also has a hangar, a wind tunnel and three rooms destined for product lifecycle management (PLM) of aeronautics design activities. The center works hand in hand with the UANL’s students, professors and researchers from the Mechanics and Electric Engineering Faculty. Every year, professionals in aeronautics engineering and aeronautics maintenance technicians among others graduate from the faculty. A Masters in Aeronautics Engineering also is offered. This program has been included in CONACYT’S list of quality degrees, which means that students in the program receive full scholarships for tuition and living expenses. With the help of Airbus, CIIIA also established a Center for the Development of Human Resources for Aeronautics Maintenance. The center began in a small area of 130m2 but the rapid growth and demand for its services led to the construction of a second facility. This facility will house two flight simulators, each valued at MX$150 million, the first of which is expected to arrive before the end of 2016. The simulators will contribute to the training of pilots and flight crew. The Airbus training center for pilots is located in Florida but with the new simulators Latin American pilots will no longer have to travel to Florida. CIIIA also develops research projects for aerospace companies. Projects are submitted to a competition and CONACYT chooses the winners. CIIIA assists with project presentation to any company that wants to participate. CONACYT funds 80 percent of a project’s costs, up to a maximum US$1.8 million. CIIIA participates in every phase of the development, design, planning, analysis and testing. Located within Del Norte Airport, CIIIA is the first of its kind in Mexico and the third center with these characteristics in Latin America, just behind the Research Center of the Chilean air force and Brazil’s Technological Aeronautics Institute. CIIIA also has collaboration agreements with the National Institute of Applied Sciences in Paris and Lyon and the Technical University of Munich.

123

ROUND TABLE

TIME TO NURTURE NUEVO LEON’S HIGH POTENTIAL While Nuevo Leon is officially established as an

civil aviation needs of the city. With ADN positioned as

aerospace cluster, it is still lacking certain attributes that

the second busiest private aviation airport in Mexico and

could push it to compete with other regions leading

AIM as the fourth busiest general airport, both the city

the global and Mexican aerospace industry, such as

and the region have a lot of potential that could be used

Queretaro, the rising star.

more efficiently to accelerate growth.

Monterrey, international

124

the

capital

airports.

of The

Nuevo Del

Leon,

Norte

has

two

Industry leaders located in Nuevo Leon's aero cluster

International

detail the advantages and disadvantages of operating

Airport (ADN) caters to the private aviation sector and

in the state and what should be put in place to see the

the Monterrey International Airport (AIM) tends to the

location excel and reach its potential.

ADN has a cooperative working plan that focuses on promoting Monterrey’s image as a center for executive aviation. The Aerocluster of Nuevo Leon, of which we are founding members, carries similar responsibilities to support the growth of executive aviation in the state. However, there have been some complaints from people in the industry regarding the state government’s efforts to attract new enterprises. Opinion is divided as to whether the cluster has let important business opportunities slip, which is intensified by the popular opinion that the government could potentially attract several new OEMs. Promoting Monterrey’s

JOSÉ CARRERA

image as a center for executive aviation is crucial.

Director General of Aerovitro

An additional challenge that needs immediate attention from the authorities is the lack of governmental support for the industry. We know the authorities have tried to get involved in promoting Mexican industry but the aerospace sector is in constant growth and it always needs investment. Mexico has the workforce and the infrastructure to succeed so the state should be seizing every opportunity as it arises. Participating in the industry would be much easier if we had support and funding from the government. This would allow us to

EVERALDO LÓPEZ Director of Operations of Mimsa

participate in more complex projects that would increase our presence in the industry. Among the obstacles we have faced is locating skilled personnel as well as the necessary equipment and software. Even though this industry does not require an excessive number of personnel, it does require expertise.

The development of the aerospace industry has been rather slow. Many factors influence industry development, especially political factors. Security problems in the area have affected how we conduct our operations and logistics, especially our costs. However, we are confident that the Mexican market offers important business opportunities and we are glad to be part of it. The industry needs more participants to avoid becoming static. Mexico is a large market with big opportunities and at Full Service NDT we are confident the industry will keep growing. Human capital in the state is well prepared but not quite enough to meet our level of expertise. While

KEES BLEIJENBERG

technical schools are training students, we still have to provide extra guidance to

General Manager of Full Service NDT

our employees on arrival, especially regarding language skills.

Working in Monterrey has many advantages, including proximity to the US, allowing us to import parts faster. Customs can sometimes be a problem as their processes often take several days, during which time an aircraft is grounded. While the center of Mexico is an attractive region, competition from consolidated companies is fierce. Moreover, clients in Monterrey are hard to reach through social media and magazines so recommendations mostly come through word-of-mouth. This, of course, takes more time because it is necessary to build a good reputation first.

EDUARDO ÁLVAREZ Operations Manager of Avihel

A more expensive dollar forces our clients to space out maintenance services and to limit their flight hours, which reduces the number of repairs and check-ups needed. To deal with the reduced volume, we are increasing our workshop’s capacities to include a greater number of aircraft models.

125

Monterrey entered the aerospace industry much later but it has many advantages, including its location, qualified human capital and strong supply chain. Disadvantages primarily arise from it being an expensive location. Queretaro similarly entered the sector relatively recently but it grew due to the industrial park constructed near the airport and Bombardier, attracting more companies to the state and leading to the creation of the Queretaro Aeronautics University. While Monterrey has several advantages for suppliers interested in establishing

EDGAR ESCALANTE General Manager of AEISA

operations in Mexico, it does not yet house any OEMs because real estate is less competitive on price than other Mexican locations.

QUERETARO

Centrally located, the state of Queretaro was one of the last to welcome the aerospace industry to its territory. However, the state’s delay should not be misconstrued as a lack of enthusiasm. Quite the opposite, in fact. Over the last 15 years Queretaro has attracted almost 50 percent of the foreign direct investment targeting the aerospace industry in the country, more than any other state. Queretaro’s success is the result of close cooperation between the government and private sector, which also has resulted in the foundation of several educational and research centers such as the Aeronautical University of Queretaro, Mexico’s only university entirely focused on aerospace. The combination of government support, the cluster’s promotional efforts and academic involvement has led to the establishment of companies with certifications such as AS 9001, ISO9100, ISO14001 and Nadcap.

This chapter includes industry insight from academic institutions, research centers, government representatives and suppliers. Reflections on the state’s performance and growth possibilities also are included.

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CHAPTER 6: QUERETARO 130

VIEW FROM THE TOP: Marco Del Prete Tercero, SEDESU

132

VIEW FROM THE TOP: Claude Gobenceaux, Queretaro Aerocluster

134

INSIGHT: Spanish Influence Colors Queretaro’s Aerospace

137

VIEW FROM THE TOP: Leonardo Romero, Helmut Fischer

138

VIEW FROM THE TOP: Angel de Lope, Kaeser Compresores de México

139

VIEW FROM THE TOP: Itziar Larrañaga, Aeroprocess TTT

140

VIEW FROM THE TOP: Hernán Rodríguez, AAMEC

141

VIEW FROM THE TOP: Beatriz Aguilar, Axon’ Interconex

142

VIEW FROM THE TOP: Felipe Alejandro Rubio, CIDESI & CENTA

143

VIEW FROM THE TOP: Jesús González, CIDESI

144

VIEW FROM THE TOP: Luis Trápaga, CIATEQ

145

INSIGHT: Testing a Local Option

146

MRO SPOTLIGHT: TechOps Queretaro

148

VIEW FROM THE TOP: Alexandr Slouka, Omni-X

Nora Guerra, Omni-X

149

VIEW FROM THE TOP: Jerónimo Sánchez, HYRSA Aerospace

150

VIEW FROM THE TOP: Pablo Calzada, Gonzalez Aerospace

151

VIEW FROM THE TOP: René Trulin, Rymsa

152

VIEW FROM THE TOP: Tudor Pietraru, Aeroconsulteck Mexico

153

VIEW FROM THE TOP: Guillermo Bonilla, Tecnum

129

VIEW FROM THE TOP

NURTURING AEROSPACE INDUSTRY’S GROWTH MARCO DEL PRETE TERCERO Minister of Sustainable Development (SEDESU) in Queretaro

130

Q: How did Queretaro translate its knowledge of

commitment to innovation. The state has 47 research

the automotive industry into the development of an

centers and 623 researchers in the National Researchers

aerospace sector?

Network (SNI). Our ultimate goal is to stop importing

A: The aerospace industry took notice of our deep involvement

technology and to design it locally. Queretaro’s companies

with the automotive sector, which requires a large quantity

and industry do not want to remain a manufacturing hub,

of precision-made pieces. In 2006, Bombardier searched for

they hope to advance to added value activities and higher

a location in which to manufacture parts and chose Mexico.

levels of technological development.

Several states started a friendly competition to secure this company for their local manufacturing suppliers but

Q: How do the automotive and the aerospace industries

Queretaro was chosen for reasons including its international

complement each other?

airport, which had enough space to host an assembly plant.

A: These industries are different but highly complementary. Automotive is volume oriented while aerospace is market

The government also invested in the state’s education

oriented, a difference that allows them to coexist perfectly.

system, creating UNAQ, and spearheading the training

Queretaro has evolved through many industries, starting in

of all new technicians that would be needed by budding

food production and evolving into biotechnology, however

aerospace

all industries in the state, including home appliances, auto

manufacturing harnesses and gradually transferred several

industry

players.

Bombardier

began

parts and software, keep growing. Queretaro’s greatest

of their suppliers to the state, Aernnova and Safran among

advantage is that it has many different economic areas

them. Safran now has five plants in Queretaro and is

and if any was to slow down the state or a company could

developing a sixth. The turbine blades it is manufacturing

switch its focus.

for Boeing engines using carbon fiber will revolutionize the industry due to the material’s strength and light weight.

Q: How is SEDESU helping the development of Queretaro’s supply chain and identifying other problems to tackle?

Once the state provided the appropriate conditions for

A: One of SEDESU’s main programs for 2016 is the creation

Bombardier’s establishment and UNAQ started delivering

of a shelter to support local suppliers throughout the

its courses, we developed a triple helix model for the

development process, from incubation to construction or

development of the aerospace industry. Queretaro is now

acquisition of infrastructure, so they can approach potential

home to about 80 aerospace entities, ranging from OEMs

clients. We also are implementing training programs for

and Tier 1 companies to research centers. An increasing

many areas such as certification, which is among the main

number of universities are offering aerospace programs

barriers for companies interested in entering the aerospace

and this year we will inaugurate the National Center for

industry. Many companies need certifications to acquire

Aeronautics Technology (CENTA), a project that will require

clients. Alongside Queretaro Aerocluster, we are working

an initial MX$110 million (US$6.4 million) investment. This

to facilitate this process by training these companies in the

center will provide material and structure testing, product

certification process.

development and aerospace research, fostering the development of innovative technologies in the state.

Among other areas we plan to develop are the acquisition of the newest technologies and the generation of training

Q: What steps is Queretaro taking to support companies

programs

that design and develop new technologies?

technologies. The aerospace industry requires specific

A: This year Queretaro is among the states that received

welding processes that are not generally used by other

the largest number of funds from CONACYT’s Innovation

industries. Queretaro produces 3,500 engineers every

Stimuli Program, which is a clear sign of the state’s

year, which gives the state a competitive advantage, but

that

teach

technicians

use

emerging

several processes need specialized technicians. SEDESU is

Q: What strategy does the local government need to

developing education programs for these together with the

implement to strengthen the sector?

state’s Ministry of Education.

A: The next step is to consolidate local aerospace industry. We have already attracted many companies and are now

Q: What strategies is SEDESU implementing to attract

working on the development of these suppliers and new

foreign aerospace companies?

technology. Strengthening the supply chain will allow

A: Queretaro is becoming a magnet for foreign companies

the consolidation of Mexican industry, which will in turn

in many sectors thanks to the local government’s efforts,

strengthen the country to better handle the economic

including enforcing safety, increasing competitiveness by

changes that Mexico is facing, such as the devaluation of

granting companies specific spheres of responsibility and

the peso. Under these economic conditions it is common

generating training programs for their workers. Many foreign

for interest rates to rise, hurting companies and thus the

companies have bet on the local industry by investing

economy. To consolidate the aerospace sector, and every

resources in Queretaro.

other sector, this year we will launch a financing program for any company that may need it. We managed a different

To attract investment, SEDESU visits foreign aerospace

financial project alongside the Commission for Economic

and automotive companies to promote the state. However,

Promotion of Business in the Industrial, Commercial and

our best promoters are the companies that are already

Service Sectors of Queretaro (COFESIAQ), which was

incorporated and operating in the state. For instance,

instrumental in the exponential growth of the aerospace

Safran’s announcement of the construction of a sixth plant

industry. SEDESU is developing guarantee funds from the

in Queretaro speaks highly of the state’s infrastructure

state government alongside state industrial development

and human capital. Many other companies also are

lender NAFIN and through the Employment Promotion

increasing their operations in the state and building more

Trust (FIPROE). This program will provide loans at very

manufacturing plants.

low rates to support innovation.

Q: How is Queretaro balancing competition and cooperation

Q: What is your long-term vision for the aerospace industry

with clusters in other states?

and what steps is the state planning to implement in the

A: Recognizing that every cluster has its own individual

short term to achieve it?

strengths means that together we can promote the growth

A: In the short term, our goal is to develop the supply chain by

of the aerospace industry in Mexico as a whole because

increasing the number of Mexican certified suppliers for this

all the foreign investment that these clusters can capture

industry. In the middle term, our goal is for these suppliers

is beneficial for Mexico. Cooperation from all the states

to sell to all of Mexico and to other countries so that, in the

is necessary to form a large, single cluster that unites the

long term, the aerospace industry is consolidated in the state

country. This would grant greater access to new technologies

and can continue leading the industry. Queretaro as a state

and processes, training programs and plans to attract

receives the largest amount of foreign direct investment in

companies. The industry is more interested in cooperation

Mexico and is fifth worldwide in global aerospace investment.

and healthy competition because what is good for every

Maintaining this position will be a challenge. Our ultimate

other state is good for Queretaro.

goal is to fully develop and fly an aircraft.

131

VIEW FROM THE TOP

YOUNGEST AEROSPACE CLUSTER SEES GROWTH SPURT CLAUDE GOBENCEAUX President of the Queretaro Aerocluster, Civil Association (ACQ, A.C.)

132

Q: What does the Queretaro Aerocluster represent for the

clients in the US, Canada and Latin America. While

Mexican aerospace sector?

clusters closer to the US border seemed the obvious

A: Queretaro’s Aerocluster is the youngest in Mexico and

choices, these companies decided distance was not

probably the most dynamic. Since 2006, it has grown from

an issue and that Queretaro offered better conditions

one aerospace company with 400 employees to 8,000

than other states. Proximity to Mexico City provides

individuals employed by the 80 companies and institutions

advantages such as ease of access to the international

located in the state. Queretaro accounts for 37 percent of

airport and the availability of qualified technicians and

Mexico’s aerospace industry and attracted almost 50 percent

engineers.

of total foreign direct investment over the last 15 years. Q: In which specific ways is the Aerocluster supporting General Electric, ITP, Safran and Bombardier have been

the growth of the local aerospace industry?

present in the region since the beginning of the aerospace

A: The cluster is undertaking several initiatives to

boom. These companies created engineering departments

strengthen and consolidate the local industry including a

and several decided to develop local design. Today,

support project for the AS 9100 certification. The supply

Mexican companies are progressively entering the sector.

chain is weak across the country as Mexico’s OEM and Tier 1

The consolidation of Queretaro’s industry was essentially

representation is not backed by Tier 2 and 3 suppliers. Both

due to the creation of fully dedicated aerospace parks to

state and federal governments are involved in developing

support OEMs operating locally.

it through the incorporation of foreign companies and the inclusion of local Tier 2 and 3 companies.

Q: The local industry is young, having developed over the past nine years. What is behind the cluster’s growth

The Aerocluster works with other clusters in sectors

during this time?

outside aerospace, such as IT and automotive companies

A: Among the main factors is the state’s effort to

that share logistics interests to generate solutions that

provide a high quality of life and optimum safety for

support the aerospace industry.

both its population and migrant workers. Queretaro has provided solid infrastructure, housing, quality schools and

Q: Which specialties are most in demand by the aerospace

universities, industrial parks, airports and hospitals. The

industry and how does the cluster help develop qualified

Queretaro state government and the federal authorities

professionals?

highlighted the importance of quality education, which

A: The aerospace sector needs highly knowledgeable

led to the creation of UNAQ, the Aeronautics Franco

individuals,

Mexican Campus, CONALEP’s Aeronautics Campus and

approximately 40 million people within a 300km radius

the Monterrey Institute of Technology (ITESM).

of Queretaro, facilitating recruitment of qualified teams.

technicians

and

engineers.

There

are

Nonetheless, the cluster continues to collaborate with Alongside FEMIA, we analyzed the possibilities for

universities

increasing local R&D operations, which resulted in

programs. CEOs from Queretaro’s aerospace sector also

the creation of a National Center for Aeronautics

participate in Consulting Councils for ITESM and UNAQ.

Technologies (CENTA), to open in 2016. Parallel to

This allows the industry to communicate with universities

academic

development,

several

OEMs

promote

the

creation

aerospace

expanded

about workforce requirements and to help them adapt

operations in the state including Bombardier, Safran,

training to its needs. This contributed to the cluster’s

General Electric and Airbus Helicopters. Aerospace

primary strategy of holding a monthly meeting with all

companies that entered Queretaro were interested in

members to discuss issues affecting the sector and the

creating first-class facilities in Mexico to supply their

provision of potential solutions.

Q: How can Queretaro consolidate its aerospace industry in the near future? A: To consolidate the supply chain, we collectively need to increase the presence of Tier 2 and 3 companies. Two years ago, we presented a study entitled “Mexican Aerospace Supply Chain Development,” in which many OEMs, Tier 1 companies and SMEs participated. This

In 2016, Queretaro was among the states that received the largest amount of funds from CONACYT’s Innovation Stimuli Program

project compiled all the necessary measures for the consolidation of the Mexican supply chain. Consequently, our recommendations have been revised by the Ministry of Economy through an Aerospace Productivity Committee. We are implementing several of these proposals in our Queretaro cluster with the help of the authorities. This two-pronged approach will take a few more years to bear fruit but will benefit the entire industry in the long term.

RESEARCHERS PER CAPITA 1. CDMX 2. Morelos 3. Baja California

4. Queretaro 5. Colima

Q: To what extent are you collaborating with other

clusters? A: We are collaborating with all parties interested in becoming cluster members or who are newcomers to

Queretaro, as well as those arriving to other clusters in Mexico. Queretaro and the aero cluster states are crucial to FEMIA’s organization and actions, as we need every aero cluster to join forces to promote the Mexican aerospace

Source: National System of Researchers (SNI)

industry. The more regional success stories emerge the more we will grow as an aerospace hub and vice versa. Due to geographic considerations, it can be easier for

Queretaro produces 3,500 engineers every year.

clusters in the northern states of Mexico to collaborate but it is important for the future of the industry for all to work together. Therefore, the cluster has been acting locally and federally as we have an active interest in contributing to global growth in aerospace. In 2012 and 2013, all aerospace companies in the country expressed an interest in defining the scope of CENTA. In 2014, several OEMs and Tier 1 companies also participated

• 47 research centers

in a study on the development of the Mexican supply

• 50 percent of the total foreign direct investment in Mexican

chain. In many cases, foreign headquarters also expressed their interest. This proves the buy-in for the development of Mexican aerospace operations, especially among companies that want to target the NAFTA region or who have clients in North America. To continue research on a regular basis and to improve its depth and quality we require leaders with extensive knowledge and expertise in

aerospace went to Queretaro. • Since 2006, Queretaro has grown from one aerospace company with 400 employees to 8,000 individuals employed by the 80 companies and institutions located in the state.

MEXICO’S AEROSPACE INDUSTRY MEXICO’S AEROSPACE INDUSTRY

the sector to collaborate. Queretaro’s aero cluster is unique due to the collaboration between the state and federal public institutions, the cluster’s members and direct communication with other clusters. This collaboration has been challenging to achieve and it

37% Queretaro 63% other states

requires continuous work but it is essential. Global project opportunities must be tackled immediately as they arise, given they are scarce. Therefore, as a country we must work toward a common goal of collaboration and mutual support.

Source: FDi Intelligence

Queretaro other states

133

INSIGHT

SPANISH INFLUENCE COLORS QUERETARO’S AEROSPACE When asked about Queretaro’s aerospace industry,

Aerocluster, which is the youngest aerospace cluster in

many will point to Bombardier’s arrival in 2006 as the

the country. In 2015, the local aerospace sector employed

true start of its involvement in the aerospace value

8,000 of the 48,000 total jobseekers in Mexico.

chain. In fact, the real beginning happened almost a decade earlier when a Spanish titan arrived on Mexico’s

Queretaro also accounts for 37 percent of the domestic

shores. Some of its compatriots would soon follow.

aerospace industry and has attracted almost 50 percent of the total foreign direct investment targeting the

ITP, which studies, designs and manufactures engines

industry in the last 15 years.

and provides maintenance services for most motor

134

manufacturers globally, heralded a new era for the state

At the end of 2015, the aerospace segment in Queretaro

when it acquired Industria de Turbo Reactores (ITR) in

was comprised of 80 companies and institutions,

1998 as part of a three-way partnership with Mexicana

including technical and engineering universities and

and Aeroméxico, later becoming sole owner. “We were

research

the first aeronautical company in Queretaro,” says Juan

facilities, 39 are members of the aero cluster. “Queretaro

Corral, Director General of ITP México. “Now, ITP’s

Aerocluster is the youngest in Mexico but probably the

Mexico branch is the second largest after Spain.”

most dynamic,” says Claude Gobenceaux, the cluster’s

centers,

these

educational

and

R&D

President.

“We were the first

The state of Queretaro also is building a new facility, the

aeronautical company to enter

National Center for Aeronautics Technology (CENTA),

Queretaro's cluster. Now, ITP’s

CENTA will employ specialized aeronautics engineers,

Mexico branch is the second largest after Spain” Juan Corral, Director General of ITP México

that will exclusively focus on the aerospace industry. chemists, physicians, mechanics and mathematicians to

generate

investigations

and

solutions

for

the

global aerospace industry, and training talent for local manufacturers in the process. Aernnova is another of the Spanish companies that saw potential in the state. Javier Pérez, Director General

The company is one of the top 100 aerospace firms in the

at Aernnova, says the company chose Queretaro after

world, according to PwC. It saw Queretaro as a suitable

a year-long analysis when it was just beginning to

location to provide MRO services for the Pratt & Whitney

expand internationally. “Studies showed that, out of 20

JT8D engine, commonly used in Boeing 727s and 737s.

countries, Mexico and China were the best options for

Introduced in 1964, 14,750 JT8D engines were in planes

our envisioned process of internationalization,” says the

all over the world at one time but they are gradually

Director General.

being replaced. Today, only 2,400 are in use. This has led ITP to reduce its MRO activities and to diversify

The company was attracted to the state’s competitive

its services toward developing local engineering and

prices, proximity to existing and potential clients and

manufacturing for the Rolls-Royce Trent and BR700 and

shared time zones with the US. The move to Mexico

the Honeywell HTF 7000, among several other engines.

rather than a non-Spanish-speaking country facilitated the move for both entities. Expatriated employees must

“We are planning to manufacture 230,000 rigid engine

be taken into account to ensure a smooth entrance to

and aircraft pipes this year, to move from one of the top

the new host country, as low turnover has proven to be

producers for pipes in America to number one in the

integral to most industries.

world,” says Corral. In 2008, Aernnova inaugurated two plants. One location After Bombardier’s entrance to the newly forming

manufactures metallic components for OEMs and Tier 1

manufacturing hub, Queretaro’s latent potential awoke

companies. It now employs approximately 200 people

and many more aerospace companies gravitated to

and covers 15,000m2. The second plant assembles

the state, leading to the creation of the Queretaro

aeronautics structures such as wings, empennages

and fuselages. It has 500 employees and measures

The lack of specific treatments available in Mexico's

16,000m . Pérez says that the company’s offices in

industrial clusters is a countrywide problem that some

Queretaro have allowed Aernnova to secure contracts

companies, like fellow Spanish firm Aeroprocess TTT,

with new clients. Aernnova currently manufactures for

see as an opportunity. The company is an international

Beechcraft, Bombardier and Bell Helicopter, among

specialist in heat treatments for the automotive, oil and

others. These plants have incorporated the innovative

gas and aerospace industries. Albeit small, as part of

technologies and all certifications required by its clients

the TTT Group, the company's knowledge of machine

to its operations in Mexico to ensure the high standards

tools means it can offer Mexican manufacturers carbo-

required in aerospace manufacturing are met.

nitriding and induction tempering, shot peening and

grinding,

“Studies showed that, out

vacuum

tempering,

nitriding,

HVOF

and

quenching.

of 20 countries, Mexico and

But one company cannot bridge the wide supply chain

China were the best options

more support in the coming years.

for our envisioned process of

Many entities in the Queretaro Aerocluster are joining

chasm and the state’s booming industry will need much 135

forces to close the treatments gap. “Both the state and

internationalization”

the federal governments are involved in developing the supply chain through the incorporation of foreign

Javier Pérez, Director General at Aernnova

medium-sized companies and the inclusion of local Tier 2 and 3 companies, which are essential for the

While the two companies manufacture for different

existing companies in the cluster,” says Gobenceaux.

segments, they share a similar vision for the state’s

The government's involvement is crucial as process

industry and what it needs to do to achieve it. “Our

standards must be certified to be able to supply the

analysis in 2007 showed there was not a sufficiently

sector's

established supply chain to begin operations without

certifications can be the main barrier to entry to small

importing the majority of the components from Europe

to medium enterprises interested in fulfilling the sector's

or the US,” says Pérez.

treatments needs.

ITP faced a similar situation to Aernnova in terms of the

As the Queretaro aero cluster keeps growing, local industry

local supply chain, amid a lack of suppliers for thermal

will inevitably see more investment from foreign and

and surface treatments specific to the aerospace

domestic sources, and will also gain from the experienced

industry.

This

forced

local

aerospace

original

equipment

manufacturers.

These

companies

input of companies like ITP and Aernnova. For these

to perform these specialized treatments in the US.

Spanish businesses among many others, the time is now to

Transporting goods across the border causes delays and

take advantage of opportunities to strengthen the supply

extra costs, greatly reducing competitiveness.

chain, the aerospace industry and the state.

VIEW FROM THE TOP

THE RIGHT MEASURE FOR MEXICO LEONARDO ROMERO Director General of Helmut Fischer

Q: What does the aerospace industry represent for the

Entity (EMA) and eventually under the Nadcap. This is

company and its product portfolio?

the cornerstone of our medium-term business strategy in

A: The aerospace industry is our second largest client after

Mexico. All our manufacturing is performed in Germany

the automotive industry, which represents approximately

and the US but we have applications laboratories in

50 percent of our activity while the aerospace sector

Maichingen, Germany, in Connecticut, Mexico and Hong

represents about 25 percent. Our main clients are Tier 2

Kong. There is high demand in the Asian market for our

and 3 companies that require coating processes or coating

products because they have broad use in the electronics

thickness measurements. We do sell directly to OEMs and

sector, mainly for the measurement of microscopic

Tier 1 companies but primarily products for quality control.

materials. In Mexico, last year we received significant

Our products range from simple tools that clients point

requests from electronics companies like Skyworks and

and use to complex equipment so our customers can

Flextronics.

make quick decisions and adjust their processes from a computer terminal. We provide software and hardware

Our offices in Mexico supply the entire country and Central

support and advisory services to ensure customers acquire

America, primarily Costa Rica, while South America is

the equipment that best fits their needs.

supplied by offices in Brazil and Colombia. The offices in Queretaro distribute across the country but we plan to open

We offer a wide variety of measurement probes. On top

a new office in Monterrey this year for the northern region.

of standard solutions, we offer tools that measure small corners or vertices where normal equipment does not

Q: What innovations is Helmut Fischer introducing to the

fit. Some of our probes measure small cavities that are

country and how are you promoting them?

unreachable with any other tool. We have also generated

A: We are beginning to offer new technologies that are

unique measurement methods, including a radioactive

unheard of in Mexico. For instance, we have equipment with

probe that uses beta-dispersion with radioactive isotopes.

X-Ray fluorescence and radioactive isotope probes. We also

This is a nondestructive, rapid method to measure very

use nanoindenter technology, a measurement technique at a

large pieces, such as highly valuable aluminum-silver alloys

nanometric scale for non-destructive testing. Helmut Fischer

that cannot be broken down. We are the only company

also provides seminars, such as a one-day workshop we

using this method, instead of X-rays for instance.

manage in CFATA for students and industry representatives, where we connected with Alaxia, a supplier for Boeing. We

Q: What hurdles did you face when entering the state?

have noticed that the industry is much more receptive to the

A: We found that many local companies had no experience

latest technologies when introduced through an academic

with our products and therefore preferred to buy from our

institution. This has led us to organize more seminars of this

competition with whom they were familiar. Many of our

kind, beginning with one on X-Ray fluorescence.

competitors are present in the region and their products are well integrated into the country, especially those from

Q: What is the company’s plan to consolidate its presence?

well-positioned US and UK companies. Therefore, we

A: Last year we doubled our sales from 2014 so we have

have leaned on Helmut Fischer’s long tradition in Europe

great expectations for 2016 but face difficulties brought

to work with several European companies.

about by the devaluation of the Mexican peso, in which some clients manage their budgets. Certifying our applications

Q: What are the company’s plans for Mexico as an entry

laboratory is a priority because certifying products are at

point to Latin America?

our offices in Germany is time-consuming. The industry is

A: We are planning to expand and certify our local

demanding specialized, certified metrology and calibration

application laboratory with the Mexican Certification

so this area has significant long-term potential.

137

VIEW FROM THE TOP

OPTIMIZATION, CONTROL AND EFFICIENCY THROUGH SAM 4.0 ANGEL DE LOPE General Manager of Kaeser Compresores de México

138

How

does

Kaeser

Compresores

complement

workshops and for painting. Industries are turning toward

Queretaro’s manufacturing industry?

compressed air as it costs less and does not require highly

A: Our engineering team evaluates each client’s needs to

specialized staff like electrical systems. It will take a long

determine the appropriate compressor and system for

time to find a friendlier energy source than compressed air.

them. Besides compressors, we also offer compressed air by the cubic meter. For this, we install the infrastructure

according to required flow and air quality for a determined

Compresores offer clients over the competition?

What

competitive

advantages

does

Kaeser

time and sell them as much as needed at fixed prices. This

A: In simple terms, our products provide more compressed

removes the complications of acquiring equipment, its

air using less energy. Sometimes, compressors have the

maintenance, initial investment costs, the need for CAPEX

largest electrical motors in the plant and can represent

and the depreciation of such for the client. This system

about 40 percent or more of its total electricity

is controlled through the Sigma Air Manager 4.0 (SAM

consumption. Therefore, electricity savings in compressors

4.0), which allows us to monitor system performance

are crucial to the competitiveness of manufacturing plants.

throughout the entire project. While our equipment is more expensive than that of the Mexico’s economy is facing a low point, leading us to

competition, the cost of any equipment over 10 years can

diversify into areas that are receiving investment, namely

be divided into 15 percent initial investment, 15 percent

automotive and aerospace. We inaugurated a Mexican

spent on maintenance over that time period, and 70

aerospace division two years ago after analyzing the state’s

percent on power consumption. Our products provide

industrial development, which had incorporated many

much higher energy efficiency than competitor’s units

companies including the two aerospace giants, Bombardier

so clients can recover their initial investment quickly.

and Safran. The timing was perfect to become involved

Sometimes it may be more cost effective to replace an

in the aerospace industry as a member of FEMIA and to

older compressor for a newer version as maintenance

participate in the Mexican Aerospace Fair, FAMEX, in 2015.

costs increase and functionality decreases, especially if technological advances provide large energy savings.

Q: What are the company’s strategies to gain market share in this space?

Q: What new technologies is Kaeser Compresores

A: Kaeser Compresores is the only privately owned

introducing to Mexico?

major compressed air company in the world so we do

A: This year we launched the newest generation of the SAM

not worry about pleasing investors or sacrificing quality

4.0 in Mexico, the master controller of the compressed air

for profit. Having built an overall market share of over 47

station. SAM 4.0 implements an optimization algorithm

percent in Mexico, according to the Mexican Association of

instead of a control algorithm, which incorporates the

Machinery Distributors (AMDM), we are now working with

most energy-efficient solution into every compressed

several companies such as Bombardier, Safran and Airbus

air station. Simulations calculate the impact of possible

Helicopters. Kaeser Compresores also installed all the piping

control strategies, selected based on objective criteria like

for UNAQ’s testing laboratories. But we mostly manage

electrical power consumption, demand for heat recovery

contracts with MROs, such as pneumatic audits performed

and the cost of maintenance, among others.

on Mexicana MRO’s air compressors for repairs and painting. We could potentially supply every aerospace company

A large percentage of our yearly turnover is reinvested

because all businesses use compressed air either to support

in innovation. About 10 years ago, we introduced the

the process or as part of the product itself. In the aerospace

innovative oil-free air compressor now used by Safran for

sector, our products are used in pneumatic tools in MRO

example.

VIEW FROM THE TOP

FINAL LINK IN SUPPLY CHAIN ENTERS QUERETARO ITZIAR LARRAÑAGA Director General of Aeroprocess TTT

Q: What led Aeroprocess TTT to enter the manufacturing

cluster as a whole. If we could travel and transport goods

chain in Mexico?

more easily between states and specifically aero clusters,

A: Aeroprocess TTT’s entrance into Mexico, specifically

we would see a significant improvement in the industry.

Queretaro, was based on the state’s proximity to our customers. We focus on engine and landing gear

Q: How does Grupo TTT, Aeroprocess TTT’s parent

treatments and although the Chihuahua cluster has a

company,

strong supply base for engine production, the majority of

expansion plans?

our clients also have facilities in Queretaro. We are the last

A: The group as a whole manages 23 different technologies,

link in the supply chain for aeronautic parts production.

all of which are approved and certified by NADCAP for

support

and

influence

your

company’s

the aeronautics sector. In Mexico, we started with heat Demand is already high and we regularly receive requests

treatments but we manage other processes at different

for our services. We are a small team of five people and

locations such as cryogenic treatments, carburizing,

expect to grow to up to 20 in the next five years but

carbonitriding, shot peening, chroming and high-velocity

we do not need large teams to manage our processes.

oxygen fuel (HVOF) spraying. We grow according to

Automatization has allowed us to hire very specialized

market needs, so we have to consider what is lacking in the

crews and avoid increasing operational costs.

market before we decide to either add more technologies or introduce something completely new. Globally we

Q: What added value do you TTT offer clients in Mexico?

employ 170 people and the group registers turnover of

A: We were awarded the AS 9100 certification in 2015, with

€20 million (US$22.3 million) per year.

which we hope to gain contracts with OEMs based in Mexico and expand our treatments beyond testing. Two furnaces

ITP was a client of ours in Spain and we continue to work

are already installed in our Queretaro facilities representing

with them here. Eaton is also supporting our company

a €2 million (US$2.2 million) investment. Another will arrive

because they share our need to develop the supply chain

shortly as we expand the laboratory’s equipment.

in Mexico, to meet their forging and machining needs.

There are very few companies that manage special

Q: What alliances are you planning with local entities to

processes for aeronautics in Mexico and even fewer in

boost technological development?

Queretaro. Heat treatment adds flexibility, strength and

A: Our Mexican plant supports innovations coming from our

resistance to parts and requires precision to guarantee

headquarters in Spain and we hope to create local alliances

the quality of aircraft pieces. Our heat and superficial

with universities to generate new ideas for engines and

treatment operations dominate the local market because

landing gears. Every piece requires a special process and

we are specialists in these processes. Before our arrival

we rely heavily on our technology centers to develop new

heat treatment had to be carried out in the US, implying

technologies and applications. The advantage of being

elevated transportation costs significantly. There are

part of a group means that we can adapt either here or at

similar companies in Chihuahua and Sonora but the

our headquarters to offer a variety of treatments.

logistics to reach those states is not as straightforward. We believe that Aeroprocess TTT could attract other Q: What challenges have you overcome in terms of

companies to the area. In light of our experience and

logistics and infrastructure?

the trust awarded to us by our clients, we are confident

A: We have taken advantage of the existing infrastructure

we will continue to grow. Following the new NADCAP

but there is a need for greater development. A direct link

certification to our product portfolio, growth should be

to Mexico City and the capital’s airport would benefit the

even easier to achieve.

139

VIEW FROM THE TOP

MORE PUBLIC DEBT FINANCE NECESSARY FOR SMES HERNÁN RODRÍGUEZ Director General of AAMEC

140

Q: How would you define AAMEC’s reception among the

So far we have not manufactured pieces that go directly

local aerospace industry?

into airplanes but we plan to do so next year. We are

A: As a Tier 3 company, our clients have been very satisfied

interested in manufacturing mechanized components

with AAMEC’s products and aftersales. Most of our clients

and we are looking for partners to develop projects of

were obtained through word of mouth and networking

this type, such as Eurocopter and PCC Aerostructures.

connections. We are now changing our strategy to improve

The main advantages we offer these companies include

our webpage and promote our newly implemented ISO

our expertise and profound knowledge of the aerospace

certification. Thus far, the AS 9100 has not been indispensable

sector, its norms, regulations and certifications. Most local

to our operations but we plan to acquire it and our ISO

companies began operations through the automotive

certification will act as a platform to obtain others.

industry but we started the company fully focused on the aerospace sector and then branched into automotive,

Our goal is to continue growing at a rate of two new clients

which now represents 20 percent of our production.

per year. We have grown much faster than expected and today we are working with aerospace giants such as Safran

Q: From your experience in automotive and aerospace,

and Aernnova. Our growth alongside them has been

what are the greatest similarities and differences between

exponential and we are now expanding our operations to

the two sectors?

include more local cluster members.

A: While the automotive sector represents much larger volumes, margins are greater for the aerospace industry.

Q: How could external entities encourage AAMEC’s growth?

The culture in both industries is also distinct as automotive

A: Funding has represented quite a challenge. As a

requires short production times and aerospace runs for far

private capital venture, the acquisition of machinery

longer. The assembly of a single plane can take up to two

has created debt. The processes we perform require

months. These longer periods in aircraft part production

extremely expensive tools and machines. I have asked for

allows us to implement better and more structured plans

external funding from the Ministry of Finance and Public

for manufacturing.

Credit (SHCP) and the Ministry of Economy but it has not materialized. The Ministry of Economy has recommended

The aerospace industry also has stricter controls for raw

we apply for the Entrepreneurship Institute INADEM’s

materials, which have to be tracked at all times. On the

funds, which are extremely competitive and difficult for

other hand, the automotive industry requires more quality

small companies to access. With support from these

documentation for all processes as the assembly line

institutions, we could consolidate our operations much

operates continuously and should not be stopped.

sooner. In my opinion, public financial entities should simplify their processes and make funds more accessible

Q: What are AAMEC’s growth plans for the short term?

to small companies. Mexican SMEs represent a significant

A: AAMEC is focusing on the aerospace sector but we will

economic force for employment creation, and all our

follow market trends and our clients’ needs. During 2016

personnel come from local schools, such as UNAQ. We

and 2017, we will take on two more aerospace clients and

generate approximately US$70,000 per month in revenue

implement new processes. We will also add one Coordinate-

yet we are still too small to access larger programs. .

Measuring Machine (CMM) to our dimensional metrology laboratory to make computerized measurements. This will

Q: What products does AAMEC manufacture for the

avoid the need to subcontract these services and reduce

aerospace industry?

our costs. We will also buy a simultaneous 5-axis machine.

A: We make special tools that aid turbine assembly as well

With these acquisitions, we expect our workforce to grow

as those for the manufacturing of wings and stabilizers.

by 25 percent.

VIEW FROM THE TOP

SPACE AGENCY, ACADEMIA TIES TO AID EXPANSION BEATRIZ AGUILAR General Manager at Axon’ Interconex

Q: Why did Axon’ move to Queretaro and specifically into

A: We have been fortunate to receive support from the

the aerospace industry?

state to attain certifications, though not always punctually.

A: Axon Cable was founded in France 50 years ago,

The government’s accounting years are skewed, which

and our family-run company began operations as Axon’

means we have received requirements for certifications

Interconex in Queretaro 10 years ago. The state offers

six months after beginning the process. OEMs work much

proximity to Mexico City and a suitable climate for

faster than the government and these time lags cause us

electronics manufacturing. Queretaro’s capital has a dry

to miss opportunities to participate in certain projects.

climate, is safe and clean, making it an easy decision for

Logistically, we have not run into problems. One container

our Mexican subsidiary.

per month is sufficient to transport our products to our main client in the US. Because our product is small and

At the beginning, we focused solely on flat cables for

lightweight, we can fly the rest of our supplies out of the

automotive

and

country without relying on the road network.

toward

distribution

electronics

and

strategy.

eventually Three

moved

years

ago,

however, we started selling flat cables to automotive

Supply chain challenges have arisen before we reach

suppliers, Continental and Kostal. Later we began

the point of transporting products, however. We have

creating mechatronic connections for SUVs. Having

specifically struggled to locate nearby partners to provide

seen the potential in Mexico, we pushed to attain the AS

packaging services. Our clients often request packaging

certification in the hope of attracting more aeronautics

without staples or adhesives and that are decomposable

business. Today, we supply Bombardier, Airbus Group,

to promote green industry. This is still lacking in Mexico

Hydra Technologies, Quetzal Aerospace and the Nuclear

and is a key part of the supply chain that must be

Sciences and Engineering faculties of the National

consolidated. Concerning human capital, the technicians

Autonomous University of Mexico (UNAM).

that are graduating from UNAQ are excellent in technical operations but require management skills and foreign

Q: How is Axon’ involved in supply chain development to

languages to be more competitive.

promote Mexico as an aerospace hub? A: We are members of FEMIA and the cluster but the

Q: Where is the company’s focus in R&D and new products?

aerospace industry only represents 1 percent of our

A: Axon’ Interconex relies on alliances in the US and our

business. To expand this, we are participating with the

headquarters for our R&D operations. The area we would

Mexican Space Agency (AEM). We foresee greater

most expect to move into in Mexico would be design but

collaboration with academia and eventually hope to

this is unlikely in the near future. Mexico does not yet have

participate in the first satellite built in Mexico.

the quantity of specialized engineers to justify our bringing design operations to the country.

Axon’ also is working with UNAM’s Institute of Nuclear Sciences and its engineering faculty on aerospace projects.

We just began implementing injection moulding in Mexico.

Furthermore, we are in collaboration with the Japanese

Therefore, we hope to attract stamping, pinning and similar

Aerospace Agency and a Russian university on a satellite

companies to the cluster to build more connectors. For

they are engineering. We also have ventured into the

the moment, Mexico is our primary workshop for large

drone segment, providing cable and Micro-D connectors

projects. We export 98 percent of our production to the

to UAV manufacturers.

US. Although we sell to Mexican suppliers the final product is part of the US supply chain. We take care of the quality

Q: What challenges has the company had to overcome

of our product to retain clients and this has the secondary

during its time manufacturing in Queretaro?

effect of improving the image of Mexican industry.

141

VIEW FROM THE TOP

NEW CENTER TO BRING MULTIDISCIPLINARY APPROACH TO RESEARCH FELIPE ALEJANDRO RUBIO Deputy Director for the Center for Engineering and Industrial Development (CIDESI); Leader of the National Center of Aeronautics Technologies (CENTA) Project

142

Q: What led to the creation of CENTA and how does the

bring it back can cause unforeseen costs and delays. Due

center support the aerospace industry?

to meticulous safety requirements, aerospace companies

A: CENTA was generated alongside FEMIA, which required

prefer to rely on functional parts and processes instead

a center with a wide range of faculties including metallurgy,

of risking changing them for newer, untested parts. Thus,

physicochemical

environmental

enterprises take a long time to adapt to new companies'

and nondestructive testing to address the needs of its

processes. Furthermore, since the aerospace industry

members. The objective behind the center’s creation was to

requires very small volumes and has extremely high-quality

complement the local aerospace supply chain with applied

standards, pieces take much longer to manufacture. While

research, product development and innovation. CENTA

initially problematic, this is good for the industry as it

stands out as the only research center in the state servicing

translates to longer contracts.

tests,

mechanical,

the aerospace industry with a multidisciplinary approach. CENTA will employ aeronautics engineers, chemists,

The third pillar will be to support the certification of

physicians, mechanics and mathematicians, among other

emerging aerospace companies. Aeronautics regulators

specialists, all of whom will focus on generating operations

do not have laboratories so all certifications in Mexico

and solutions for the aerospace industry.

have to be performed with foreign representatives from OEMs, implying greater costs and potential delays. We

CIDESI was entrusted with CENTA’s development by

want to be a technological wing that can support both the

CONACYT because CIDESI had eight years of preliminary

aerospace sector and any other company that may require

research into composites and the characterization and

access to highly advanced technologies and equipment.

validation of raw materials, finished products and processes for the aerospace industry. Through collaboration with

Q: Besides finalizing construction, what steps are

FEMIA and CIDESI, we generated a detailed technological

necessary to begin research?

plan to address the industry’s needs, which will be

A: Among our first steps will be the integration of a solid

implemented over 12 years in three stages. We expect the

group of researchers and students and the expansion of

center’s first stage will be finished by the end of 2016.

our research areas to offer graduate programs. We are working alongside the industry to develop and repair

Q: What forms the foundation of CENTA’s development?

composites, which is a complex and delicate process,

A: There are three pillars to CENTA’s development. The first

and developing resins with ceramics and metal matrixes.

principle dictates the center must develop at a national

Composites are occupying a central role in the industry.

level and while it will initially focus on Queretaro’s market,

For instance, the Boeing 787 is made with composites.

we are working with companies from other states. The center helped the development of a multi disciplinary

We are nearing the end of the construction period and

approach. Being present in all aerospace related zones such

expect the laboratories to be operational soon. Once

as the states of Nuevo Leon, Chihuahua, Sonora and Baja

finished and fully equipped, CENTA will be the center

California. Our goal is the integration of national capabilities.

with the widest and most varied composites equipment in Mexico. We will begin operations with research on highly

The second pillar is industry collaboration to consolidate

advanced materials, safeguarding the design quality

the aerospace supply chain, which is a feat urgently

to be used in our plants. Secondly, we hope to begin

needed by the entire sector. Several OEMs, after entering

designing for manufacturing. I believe the center can make

the country, found gaps in the supply chain that diminish

a significant contribution to the aeronautical industry,

their competitiveness. The need to send a component

offering simulation processes that reduce time spent on

outside of Mexico for certification or for treatment and

expensive physical experiments.

VIEW FROM THE TOP

CHAMPIONING THE PUSH TOWARD INDUSTRY 4.0 JESÚS GONZÁLEZ Director General of CIDESI

Q: What are CIDESI’s principal objectives?

of microelectromechanical systems (MEM) sensors on

A: One sole objective is to support industry growth. We

household electrical products. Grupo Carso also uses our

must continue to work on projects that increase global

services, with whom we are in contact constantly regarding

competitiveness for companies operating in Mexico,

innovations as we share long-term goals.

ultimately to convince these same corporations to bring their R&D operations to our country. In the long term we

Last year we contracted the necessary human talent to

would like to be an integral part of product development.

manufacture MEMs here in CIDESI. We will be producing

We know we have the resources and expertise to

these instruments by the end of 2016. MEMs can be

participate but the national industry as a whole must work

used in numerous sectors including the automotive,

to generate trust in local operations.

aeronautics, manufacturing and energy sectors. We expect Honeywell to be the first to develop this type of

Q: How is CIDESI developing materials and technology

specialized technology, while our vocation is supporting

for the aerospace industry?

manufacturing evolution toward Industry 4.0.

A: We have been acquiring equipment to create an attractive offering for potential clients, including coatings

Mexican

for materials varying from plastics to turbine blades. We

specialized courses and we are excited to see new experts

also are contracting specialists to form a new department

who will graduate with specializations in connectivity, Big

for aerospace coatings and additive manufacturing, for

Data and high-tech electronics. Nanotechnology is also

which we have two production lines. The first is the diffusion

becoming increasingly available as a university course

of molecular atoms to generate characteristics that resist

and it will soon be possible for young people to study

carburizing, oxidation and nitration. The second area is

intelligent manufacturing.

institutions

are

training

people

through

coating applications to both upper and lower surfaces. The preparation of materials for this process is equally

Q: How is CIDESI tackling the influx of aerospace

important to ensure they do not deform when applying

companies?

the coating. CIDESI must offer high-quality treatment

A: About 10 percent of CIDESI’s efforts are targeted at the

from start to finish. Additive technologies offer flexibility

aerospace industry. We have been incubating the National

in manufacturing to create parts that would be extremely

Center for Aeronautics Technology (CENTA) and as soon

complicated to produce, known as hybrid manufacturing.

as it is up and running, we will begin to expand the area

This involves machines that can consecutively perform

and contract more personnel. CENTA will firstly focus on

both processes on the same part and we are beginning to

metrology for aeronautics applications and the majority

use the first machine of this type in the hope of expanding

of the equipment acquired is destined for this use. Many

our hybrid manufacturing in the near future.

research centers, such as the Research Center of Advanced Materials (CIMAV), CIDESI, the Center of Advanced

Q: To what extent have CIDESI and public and private

Technology (CIATEQ) and the Research and Development

institutions collaborated in the last year?

Center of Electrochemistry (CIDETEQ) in Queretaro, are

A: CIDESI is pushing to be in contact with large companies

involved in aerospace activities. CENTA will be responsible

such as Mabe, which has an R&D center in Queretaro. We

for taking over and coordinating those departments. Despite

have jointly planned strategies with private companies to

not being operational yet, the center has already secured

understand our clients’ objectives and to collaborate in

several clients. Leading a team of about eight people, the

defining new technologies that will influence local industry.

director of CENTA has overseen an investment of MX$80

Mabe, specifically, has directed MX$6 million (US$353,000)

million (US$4.7 million) in equipment and MX$120 million

toward a clean room that could define the positive impact

(US$7 million) for the construction of the center.

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VIEW FROM THE TOP

FOSTERING MEXICAN R&D LUIS TRÁPAGA Director General of the Advanced Technology Center (CIATEQ)

144

Q: How do CIATEQ's capabilities complement local centers

technologies can be used to manufacture new models

and universities that cater to the aerospace industry?

for existing products that reduce weight and new

A: One of CIATEQ’s primary functions is to aid other

functionalities for existing aerospace components.

CONACYT centers and local universities in the development of additive manufacturing solutions of metal and polymeric

We also have a one of a kind 3-D printing system that works

materials for aerospace projects. We manage important

through metal laser sintering. It manufactures pieces and

technology advances that help develop the national

components in several metals and alloys such as stainless

aeronautics industry, particularly prototypes of new

steel, tool steel, aluminum and titanium. We hope that

products and turbine component repairs. CIATEQ can also

in the future, this system will allow us to manufacture

manufacture large pieces that require high precision. We

prototypes and to repair propulsion system components.

also work on the design and manufacturing of machinery Q: How do you contribute to the development of human

to meet the specific needs of our aerospace clients.

capital specializing in the aerospace industry? CIATEQ hosts R&D operations to develop metal alloys

A: CIATEQ offers three different Master’s degrees and one

through Direct Melting Laser Sintering processes for

PhD program, all of which are certified by CONACYT’s

additive manufacturing. Several repair processes for

National

components used in the aerospace industry rely on the use

programs are characterized by a strong link with industry.

of this technology. The center also manufactures functional

Since students work at a company related to aerospace

coating using a thermal spraying method. We have

they then usually develop their dissertation trying to solve

developed a joint investigation project with the Center

a real-life problem they encountered during their previous

for Engineering and Industrial Development (CIDESI) and

jobs, which contributes to local R&D.

Quality

Graduate

Program.

Our

graduate

CINVESTAV Queretaro for the development of thermal barriers and hard coating used on turbines.

In 2012, CIATEQ worked alongside CIDESI and the Center of Research and Technologic Development in Electrochemistry

Q: How does CIATEQ contribute to the implementation of

(CIDETEQ) to strengthen Mexican aerospace SMEs. The

materials testing and R&D activities?

project integrated 22 companies to the aerospace supply

A: We are deeply involved in the materials testing field.

chain through the AS 9100C certification, encouraging

CIATEQ is equipped with a mechanical trial lab, with two

participation from local companies. In this context, CIATEQ

testing and sensing MTS servo-hydraulic machines for high

opened a high-temperature mechanical testing laboratory

and low-temperature fatigue tests. Our equipment allows

for alloys used in aerospace.

the execution of tests at temperatures of up to 1,200°C and classification of the mechanical properties of several

CIATEQ also played an important role in the creation

materials used in the aerospace industry such as Inconel,

and consolidation of the National Laboratory on Thermal

titanium, stainless steel, several alloys and carbon fiber.

Spray and PVD (CENAPROT). Thermal projection allows for metallic, ceramic or compound materials to be

For manufacturing, we engage in extractive processes

added to a component that permits the modification

using numerical control machinery of three and five axes.

of its superficial properties. The modification increases

This machinery is used for high-precision manufacturing

the material’s resistance to erosion and corrosion and

of large components. For prototype manufacturing, the

reduces its thermal connectivity. This process is used

center has equipment designed for polymer additive

to manufacture aircraft components, particularly for

manufacturing through fused deposition modeling, laser

propulsion and landing, and the laboratory’s capabilities

sintering

increase the usable lifespan of components.

and

photo-polymerization

processes.

Such

INSIGHT

TESTING A LOCAL OPTION Companies in the Mexican aerospace industry tend

machinery to test almost all components, from tiny

to send their equipment to India, China and the US to

screws to large suspension parts but it concentrates

be tested, which can delay production for up to three

mostly on developing coating solutions. Its coatings

weeks. The Electrochemistry Innovation and Technology

testing generates resistance to corrosive environments,

Development Center (CIDETEQ) wants to provide a local

and involves a comprehensive process encompassing

option to the sector. Its goal is to offer the same testing to

coating formulation and engineering deposition systems

aerospace companies in Mexico and the southern US with

for industrial applications.

results returned in about 24 hours. CIDETEQ is investigating coating developments based on Besides strengthening its individual position as a research

nanostructured materials. Having recently patented coating

center CIDETEQ also wants to foster an environment of

based on silver nanoparticles, the center is innovating in the

innovation through healthy competition and collaboration

decontamination of components, specifically for handrail

with other institutions. The center is part of a six-member

applications. But these nanostructured projects are in the

R&D group that will focus on technology transfer,

research phase, unlike its technological developments.

so discussion and work on the most relevant topics

The center has developed photovoltaic systems with an

in the industry is encouraged. A research leader in

electrochemical approach for environmental applications

electrochemistry, material science and characterization,

and invested in biofuel applications, investigating biodiesel

water testing and fault analysis, CIDETEQ is expanding

and bio jet fuel. Its residue exploitation and the speed up of

its services to support the manufacturing industry.

its catalytic processes project is beyond the research phase

CIDETEQ’s facilities have the necessary equipment to

and clear application goals have been set for the medium

carry out accelerated corrosion and weathering tests,

to long term. Thanks to a CONACYT initiative, CIDETEQ

which help clients to determine if certain materials are

participates in the biodiesel and the bio jet fuel cluster

fit for a specific purpose. The center has the necessary

alongside companies and R&D centers, including CIATEQ.

145

MRO SPOTLIGHT

146

TECHOPS QUERETARO Along the Queretaro-Tequisquiapan highway, in a strategic position close to Queretaro Intercontinental Airport (AIQ) and UNAQ, sits the largest MRO center in Latin America. TechOps’ facility is an impressive sight, even from the road. It spans 100,000m2, and holds up to nine aircraft at a time. The center incorporates cutting-edge technology and the highest quality standards to ensure safety. An array of solar panels produce 30 percent of the facility's electricity, while water is collected and recycled. The facility was inaugurated in 2014 after a US$110 million investment equally divided between its two current users, Aeroméxico and Delta Airlines, and backed by Queretaro’s government. The center is in an ideal location to support the state’s blooming aerospace sector and enjoys the advantage of its proximity to UNAQ to help feed its workforce. With approximately 1,600 employees, the facility operates 160,000 man hours per month, all with standards that maximize employee safety. “Our strict safety standards have allowed us to reduce on-site accidents from five per month to only one in several months,” says Rick Uber, General Manager Base Maintenance of TechOps. While TechOps can service any aircraft, this facility specializes in Boeing 737 and 717, Embraer ERJ-145, E-170 and E-190 and Michael Douglas MD-80 and MD-90, to support the fleets of Aeroméxico and Delta Airlines. This year TechOps Mexico signed a licensing agreement with EmpowerMX to use its FleetCycle software, which is designed to enhance aircraft maintenance operations. The software “has improved our processes and it will put us in an excellent standing to reach the top market position,” Uber says. The size and capabilities of this facility would allow for an expansion. Capitalizing on its strengths, the center is targeting airlines that operate Boeing or Embraer aircraft, including regional TAR Aerolíneas and the Brazilian GOL Airlines. TechOps Mexico also wants to increase its service portfolio to include the Boeing 757 and CRJ-700 and 900. Uber projects an increase in processes of 10 to 12 percent for 2016, requiring 130 more qualified workers. This year the facility also acquired the AS 9100 certification and plans to incorporate tooling and training. TechOps services 50 to 60 airplanes every year. Storing aircraft takes a considerable amount of space leading TechOps to redesign its practices to increase capacity. Thanks to this practice, the large MRO has more than enough room to continue growing.

147

VIEW FROM THE TOP

DEVELOP LOCAL TALENT FOR ADDED VALUE

Alexandr Slouka CEO of Omni-X

148

Nora Guerra President of Omni-X

Q: How has Omni-X's experience in Mexico influenced its

NG: Our main challenge has been the acquisition of

growth plans?

qualified and knowledgeable individuals. We have noticed

NG: We are worldwide leaders in bending tools due to our

that Mexicans are hardworking and motivated but lacking

quality products, which are designed to provide the tight

the necessary skills for this industry. Therefore, we are

tolerance that the aerospace industry needs. We also have

contacting academic institutions such as the National

an engineering division, which has designed bending tools

College of Professional Technical Education (CONALEP)

specifically for this industry.

to communicate the specific skills we need from potential employees. In Queretaro, we had to create internal training

In 2012, we opened our facility in Queretaro because we

processes to provide our employees with the necessary

were supplying this important market through the US

skills, which we had not needed at our other two facilities,

and realized that we could not provide the same quality

as entry-level professionals in those countries had been

customer service from afar. Having analyzed the Mexican

better prepared.

market we concluded that it was large enough to justify opening an office here, from which we are overseeing our

AS: The Czech Republic, for instance, has excellent machining

market in all Latin America. Omni-X’s offices in Queretaro

engineering and technical programs. The US’ engineering

are small but growing, and as we continue to do so it will

capabilities are not as strong but Mexico is much farther

become necessary to open new facilities in Brazil and

behind both countries. To improve the quality of professionals

Argentina.

here we needed to invest in new machinery for the technical schools we work with. Schools in Mexico still teach machining

Q: As a young company, how is Omni-X competing with

with manual equipment, which is no longer the industry

more established companies?

standard for Omni-X or many other companies. Today we use

NG: We are the first company of our kind to take the risk and

CNC machines. This downside is offset by Mexican students

establish operations in Mexico. So far we have perceived

who are highly motivated to learn. We often send them to

a local workshops as competition, which are extremely

the US or Czech Republic for training or we bring technicians

common in Mexico. These workshops do not generally

here to train our employees in Queretaro.

have the necessary expertise or the qualifications and so customers sometimes return their products for further

Q: Which companies are your main clients here and what

improvements. Our prices are higher but so are our quality

are your priorities going forward?

standards, so we save clients potential complications.

AS: Omni-X is managing R&D operations with a few OEMs but our main clients are Tier 1 and 2 suppliers. On

AS: It is common for OEMs to bring a small part of their

occasion, we work directly with Boeing, Bombardier or

operations into the country but they do not necessarily

Embraer. While Embraer performs most of its production

bring their employees, relying instead on the Mexican

by itself, Airbus and Boeing do rely on other companies

workforce. Sadly, local companies do not always know how

for much of their manufacturing. From Mexico, we export

to operate their machines or to manufacture their products.

mostly to Brazil and Argentina, although we do receive

Omni-X can promise added value tied to a comprehensive

sporadic operations requests for Colombia. Nonetheless,

knowledge of the machinery, their processes and their

at this point we are concentrating on the Mexican market,

requirements, such that we can provide the local workforce

which is why only 5-10 percent of our products are

with the correct training for our equipment.

exports. We still have a lot of room for growth and many areas could be improved in our local operations. However,

Q: What are the greatest challenges of manufacturing

we are confident because our two local markets, namely

you face in Queretaro?

automotive and aerospace, are growing rapidly.

VIEW FROM THE TOP

ADAPTING ON THE GO JERÓNIMO SÁNCHEZ Executive Director at HYRSA Aerospace

Q: What encouraged HYRSA American Steel Crowners to

is exported and the other 50 percent remains in the state

inaugurate an aerospace division?

of Queretaro. Because our product line is targeted at small

A: HYRSA has been operating for 50 years, building on our

parts, we are refocusing our operations on fittings and

initial experience in the food and beverage industry. In 2008,

bushings as they have similar characteristics to our current

we realized the aerospace industry required similar levels of

production in terms of size, material and tolerance. We

tolerance and volume as the food industry and began our

deliberately maintain a narrow specialization, and target

first branch of HYRSA Aerospace to supply ITR, which is

the turbine market very specifically.

now called ITP. This branch produces fittings, air and fuel tubing and connectors for turbines. We depended entirely

Q: What challenges have you faced in the state in terms of

on HYRSA American Steel Crowners until the aerospace

obtaining raw materials?

division was founded in 2013 as an independent company.

Subsequently, we began managing government-led projects

complicated because certifications and standards are very

and entered certification processes with their support.

stringent, hindering the benefits that Queretaro enjoys in

Sourcing

raw

materials

has

been

particularly

such a central location. Raw materials must also be certified Aerospace is a highly competitive industry and requires

and since aerospace tends to require small amounts of

investments over six to seven years to secure success,

less common resources, the first companies in the supply

with little return generated during that period. While

chain do not consider it attractive to process expensive

automotive models may change every five years, aircraft

certifications for these quantities. Of the four or five types

design only changes every 25 to 35 years and the

of aluminum that are used in the aerospace sector, each

lifespan of units can be extended further thanks to a well-

can have another three or four variations. Maintaining

developed aftermarket. As the aerospace industry moves

stocks of this type of alloy is complicated and as the

more slowly than automotive manufacturing, we compete

industry is just starting to develop, locating providers for

for 10-year contracts, which require greater spending from

this material is difficult. As a result, we use three suppliers

the beginning of the projects.

in Mexico, all of which have large warehouses in the US and a small local warehouse or sales point.

Q: What allows HYRSA to stand out amid such fierce competition in the Queretaro Aerocluster?

Q: How will HYRSA continue growing in the coming years?

A: Our first competitive advantage is our employees’

A: We plan to open a technology development center

expertise. Their numerous skills mean that one person

for turnkey plant projects, specifically aimed at helping a

can design and interpret blueprints as well as create

client who requires this type of manufacturing. This center

prototypes. All but 20 percent of our workforce was trained

should reduce our project completion times, which stand at

internally through HYRSA’s food and beverage operations

one every three weeks. Through collaboration with UNAQ

and 80 percent of our staff can manage software on our

and the Autonomous University of Queretaro (UAQ) we

machines. This allows us to make adjustments on the go

hope to enter new markets as well as lower our project

and switch between manufacturing one part to another

completion times to just three days. Those of us that

very swiftly, which is extremely attractive for an industry

manage small enterprises hold these projects close to our

that handles low production volumes.

hearts because if we can generate a solid supply chain here in Mexico, OEMs will no longer need to import materials or

Q: How has HYRSA’s latest plant helped spur business in

semi-finished parts. The commitment of companies in the

Queretaro?

cluster should push us toward technological improvements

A: HYRSA only supplies one aerospace company based in

to develop complex aerospace parts and eventually an

Queretaro: ITP Group. About 50 percent of our production

entire aircraft in Mexico.

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VIEW FROM THE TOP

RAW MATERIALS A HURDLE IN AEROSPACE PABLO CALZADA Business Development Director of Gonzalez Aerospace

150

Q: What is Gonzalez Aerospace’s main competitive

challenges in aerospace is acquiring raw materials. While

advantage?

it is simple to find the most frequently used materials for

A: Gonzalez Aerospace has many different services, all of

machining, aerospace requires significantly more complex

which are AWS and ISO certified. Some worth highlighting

alloys. Local companies have to pay freight costs to import

are laser tracker measurements and machining, design

these materials, transport them and then again to export

and fabrication services. A key characteristic of Gonzalez

the final product. Competitors in the US and Canada are

Aerospace, which sets us apart from the competition,

much closer to suppliers and thus save considerably on

is the constant training our employees receive so we

transportation.

can continue to be the best option in the market. Laser tracking measurement is one of our main strengths. While

Some companies become interested in Mexico as a low-

many companies perform these measurements, most only

cost manufacturing country but the cost of machining

provide an informed report of necessary repairs, Gonzalez

one part is the same here as in Canada or any other

Aerospace is able to perform these repairs on instruction.

country because the cost of the equipment is almost equal in any country. For large numbers of pieces

Q: In which ways does your design division represent a

requiring extensive welding, cutting and tooling, Mexico

competitive advantage?

is more cost-effective. This is not the case for tools

A: Our design division uses CATIA V5, Solidworks, BobCAD,

and pieces that require low labor and a lot of standard

AutoCad

aerospace

components as their manufacturing costs are similar to

companies have their own design divisions and only require

and

MasterCAM

licenses.

Most

those in the US and Canada due to the costs of importing

these specific services when they have a demand spike. For

raw materials.

instance, three years ago we developed a project with a customer who required five CATIA designers. However, the

Q: What is Gonzalez Aerospace’s next step to consolidate

project started with only two, then reduced to one before

itself here?

eventually cancelling the project entirely. For that reason,

A: We will strengthen our Aerospace division with new

we decided to develop our own design division.

machining services, including new CNC machining centers and a boring mill. We are strengthening our internal

As part of our service, we have developed a unique and

processes to continue providing high-quality products and

registered project management software internally, which

services. Our goal is to continue developing and offering

gives access to a design from any location worldwide.

fully comprehensive and integrated services. Every single

Aerospace projects are collaborative projects from all over

step of our process is closely monitored and documented,

the world and managers at different locations often require

allowing us to be aware of everything that happens to any

real-time access to the fabrication progress. This software

given product. At this point we are competing for a large

allows instant access from all over the world to up to date

tender which will allow Gonzalez Aerospace to grow in

information and operates alongside a different project

many areas, including personnel.

called Four Clicks. This service grants simple access to the specifics of the most complex projects with a maximum of

This year we are expanding our Mexican operations as we

four clicks and has been extremely well received by clients.

are going to target the automotive industry more. This does not mean that we will be putting aerospace aside,

Q: What are the greatest challenges of machining and

but that we are interested in capitalizing on our 40 years

manufacturing aerospace components in Mexico?

of experience in the automotive sector which is extremely

A: Our production in Mexico is divided into 90 percent

strong in Mexico. Furthermore, we already possess the

aerospace and 10 percent automotive. One of the greatest

appropriate technology and expertise to tackle it.

VIEW FROM THE TOP

OIL AND GAS EXPERT BRANCHES OUT RENÉ TRULIN Operations Vice President of Rymsa

Q: How has Rymsa adapted its experience in the oil and

original equipment manufacturers this year. Our teams are

gas sector to the aerospace industry?

speaking to several potential clients with whom we hope

A: Operating in the oil and gas industry allowed us

to work once we have the certification.

151

to weather fluctuations in the local economy without restraining growth. The oil and gas industry has contributed

Q: What impact did RYMSA’s transition to aerospace have

to our success but we are constantly diversifying. We

in terms of human capital?

have had our sights set on the aerospace industry for

A: Six years ago we implemented a training program for

the past two years. In that time, we started implementing

our technicians. We hired operators with a minimum level of

internal processes to comply with aerospace industry

knowledge and provided them with two or three months of

requirements and the AS 9100C certification, which is

theoretical training and another three months of practical

in progress. The correlation between the oil and gas

training. Five to six months later we had our own fully trained

and aerospace industries is not instantly clear but both

team of operators. The creation of UNAQ made acquiring

sectors are similar. Some oil and gas areas have significant

qualified employees much easier for us, as technicians were

need for advanced technologies and have strict safety

better prepared to join our company. Still, I believe UNAQ

requirements due to the elevated risk associated with

could work even more closely with SMEs because it is now

certain operations, which is comparable to the aerospace

set up to provide professionals to OEMs. It would be greatly

industry. Machining is another similar area between the

beneficial for the sector if UNAQ developed technicians

sectors. Both industries require several different types

according to the needs of smaller companies.

of machining from simple units to the utterly complex, especially for deep-sea exploration and drilling in oil and gas. The materials used for these processes are extremely complex to machine and their tolerance requirements have become stricter, resembling the aerospace sector which also requires highly advanced materials and very low tolerances to create safe, quality pieces. Q: How has diversification helped resolve the problematic

Operators hired with minimum knowledge receive two or three months of theoretical training and three months of practical training

acquisition of raw materials? A: Most of our oil and gas clients are located in the US

Q: How are you approaching national and international

and are obliged to acquire raw materials only from their

aerospace companies to establish working relationships?

approved list of suppliers, which also are outside Mexico.

A: ProMéxico was developing a program for Queretaro’s

This forced us to develop an internal infrastructure

aerospace SMEs to facilitate their export procedures.

for imports, exports and certifications. By the time we

Under this program, several SMEs would be brought

branched into the aerospace industry we already had a

together

series of certified suppliers and the internal certification

companies as a group with a clear solution to their supply

processes to import raw materials. We have been unable

chain gaps. This program started with ProMéxico but

to find the appropriate raw materials for the aerospace

was put on standby so the companies involved decided

industry in Mexico but fortunately, nearly all our suppliers

to continue on our own. We are now 10 strong and cover

in the US have the appropriate materials. We manufacture

several different areas of the supply chain, including

parts to repair landing gears. Since we do not yet possess

machining and thermal coating. We are banding together

the AS 9100C certification, we are only manufacturing

to increase our negotiating power with the government,

for Safran’s MRO but we will begin manufacturing for

the cluster and OEMs.

approach

well-established

aerospace

VIEW FROM THE TOP

START SMALL, GROW SLOWLY AND SUSTAINABLY TUDOR PIETRARU President of Aeroconsulteck Mexico

152

Q: What advice does Aeroconsulteck give small companies

industry. When it is up and running, CENTA will perform

that have received certification?

design

A: Aeroconsulteck Mexico was founded in 2001 with the

components, material testing and certification as well as

goal of developing the Mexican aerospace industry, with a

Non-Destructive Testing (NDT) and human capital training.

particular focus on SMEs. Our goal was to import aerospace

The center was constructed in Queretaro’s aerospace

expertise from Canada and the US and to transfer knowledge

industrial park so it could work with the Aerocluster there

and industry experience to local companies. These smaller

as well as FEMIA to harmonize their efforts toward the same

enterprises were intended to become suppliers that would

goals. To offer the workforce the best programs, CENTA has

support OEMs and Tier 1 businesses operating in Mexico,

also established connections with renowned universities in

especially in Queretaro.

Europe. Aeroconsulteck Mexico has created a detailed long-

and

research

operations

for

aeronautical

term plan to meet the goals set out in ProAéreo for 2020, Aeroconsulteck Mexico is a member of FEMIA and of the

including industry integration. The plan includes a results-

Queretaro Aerocluster. We won a public bid to guide 25

oriented program that would incubate aerospace companies

SMEs through the AS 9100C certification, which is vital for

with existing AS 9100C certified SMEs, which are already

companies interested in supplying aerospace manufacturers.

capable and willing to enter the industry. CENTA, in line with

We were pleased that 18 SMEs completed the certification

the Aerocluster, FEMIA and the government, may develop a

successfully, including Elastómeros de Querétaro, Laser

shelter program to help local and foreign OEMs and Tier 1s

Manufacturing, Global Composites and Frol. Aeroconsulteck

to continue developing locally, by ensuring all the necessary

conveyed its vision to these companies to think and

conditions for their consolidation. Finally, CENTA would

dream big to develop the Mexican aerospace industry. We

lead the Aerospace Training Center and take advantage of

advise aspiring companies to start small, to grow slowly

Mexican and foreign universities. Specializing and increasing

and sustainably and to take advantage of opportunities.

the skill sets of professional graduates in Mexico would help

Aerospace companies’ entering the industry must have

companies to compete in the global market.

a long-term vision to survive because profit margins take longer to develop than in other industries and they likely will

Q: How can Aeroconsulteck support the local sector’s

not see a return on their investment until after about three

future growth and improve visibility for smaller industry

years of operation. Mexican SMEs must be prepared for that.

players? A: Aeroconsulteck is researching 10 SMEs with varied

Q: What would help the local aerospace industry compete

manufacturing capabilities that could form part of the

at a global level?

state’s supply chain, generating parts and components for

International

companies

are

operating

highly

Bombardier Aerospace and PPC, initially. If we can extend

specialized aerospace segments in Mexico but few Mexican

local company’s participation and diversify their areas

entities are competing in the market. OEMs and Tier 1s,

of expertise, Mexican industry will benefit from reduced

including Boeing, Bombardier, Safran and Airbus Helicopters

manufacturing costs. Processing parts locally would also

among others, are mainly using Mexican resources for what

drop logistics costs and therefore attract more investment.

they consider labor-intensive operations. If we do not consolidate the supply chain as a country, competition from

Aeroconsulteck will provide support and training to SMEs

foreign suppliers entering the local clusters may undermine

to create business plans and for new certifications, as well

Mexico’s chances to grow in aerospace.

as manufacturing methods and any specific training that customer specifications may stipulate. We hope that our

To remain competitive, the government created CENTA

alliance with CENTA, the Aerocluster and FEMIA will help us

as part of CIDESI to be purely dedicated to the aerospace

develop a reliable supply chain in Queretaro.

VIEW FROM THE TOP

RIGHT NICHE KEY TO MARKET PENETRATION GUILLERMO BONILLA Director General of Tecnum

Q: What makes Tecnum stand out among machining

for the industry was rather simple. The development of

companies in Queretaro?

appropriate processes for these new pieces was more

A: Tecnum was created to develop machining solutions for

difficult.

metal-mechanics companies. It now has its own park with seven machining centers able to manufacture pieces up

So far, we have not needed to hire any new specialized

to 15m long, which is an unusual feat for a small company.

technicians but this may be necessary should our

Our machines have flexible cells, which are essential for

aerospace projects continue to grow. Entering the

the low volumes and great variety of pieces required by

aerospace sector is not easy. It was much easier and

many industries, including aerospace. Our machines work

faster for Tecnum to incorporate into other economic

with titanium superalloys, which are harder and more heat

sectors such as the railway segment and became one of

resistant than the alloys normally required for this sector.

the leading industry players. For the aerospace sector, the conditions are distinct, as prices, timelines and conditions

Few machining companies in Queretaro, or even in

may be decided by other companies.

Mexico, possess machines, with the necessary technology to develop added-value pieces such as landing gear and

Q: What does the aerospace industry need for companies

components for small and medium motors. We have

to consolidate in Mexico?

machined prototype landing gear for the Airbus A380

A: The local industry must generate a more integrated

using these materials.

supply chain to be more than a manufacturing site. The government should identify small and medium companies,

Q: How did Tecnum use its experience in diesel motors

which have already developed the necessary processes,

and other sectors to penetrate the aerospace industry?

technology and infrastructure to enter the aerospace

A: The aerospace industry was not a challenge for us in

industry and support their development. The government

terms of technology and machining since its components

should also take inventory of the well-established

have similar quality requirements to our other divisions. The

manufacturing plants in Mexico and invite international

main barrier to entry was the selection of the appropriate

companies to collaborate with them through the creation

market niche based on our strengths and infrastructure.

of joint ventures, strategic alliances and even mergers.

It was of the utmost importance for us to understand the bidding process for the aerospace industry because it

It is unlikely that a Mexican company with high value

differs from others sectors. This is due to the smaller number

metal-mechanic operations could enter the aerospace

of pieces ordered at a time, which raises nonrecurring

sector on its own, as it needs the support of suppliers with

costs. These expenses can be very high as they represent

the necessary technological and commercial experience.

the development of unique pieces for each specific client.

This support would make it possible to avoid greenfield

Therefore, it is better for clients and suppliers to share risks.

projects and to adapt existing companies instead. Any

Mexican companies are often unaware of these processes

international company interested in investing in Mexico

or are unwilling to take them on because they do not

will have to dedicate a lot of time and resources to build a

consider them cost effective for their business model. In

plant and hire personnel but it can save on both accounts

these circumstances, support from the government would

by allying with an existing company in Mexico. This

be beneficial to help SMEs develop an aerospace business.

permits foreign companies to quickly adapt and respond to changes in the local market. There is a lot of work to

Q: What challenges did you face moving into the sector?

be done by authorities to strengthen Mexican metal-

A: For Tecnum, acquiring instrumentation, including

mechanic companies to integrate and assimilate into the

engineering and holding and measuring instruments,

aerospace supply chain.

153

SONORA

Sonora’s involvement in the aerospace industry has come a long way, from manufacturing switches and harnesses to excelling in aerostructure assembly, machining, metalworking, tooling and composite materials, many of which are only performed in the northern state. Though the state excels in several aerospacerelated activities, it specializes in the manufacture of blades and turbine and engine components. With over 50 aerospace companies, Sonora exports most of its production to the US. Adding to its strength are the over 29,000 students enrolled in an engineering major -- a potential workforce that will be invaluable to the state’s vision of becoming the leading turbine manufacturer in Mexico in the coming years.

This chapter ventures into the activities performed by the companies located in Sonora, their close relationship with the US and the role the state has in the global production chain of international companies.

155

CHAPTER 7: SONORA 158

VIEW FROM THE TOP: Enrique Ruíz, COPRESON

160

VIEW FROM THE TOP: Pascal Neau, Daher Aerospace Mexico

161

VIEW FROM THE TOP: María Elena Rigoli, Collectron International Management and Sonitronies

162

VIEW FROM THE TOP: Roberto Klosek, Javid LLC

Richard Rubin, Javid LLC

164

VIEW FROM THE TOP: Armando Lee Quiroga, Offshore Group

165

VIEW FROM THE TOP: Javier Betancourt, Sargent Aerospace Mexico

166

MRO SPOTLIGHT: Qet Tech

168

VIEW FROM THE TOP: Franklin Gaxiola, Ducommun Incorporated

169

VIEW FROM THE TOP: Arnoldo Francis, TE Connectivity

170

INSIGHT: Gregory Jones, Trelleborg Sealing Solutions Aerospace Hub in the Americas

171

VIEW FROM THE TOP: Pedro Mar, UTG

172

ROUND TABLE: Options for Perfecting Production

157

VIEW FROM THE TOP

A TWO-PRONGED APPROACH TO GROWTH ENRIQUE RUÍZ Director General of COPRESON

158

Q: Considering the state’s involvement in several economic

Q: What is Sonora doing to attract new investment to the

sectors, how much of a priority is the aerospace industry?

industry?

A: The aerospace industry is a strategic sector and a

A: The state has developed long-term strategies to attract

priority for Sonora. Our state is home to the second largest

new investments, to consolidate and seek opportunities

aerospace cluster in Mexico with more than 60 aerospace

for growth with established companies and to develop

companies that generate over 10,000 direct jobs. The

a strong base of local suppliers. This strategy is built on

aerospace sector is responsible for the introduction of the

the foundation of a complete training offer for existing

latest technologies and the creation of a highly specialized

and potential segments, namely engine components,

workforce. This industry is creating long-term employment

aerostructures and MRO service providers.

opportunities for young people and contributing to the economic stability of the state since aerospace contracts

Q: How does Sonora’s value proposition differentiate its

tend to last for 10 or more years.

supply chain and level of government support from other aerospace hubs in Mexico?

The aerospace sector also is putting Sonora on the map

A: Sonora is taking an integrated supply chain approach.

through events such as Engine Forum Sonora, which

In the engine components segment, the state offers a

attracted over 150 top industry executives to its first edition

unique integrated supply chain that goes from castings

in 2013. Some of these executives had never visited Mexico

to coatings companies. The state's authorities closely

and now they know the country's capabilities through

collaborate with local engine OEMs to identify gaps in

Sonora's events. The aerospace industry is not as mature in

their supply chain and enhance their competitiveness

Sonora as in other states but it has a lot of potential.

globally. This region has a different array of Tier 1 and 2 companies participating in various programs and, unlike other states, Sonora has not centralized all its skills in a single city but has spread them across several locations,

Over 60 aerospace companies generate over 10,000 direct jobs

including Nogales, Hermosillo, Guaymas, Empalme and Ciudad Obregon. Our training school, the Sonora Institute for Aerospace & Advanced Manufacturing (SIAAM), is offering programs such as aerostructure assembly, CNC Machining and wire harness assembly, among many others. SIAAM will soon offer courses on composite materials and sheet metal. We also are working closely with local universities, including the

Monterrey

Institute

Technology

and

Higher

Sonora also is creating alliances with foreign states such as

Education (ITESM), Hermosillo Technological University

Arizona, which has aerospace expertise and a supply chain

(UTH), Guaymas Technological University (UTG) and

that complements ours. Arizona is manufacturing many

Hermosillo Technological Institute (ITH). Our goal is to

parts for Asian and European companies so an alliance

help these academic institutions create programs focused

with the state can greatly reduce the distance these pieces

on aerospace. A further example of innovation in ITH is

have to travel and time lags as a result are shorter. We

a project that recently received a MX$50 million (US$3

are not yet ready to compete with clusters the size of

million) investment to create the Regional Center for

Arizona but we are perfectly capable of complementing

Innovation and Design of Engine Components, in an effort

their activities.

to increase local manufacturing capabilities.

Q: How does having production spread across different

Q: What strategies are the authorities in Sonora

cities rather than concentrated in one central location

implementing to promote the state internationally as an

change the way the state operates?

aerospace hub?

A: We see this as an opportunity because it allows local

A: World class operations running in our state include

companies to thrive unimpeded and reduces competition

Rolls Royce, UTC Aerospace Systems, Chromalloy, BE

for human capital. It also offers foreign companies the

Aerospace, Latécoère, Figeac Aero, TE Connectivity and

opportunity to choose the location that best suits their

Radiall. These are our most important assets to promote

needs and the aspirations for their workforce.

Sonora as a successful aerospace hub. SIAAM and local universities generate our labor force and are vital to our

Companies consider a series of requirements before

promotion efforts. Additionally, elite service providers,

choosing a location, including distance to client facilities,

such as shelters, logistics companies and local suppliers,

to their suppliers or the border, as well as availability of

are an essential complement to attract foreign direct

potential employees, logistics and connectivity. Carlisle,

investment for aerospace.

Amphenol, Daher, B/E Aerospace and Curtiss Wright chose Nogales. TE Connectivity, Bosch, Latécoère and

To promote the state internationally, we attend industry-

Figeac Aero chose the state’s capital, Hermosillo, which

specific events, such as the Farnborough International

started attracting industry later than other cities but is

Airshow and the Paris Air Show. We also visit MRO

growing quickly. Rolls Royce, UTC Aerospace Systems and

operations in other countries and pay close attention to

Chromalloy have their operations in Guaymas, and Radiall

follow-ups.

and Qet Tech Aerospace chose Obregon. We promote all cities equally and guide companies to the best location for them. In many cases, new companies follow their clients into a specific city even if they are already operating in a different location in Sonora. Q: To what extent is Sonora struggling in the face of a weak supply chain, a common problem among aerospace companies? A: Developing the supply chain is both a challenge and an opportunity. We are working with SMEs in the state,

Sonora is home to Mexico’s 2nd largest aerospace cluster

in particular with engineering companies to obtain the necessary certifications. We also have studied the

We are investing locally and support the Engine Forum

capabilities of local companies to introduce them to

Sonora among many other meetings. For the past four

procurement officials of Tier 1 and Tier 2 entities in the

years, we have developed strong partnerships with BCI.

state. These efforts have proven successful as SMEs have

This company is responsible for the B2B meetings at

grown exponentially in personnel, equipment and clients

the Paris Air Show and many other events and is now

in a short space of time.

supporting events in Sonora. Our alliance with BCI will allow us to promote Engine Forum Sonora globally and

So far, we have connected 12 entities with major aerospace

attract executives from aerospace companies across the

companies after seeing the potential for long-term

world.

collaboration between them. This is beneficial both for SMEs and for Tier 1 and 2 companies, as the latter can

Q; How do you expect the state's industry to develop

avoid the complications of transporting products or raw

to support the country's aerospace operations and

materials from their home offices.

represent Mexico internationally? A: Many foreign companies are already aware of Sonora’s

Nevertheless, we are not neglecting the introduction of

specialties but our goal is to be their first consideration

foreign suppliers to Mexico. A two-pronged approach

when evaluating the possibility of expanding internationally.

is necessary, choosing companies through constant

Mexico still is not a top manufacturer but the country’s

communication with OEMs and Tier 1 and 2 companies.

advantages, such as its strategic location, have delivered

These enterprises are under constant pressure to optimize

consistent double-digit growth. Our long-term goal is to

their costs, which is a great opportunity for the state to

consolidate Sonora’s skills and become leaders in engine

introduce enterprises that can meet their needs. We also

component manufacturing. We also hope to reinforce

have analyzed our supply chain closely and developed

our aerostructure capabilities to consolidate the MRO in

strategies to close any existing gaps.

Ciudad Obregon.

159

VIEW FROM THE TOP

NOGALES FOOTPRINT POINTS TO LATAM EXPANSION PASCAL NEAU CEO of Daher Aerospace Mexico

160

Q: What role does Daher Aerospace’s Sonora plant play in

To manufacture a product, the production process is

the company’s global business strategy?

examined first, then materials pass through the cutting

A: Our plant in Sonora plays a strategic role for Daher

machines and everything is laid out for parts to be

Aerospace because it is the company’s manufacturing

mounted. The parts may be machined again, before

bridge to the US market. We rely heavily on this site to

passing through the finishing production line and being

supply parts for manufacturers in North America. As

shipped. Our next step for 2017 will be to integrate new

a French aerospace, defense and nuclear company, all

production processes alongside our partners, which

product development happens in France but our Mexican

include Boeing.

team can improve process quality and production in each manufacturing center.

Q: How does Daher Aerospace ensure its supply chain meets the plant’s resource needs?

This plant supports our goal to expand our business into

Latin America. When we started operations in 2007, we

management of its supply chain. Products are received

employed and trained 25 Mexicans in our plants for two

in our French logistics hub, where all suppliers in Europe

months. We shipped our first parts, started our IT system

ship their parts. Once products arrive, they are recorded in

and received our AS 9100 certification in 2008. In 2011, we

the system so that we know exactly what is in stock. We

invested in our own 5-axis CNC machine. Aside from sales,

record their destination site and how many of each part is

we do everything on site completely autonomously.

being shipped. Once they arrive, the records are updated.

Daher

Aerospace

has

complete

control

over

We maintain the same control over the supply chain with Our main challenge when opening this plant was

our suppliers to measure exactly what is in each supplier’s

transferring knowledge to Mexico for the classification

facility, in stock or in transit.

and production of the engine parts. We invest to maintain low employee turnover and avoid having to unnecessarily

Q: Following this plant’s successful reception in Nogales,

train new employees. Our training process includes a

what is the next step for Daher Aerospace to build on its

two-month intensive course followed by a test. By the

presence in the state?

third month, our employees are considered qualified

A: The plant in Nogales has met very high rates of

for our processes. In eight years, we have trained great

satisfaction within the industry. We were the second

aerospace engineers in Mexico. Support could come

composite company in the Mexican industry to receive

from France if we ever needed it but this has not been

a NADCAP certification, which is re-evaluated every

necessary for the past five years.

two years. We also have the ISO14001 and OHSAS 18001 certifications. In terms of customer satisfaction,

Q: What main resources characterize Daher Aerospace’s

we achieved 100 percent on-time delivery and 763ppm

production in Nogales?

accuracy last year. Our main goal is to ship quality products

A: Our 6,300m facility in Nogales was designed specifically

on time directly to our US customers.

for the production of composites. The plant can handle future extensions as it could potentially accommodate

We have finished the development of the first step of this

150 projects. One hundred employees produce simple

plant but launching the next step depends on customer

composite parts for companies in North America, such

demand increasing. We have enough free space and

as Bombardier. This plant has local training, production,

resources to continue growing and once we obtain more

manufacturing and tooling capabilities and we have

accreditations, such as Boeing’s, we expect to secure

digitalized all information. This increases communication,

more contracts. This will justify a further expansion to

productivity and transparency at the site.

use this unoccupied capacity.

VIEW FROM THE TOP

SHELTER FROM THE REGULATORY STORM MARÍA ELENA RIGOLI President and CEO of Collectron International Management and Sonitronies

Q: How is Collectron working to strengthen the aerospace

Q: How essential have shelters such as Collectron been to

sector in the state?

the development of Sonora’s economy?

A: We want to strengthen the aerospace supply chain in

A: Shelters have been of the utmost importance for the

Sonora. In 2016, we will incorporate four more companies

development of the local manufacturing industry, leading

into Mexico, two of which are aerospace industry. We plan

to the state’s economic growth. In comparison to other

to continue putting our clients first. It is important for us

border states, Sonora has fewer companies but the

to help them weather uncertainties in the Mexican market

efforts of many players have helped us become one of

that arose from changes in regulations since 2014.

the most competitive states across many industries.

Q: What impact has Collectron had on the overall

We are sheltering aerospace companies such as B/E

manufacturing landscape?

Aerospace, which grew from 50 employees to 1,100 under

A: The original shelter plan program, now used by many

our program. This is much greater growth than other

companies across Mexico, was created by Collectron

companies that entered Nogales at the same time, such

in Nogales, Sonora. Foreign companies were wary of

as Figeac Aero and Radiall. We help our clients to find

entering the country, unsure how to integrate, and this

technicians by visiting schools to recruit and train them

model simplifies their entrance because a foreign company

before they start working.

represents them here. Their legal presence in the country is under the shelter’s name. The state was home to some

Our main competitive advantage is attention to detail

of the first IMMEX manufacturing companies in Mexico.

in all services, from training to logistics. Companies can trust our reliability and efficiency and they know

Collectron

operates

Nogales,

Hermosillo,

Ciudad

Obregon, Agua Prieta and Santa Ana in Sonora, and in

they can contact us directly whenever they run into a problem.

San Luis Potosi and Queretaro. We have helped over 260 companies to enter the country and today we represent

Q: How are shelters shifting the negative perception of

30 businesses in these seven cities. Our client portfolio

Mexico in terms of security and skills?

includes mostly Fortune 500 and Fortune 200 companies in

A: Mexico’s expertise has changed considerably in many

addition to privately owned firms. We often attend events to

areas in the past few years. One of the most important

increase our presence and to contact large companies. Our

improvements is human capital, with 90,000 engineers

marketing department is in charge of identifying potential

graduating every year. Nonetheless, the country severely

businesses that complement industry gaps and have the

lacks qualified technicians. Thus, we have invested in

necessary infrastructure to expand their operations into

training. Competition for qualified technicians between

Mexico. Our goal is to find companies that will support

the main manufacturing centers in the state has led some

existing industry by generating an integrated supply chain,

businesses to choose smaller, less industrialized cities,

one of the larger areas of opportunity in Mexico.

to avoid competition for labor. The greatest strength of the state has been its human capital, so our government

Our greatest strength is our highly informed professionals

must increase its efforts to train technicians to retain this

who are experts in global markets. Collectron has kept up

reputation.

to date with changes in all economic sectors to support our client companies. We also offer competitive costs

The state also is becoming much safer. We analyze

and stable structures. All our skills have been developed

security conditions for companies in states close to the

through many years of work and our more than 48 years

US border and have seen the crime rate fall significantly

of experience in the industry.

in the past few years.

161

VIEW FROM THE TOP

OLDEST SHELTER ADAPTS TO LATEST NEEDS

Roberto Klosek President and Co-owner of Javid LLC

162

Richard Rubin (RR) CEO and Co-owner of Javid LLC

Q: As the oldest shelter in Sonora, how did Javid

RR: The shelter model has changed considerably over the

LLC develop the skills required to support the state’s

years. The model began catering to companies looking

manufacturing industry?

for cheap labor in Mexico and that brought all their

RK: As a subcontractor, I had to develop, build and test

management from the US. Nowadays, few foreigners

products so I became acquainted with the intricacies

manage corporations here because Mexico is producing

of the manufacturing process. One of my clients, a

a greater number of engineers and managers. Thus,

CNC machining company, asked me to sublet a space

management chains generally consist of bilingual and

for them. This agreement eventually expanded into

highly qualified Mexican professionals. This attracts

management, logistics and several other services and laid

foreign firms, such that even companies that had left for

the foundations for Javid LLC. I eventually convinced my

China have returned to Mexico.

clients that a shelter company would provide significant economic advantages and allow them to concentrate on

The country enjoys shared time zones and no currency

timely production and shipping. Today, this relationship

problems

benefits us both, shelter and client.

Interest from foreign companies has translated into many

which

attracts

foreign

direct

investment.

benefits for local industry, which have filtered through to RR: Subcontract manufacturing is always increasing and

the entire Mexican economy. The country has the lowest

Javid LLC’s goal was to help companies transition from

rate of unemployment seen in many years. Qualified labor

subcontract manufacturers to direct manufacturers.

has helped the development of a local aerospace industry,

This brought about a set of new challenges, including

including several ITAR-certified companies such as Semco

logistics, transportation, acquiring personnel, customs,

Instruments and Aeronamic Aircraft Subsystems.

environmental compliance and permits. Javid LLC can centralize these services in a single office, reducing the need for multiple administrative personnel

By the end of 2016, Javid LLC will have over 3,000 employees

in many different companies. Javid LLC’s strategy is to generate long-term customers so we adapt to their needs in terms of pricing, services and quality. By the end of 2016, Javid LLC will have over 3,000 employees under its belt to keep up with our accelerated growth. We signed contracts with six companies in 2015, and one direct aerospace employee may translate to up to six indirect employees in other sectors, from transportation to food.

Foreign companies were uninformed about regulations, laws and processes in Mexico so we had to become

Q: What are the greatest challenges that foreign

experts in these areas to support them. We focused on

companies report having faced when they enter the

making companies entering our shelter feel comfortable.

Mexican manufacturing industry?

We developed a whole range of services to support

RR: CNC machining was recently integrated into the

their administrative offices so they could concentrate on

state so companies had to spend a lot of time training

production and quality.

their employees. To solve this problem, we have created partnerships with universities in Sonora and donated

Q: How has your shelter evolved to reflect the global

US$10,000 to the creation of training programs across

market's needs?

many industries.

RK: The state had to overcome its negative image due

comes directly to us. Therefore, we have a say in topics

to misinformation regarding Sonora. There was a time

such as human resources.

when companies did not want to use the Made in Mexico branding on their products. However, this has changed

What distinguishes us is that our customers know the

considerably and Javid LLC is trying to connect with

exact cost per hour of operations because Javid LLC

directors, inviting them to visit the company's plants

wants to keep costs as competitive as possible. We

to see our advanced technologies and highly qualified

also provide quarterly reports with a cost breakdown

staff. They are often astounded when they see our

of expenses for purchases, transportation and customs,

plants' quality because they are sometimes even better

among many others.

equipped than those in the US. Once they see our facilities, they understand that Mexico is not a second-

RR: In Nogales, we represent 24 companies that fill 1.5

rate manufacturing country.

million ft2 and employ almost 3,000 employees. We are facing an important period of growth and for the rest of

Q: How are Javid LLC and other shelters helping to

2016 we will focus on assimilating six more companies,

promote Sonora’s talents outside of Mexico?

two of which are billion-dollar businesses. By 2017, we

RR: Sonora is known for its manufacturing capabilities.

expect to have 30 companies and we hope to continue

Foreign companies considering Nogales will find us first,

growing at this rate.

if they prefer Guaymas they navigate toward Tetakawi and if they choose Hermosillo they will consider different choices as there are many small clusters in the city. We believe that Hermosillo has plenty of potential for us and we are analyzing the possibility of opening another office in the city. We also are evaluating opening another office in a different state to support our clients. RK: Shelters in Sonora have good working relationships. We collaborate closely and even refer companies interested in locations in which we are not present to other shelters and these shelters recommend us to their clients. Q: How would you describe the help offered by federal and state governments to companies entering local industry? RK:

have

received

significant

support

from

the government but it can vary depending on the administration. Our current governor has supported the aerospace industry and has many plans to help develop the sector, and especially to curb corruption. RR: The government must continue backing universities because the country needs a large number of quality engineers,

programmers

and

technicians.

The

government must promote the consolidation of the supply chain by helping companies enter the country and allowing foreign investment. These measures will encourage the economic development of Mexico and boost the quality of life of its people. Q: What role does Javid LLC play in the operations of the companies it shelters? RK: We take a hands-on approach in their daily operations. For instance, our customers do not handle finance matters in Mexico so any fine they may incur

163

VIEW FROM THE TOP

CREATING CLOSE, COLLABORATIVE COMMUNITIES ARMANDO LEE QUIROGA Director General of The Offshore Group

164

Q: What impact is the weaker economy having on

Finally, we are working closely with local universities and

Sonora’s manufacturing?

training centers to communicate the industry’s needs

A: The current economic climate has struck companies in

as well as generating several projects with CONALEP

several areas, leading to reduced production and profits.

and Hermosillo Technological Institute (ITH). Williams

Our 2016 goal is to protect and promote local companies.

International, for example, entrusted ITH students to come

We are Sonora’s largest employer with 13,500 employees

up with a solution for reducing the volume of a small

and we still are growing, having increased our workforce by

airplane’s engine by 20 percent.

600 people. We expect to grow by 5-6 percent next year to finish 2017 with 14,000 employees. Having received many

Q: What does Sonora offer foreign aerospace companies

inquiries from international companies our goal is to bring

that they will not find in any other location in Mexico?

them to Empalme to see the city’s expertise in person.

A: The state offers advantages such as its strategic location but other states also share this advantage. Sonora’s

Q: How does The Offshore Group attract companies to

distinguishing factors are its workforce, its highway and

the aerospace industry and what support does it provide?

airport infrastructure and suppliers. These characteristics

A: Our business development department specializes in

make Empalme as competitive as any larger location in

attracting talent from all over the world through trade

Mexico and companies are choosing it even over major

shows and networking. This team identifies potential

manufacturing hubs. Sadly, many are unaware of these

companies that could integrate into the supply chain and

advantages. We consider the state a best-kept secret. We

caters to our existing clients’ suggestions. The Offshore

want to communicate Sonora’s potential worldwide. To do

Group has become a large and essential source of

so we need support from the federal and state government.

information for investors. Having identified that aerospace companies needed Tier 3 and 4 companies to support

We are not limiting our efforts to Sonora and are turning

them to avoid sending their products to the US for final

to Queretaro, Tijuana and every area with potential. The

treatments, we incorporated several companies to the

current presidential administration has implemented an

country. Bodycote, for instance, manages heat treatments

initiative called Special Economic Zones (ZEEs) to identify

and Incertec offers anodizing processes and plating.

underdeveloped areas in Mexico and offer preferential

Ellison

conditions regarding infrastructure and regulations to

Surface

Technologies

provides

high-velocity

oxygen fuel and plasma spray.

promote development. We support development in these areas and hope the government will facilitate this process.

The Offshore Group works to simplify the entry of companies into Mexico. We offer much more than a

How

has

The

Offshore

Group

supported

the

facility, we provide a series of manufacturing communities

consolidation of aerospace manufacturing in Sonora?

with a number of benefits and unique characteristics,

A: We have 18 clients from the aerospace industry that

from sports centers to nurseries. Our communities allow

have brought a series of processes and expertise to the

companies to connect and create partnerships. We also

state, from harnesses to aerostructures. The Offshore

introduce economies of scale to these communities, which

Group turned 30 in 2016 and we feel that all the projects

increases our client’s competitiveness. For instance, they

we have backed contributed a unique aspect to the

can reduce transportation costs by paying only for the

state’s aerospace sector. As international companies

space they need in a truck instead of leasing an entire unit,

enter Mexico to manufacture, we simplify their processes

which would be mostly empty. As we manage extremely

by handling legislative processes, payroll and dealing

large volumes, there will always be trucks available for

with governmental offices. This led to the creation of our

transportation.

motto “You manufacture … we do the rest.”

VIEW FROM THE TOP

AEROSPACE SUPPLIER CONSOLIDATES IN GUAYMAS JAVIER BETANCOURT Plant Manager of Sargent Aerospace Mexico

Q: How has Sargent Aerospace grown since coming to

Our training programs are tailored to the specific needs

Guaymas 12 years ago?

of the aerospace industry. The education these students

A: Our team has grown from four employees to 200 and

receive in our facilities has been so valuable that other RBC

we plan to employ 350 staff members in the near future.

bearing facilities outside Mexico push to acquire this talent.

In response to the growth of our local operations, we plan to double our local production.

Q: What have been the main benefits of working under The Offshore Group’s shelter model?

Sargent Aerospace now has five facilities, each of

A: The Offshore Group is in charge of human capital

which supports a different aerospace division, from

management and this has benefited our turnover, reducing

aero structures to propulsion systems. The goal of all

it to less than 1 percent per year. This admirable turnover

our facilities is to provide focused solutions to specific

is important to us because our processes require highly

problems in the industry. The facility in Guaymas supports

trained and experienced individuals. Our relationship with

ceiling solutions and hydraulics. A significant number of

The Offshore Group dates back to its collaboration with

our customers for these products are located in northern

Sargent Aerospace’s previous owner, Dover. The Offshore

California and Arizona. Moreover, the environmental

Group has also played a significant role in the development

conditions of the region are ideal. This strategic location

of logistics solutions to import raw materials and to export

close to the border enjoys little competition for labor while

finished products north of the border.

transportation of raw materials and finished products is simple from Sonora. Should we ever run into problems at

Q: What are your next steps to ensure growth continuity?

the border, other routes via Monterrey or by air freight are

A: Sargent Aerospace is fully consolidated and our

available, although this has not been necessary thanks to

operations are financially sound. We are planning to

our comprehensive planning and stock.

double our sales and will soon produce two more products locally. These plans will be finished in 2018. The next step

Sargent Aerospace was acquired by RBC Bearings in

is to develop a supply chain for our special processes,

April 2015. This acquisition has meant more exposure and

including chemical and heat treatments. This is a significant

greater resources for our local operations to invest. RBC

challenge because there are no local suppliers so we

Bearings has greatly supported our aerospace operations,

still have to undertake these processes in the US. While

such that our main clients now include Airbus, Boeing,

some suppliers are starting to operate in Queretaro, they

McDonnell Douglas and Bombardier.

do not comply with all our certifications. Chihuahua and Monterrey also are starting to develop these processes but

Q: What challenges did the company face when beginning

suppliers do not yet comply with all our requirements. This

to manufacture in Sonora?

is a big opportunity for Mexico because it would remove

A: Finding professionals with the correct manufacturing

the need to ship parts outside the country for treatment

and engineering background was the first hurdle. It was

only to bring them back for further processing.

also difficult to find personnel for managerial positions who were familiar with the processes we employ so we

Another solution would be to bring our existing suppliers

concluded we needed to develop our teams. However,

to Guaymas, which would cut our production cycle by

professional development is a time-consuming operation.

more than 70 percent. We are designing joint ventures

A mechanical engineer takes three to four years to train,

with existing suppliers to convince them to introduce

for example. As a solution, we generated joint ventures

operations in Mexico in collaboration with Sargent

with several schools in the area and created a program

Aerospace and other manufacturers in the area. We hope

called Manufacturing, Engineering and Training (MET).

to close these negotiations in the next two to four years.

165

MRO SPOTLIGHT

166

QET TECH Located in Sonora and Queretaro, Qet Tech Aerospace has been providing quality technical services for aircraft since 2008. The company’s focus on customer service has allowed them to become, in only eight years, one of the country’s most important MROs. According to Julio Alvarez, Director General of Qet Tech Aerospace, the company’s goal is to be the first place companies turn to for major maintenance operations. “Pushing to offer quality service with competitive prices embodies our growth strategy. If customers leave satisfied they are more likely to return. If they do not come back, the service we provided did not meet their expectations or our prices were not competitive.” Besides major repairs and start-up support, the company also offers a wide array of services such as aircraft inspections for new, used or modified units, as well as inspections for clients that are interested in purchasing an aircraft and when clients return a leased unit. Other services include aircraft recycling, administration of aircraft warranties, borescope inspections on all engine models and fleet planning services such as tools and consumable material planning. Qet Tech’s technical expertise is complemented by administrative and less technical services. Among these is the company’s verification unit, which assists customers in preparing for DGAC’s audits. Qet Tech also develops training programs and offers digitalized and indexed aircraft archives. Though Qet Tech can easily service any aircraft, the company specializes in technical services for Bombardier, GECAS, CIT Group, First Greenwich Kahala, Aero Maintenance Group and AWAS. The expertise developed in the past eight years allowed the company to sign a three-year maintenance contract with TAR. The deal permitted Qet Tech to open line stations in all the airports to which TAR flies. With two sites, 230 employees and 12 service stations throughout the country, Qet Tec tends to commercial and cargo aircraft. “We have been developing all the stations needed to provide full maintenance services to any type of aircraft,” says Alvarez. Its site in the city of Obregon is the company’s largest. It measures 5,500m2 and can fit up to six aircraft at a time. Having broad enough facilities to accommodate large aircraft is part of the plan. “Our goal is to provide services for bigger airplanes such as Boeing or Airbus.”

167

VIEW FROM THE TOP

DEMYSTIFY AEROSPACE TO UNLEASH POTENTIAL FRANKLIN GAXIOLA Plant Manager of Ducommun Incorporated

168

Q: What factors brought Ducommun to Guaymas?

Q: What new processes or technologies is Ducommun

A: When the Boeing 737 program started, we secured a

planning to bring to Mexico?

contract with the OEM to build spoilers at Ducommun’s

A: Ducommun holds the intellectual property patent for a

facility in California. In 2005, it became necessary to

technology called Foam Matrix. We are building parts for a

reduce our manufacturing overhead and become more

large client using this technology, which can be considered

competitive. Ducommun chose to build in Guaymas

resin transfer molding with a twist. The company also plans

because of the convenient location, similar time zone

to invest over US$10 million in an automated production

to our Californian offices, availability of bilingual staff

line. This will push us toward developing bigger and better

and, most importantly, Sonora’s industrial environment.

technical capacities that will put us on the map as the

Ducommun is certified to FAA standards.

supplier of choice for flight control services.

The 737 program evolved well and we managed to reduce

People believe succeeding in aerospace is near impossible

costs more than anticipated, to speed up production and

but it is not drastically different to other industries. For

improve performance. This convinced Boeing to award us

Mexico to become a stronger industry partner, we must

another contract. For the past six years, we have achieved

demystify this belief. We can do much more in Mexico than

100 percent punctual deliveries, never missing a single

simply manufacturing if we teach the right skill sets at all

distribution deadline. We produce fin tips for the 777

levels of education. The aerospace industry is not beyond

program and perform composite carbon fiber work for the

the country's grasp and we would love to see Mexican

Embraer Legacy 450 and 500. These are the three major

entities building a complete aircraft from start to finish.

programs in Guaymas. We also do some CNC machining for Boeing, such as titanium sheet-metal work. Our teams

Q: What are Ducommun’s local plant expansion plans?

work with titanium, composites and other advanced

A: Ducommun has several manufacturing sites, all located

materials and handle transit for our clients. Crossing the

in the US except for one in Thailand and one in Mexico. We

US border happens seamlessly for Ducommun because

are a public company with sales slightly under US$800

our records are clean.

million a year and we plan to grow to US$1 billion in sales. Ducommun’s goal is to bring in new businesses to secure

Q: What are the main advantages of working under a

advanced manufacturing companies as clients, especially

shelter program?

direct suppliers to OEMs. A good portion of this expansion

A: Working with a shelter allows us to avoid red tape

will be for our Mexico facility. The Thailand operation

or dealing with any of the three levels of government,

satisfies the needs of that local area but the Mexican site

taxation or regulations. Procurement is also easier

complements US operations.

because we have more purchasing power from a united front than buying as a single company. Being in a shelter

This plant is in a consolidation phase. We are downsizing

program reduces risk and simplifies the process of

certain areas to become smarter and more effective by

traveling to another country to conduct business. We

focusing on improving every area related to costs and

have an agreement with fellow sheltered companies not

efficiency. That includes reducing the amount of square

to hire the competition’s employees, leading to a more

footage and manpower needed. We are rearranging all

stable workforce environment. This is important, as it

the company’s operations and in the last 18 months we

would otherwise be necessary to invest a large amount

have achieved a 30 percent headcount reduction, which

of money and time, anywhere from three to eight months,

will put us in a more competitive position. As for 2017, we

to train and develop the specific skill sets that are not

hope to be reaping the benefits of the consolidation and

readily available locally.

improvement processes carried out in 2016.

VIEW FROM THE TOP

SUPPLY CHAIN IS BIGGEST HURDLE ARNOLDO FRANCIS General Manager of TE Connectivity

Q: Why did TE Connectivity bring its aerospace division

TE Connectivity also employs innovative measures,

to Hermosillo?

spearheading new connectivity solutions. Accordingly,

A: As a corporation present in the main global economic

our investment in R&D is significant. We have grown

centers, namely Asia, Europe and the Americas, we

both organically and through mergers and acquisitions

have undergone many changes. Several restructuring

and our goal is to become global leaders. Creating close

processes grouped our manufacturing in distinct plants.

relationships with our suppliers allows us to handle drastic

Our aerospace segment has been independent for

peaks in demand. Representatives who visit our offices in

the past 10 years and while we started small, we have

Mexico have been pleasantly surprised by our excellent

doubled those operations every five years. The aerospace

operational conditions.

sector is growing globally and TE Connectivity chose to expand this division in Hermosillo taking our experience

Q: In what ways have you adapted your operations to

and capabilities in many other sectors into account. TE

clients' requests and the characteristics of Sonora?

Connectivity has been present in Hermosillo for over 30

A: As our name suggests we mostly focus on connectors

years where, as technology evolved, the city gained a more

but we also manufacture switches, optic fiber and cables.

significant role as a technology center. Other advantages

Our core processes to create these components are CNC

included proximity to the US, Sonora’s stability, security

machining, molding and assembly. We had to develop

and local human capital. The city has grown considerably

the latter production line ourselves, having struggled to

in the past few years but it remains small enough to permit

locate nearby suppliers that could sufficiently specialized

simple logistics.

in our needs.

Q: How has growth in the Mexican aerospace segment

Boeing is one of our main clients and many of our

impacted TE Connectivity’s operations?

processes are being adapted to their requirements. Boeing

A: Hermosillo is home to four divisions of TE Connectivity:

representatives visit us at least once a year. Another client

automotive, communications, industrial and aerospace.

is Labinal, to whom we sell products that are ultimately

We have three other divisions in Empalme, Sonora, two

distributed to Boeing. Other destinations for our products

in Ciudad Juarez in Chihuahua and two in Tijuana, Baja

include the offices of Honeywell, GE, Lockheed Martin,

California. Our 11 plants in Sonora individually report to

Carlisle and Nordstrom Grumman. Our production is

headquarters but our processes are often linked as we share

diverse as we manufacture for a variety of aircraft models.

suppliers. TE Connectivity manages an entire industrial

TE Connectivity’s manufacturing is used both in civil

park in Hermosillo for several divisions and as we continue

aviation and in the defense sector and even in satellites.

growing, we may need to acquire one or two more parks. Q: What measures is TE Connectivity implementing to When our aerospace plant was created, it covered only

25,000ft and

employed

eight

operators

four

administrative

personnel.

Once

the

increase competitiveness?

and

A: As we grow, it is necessary to create a strong network

aerospace

to address our clients’ needs. We have implemented the

industry really took hold in the state investment grew.

Extraordinary Customer Experience initiative, designed

TE Connectivity invested US$30 million to install state

to tackle fluctuating timelines and shifting requirements.

of the art equipment. This plant represents the largest

For instance, one of our clients miscalculated the time for

capital spending our main offices have made in Mexico

which they would need a piece by two months, forcing us

for highly sophisticated processes. We often measure our

to speed up production to deliver the piece in only two

employee’s engagement in the company because their

weeks. This gave us significant recognition and helped us

commitment is the basis for our growth.

consolidate that company as a permanent client.

169

INSIGHT

DIVERSITY HELPS SEAL GLOBAL REPUTATION GREGORY JONES General Manager for the Trelleborg Sealing Solutions Aerospace Hub in the Americas

170

After more than 100 years in the market, the Trelleborg

also has created sub-specializations that encompass

Group has made its way into a range of industries and

airframe solutions, engine systems, hydraulics and actuation

Trelleborg Sealing Solutions for aerospace has become a

systems. The company designs products according to

household name in global manufacturing centers. Certified

each client's specific material and chemical compatibility

by OEMs, the sealing company designs innovative solutions

needs, instead of one size fits all solutions. Trelleborg was

for every part of the aircraft that has a critical function.

the first company to use polytetrafluoroethylene (PTFE) in

Almost every aircraft contains a Trelleborg product.

aerospace sealing and while others now use this polymer,

Bombardier, Embraer, Boeing, Airbus, Cessna, Honeywell,

Trelleborg remains at the forefront of the technology.

GE Aviation and Dassault Aviation are among the industry names that have given Trelleborg their stamp of approval.

Aerospace contributed 6 percent of Trelleborg’s overall net sales in 2015, up 1 percent from 2014, but 15 percent

As a supplier for major air framers and their Tier 1 and Tier 2

of its sealing solutions division in 2015, also an increase

accounts, the Swedish company maintains an open channel

of 1 percent. The international nature of the aerospace

of communications with its clients to address product,

industry was crucial to achieve Trelleborg's “15 by 15”

quality, engineering support and manufacturing needs.

target of reducing at least 15 percent relative to sales of

Having succeeded in creating a global production platform,

their direct and indirect CO2 emissions at the end of 2015.

Gregory Jones, General Manager for Trelleborg Sealing

The company’s strategy was successful as it registered a

Solutions for the Aerospace Hub in the Americas, says, “we

20 percent reduction of CO2 pollution from their 2008-

have a local presence with an unprecedented global reach.

base year. For the period 2016-2020, the Trelleborg Group is targeting a 20 percent decrease.

“We are positioned to be a trend-setter and to find new solutions whether it be with product, materials or service,

The company has eight R&D locations, including the US,

so that our customers can also be leaders in the industry,”

Germany and Italy. The company’s HA Traub Technical Center

says Jones. The company has been part of the aerospace

in Indiana in July 2016 unveiled the Primary Flight Control

industry for over 60 years. Its offering is divided into two

Seal Test Bench. This equipment has multimillion cycle-

areas, aircraft application and ground support equipment.

testing capabilities that shorten the time needed to test

Aircraft benefit from the company’s sealing solutions,

aerospace seals. “The Primary Flight Control Seal Test Bench

engineered coated fabrics, fire resistant coatings and

is the only system available in the world that tests either

thermal insulation materials for the interior. Ground

rod or piston hydraulic seals under extreme environmental

support equipment includes aviation fueling hoses, tow

and motion conditions combined with a multimillion cycle

trucks and flooring for airport terminals.

capability,” says Jones in a company statement.

Trelleborg has responded to the industry’s consolidation

To ensure continued growth, Trelleborg Sealing Solutions

with the development of more than 2,000 proprietary

will concentrate on global initiatives, boosted by acquisitions

materials and patented product designs. The company

in Asia, Eastern Europe, North and South America. Mexico

sharpened its commitment to the aerospace market by

also continues to play an important role. Trelleborg has

forming its Global Marketing Aerospace Group. “This group

had an active presence in Mexico for several years, with

allows us to narrow our focus on this specialized industry

manufacturing sites and sales offices in Baja California,

with a dedicated sales and technical team,” Jones says.

Sonora and the State of Mexico among others. “Aerospace is a global industry and as our customers expand and place

Airframes, engines, flight controls, landing gear, wheels and

manufacturing or offices in Mexico, we are prepared to

brakes require the company’s critical applications. Trelleborg

support their requirements,” Jones says.

VIEW FROM THE TOP

UNIVERSITY ADDRESSES EMERGING NEEDS PEDRO MAR Rector of Guaymas Technological University (UTG)

Q: How are UTG's courses and graduates contributing to

Q: How has the university responded to the emerging

the local economy?

needs of the aerospace sector?

A: UTG was the first university created to support the

A: Companies in the state need experts in precision

manufacturing of Maquilas Tetakawi, a shelter in the

machining, which we are reinforcing through our BSc in

northwest of Mexico, which has more than 19 aerospace

Aeronautics Manufacturing. We are developing a MX$30

companies and many more dedicated to the automotive

million laboratory alongside Emco, which will use a 5-axis

and telecommunications industries. It employs at least

CNC machine. This will be the first of its kind in Sonora

13,500 individuals but a few years ago, it identified a need

and students can be certified to use this model. We are

to generate a steady source of qualified human capital

also implementing a product lifecycle management (PLM)

for the companies it was bringing to Mexico. In 2012

process in the aerospace industry and discussing other

the university was created with two programs, one for

certifications alongside Dassault Systèmes. These would

aeronautics and the other for industrial processes.

encompass the design of airplane parts using CATIA.

UTG specializes in precision machining and metrology,

Specialization is of the utmost importance and we want

which are in high demand by the aerospace industry

our students to be perceived as experts in the newest

among several other sectors. These trained professionals

technologies, from CNC machining to robotics. Ideally,

support the improvement of their companies' quality

we want our students to have a diverse range of skills. To

processes

The

this end, the university has created a Project Management

university has had a positive influence on the sector and

and

products

their

companies.

program for students who did not previously finish a degree

has helped our students and graduates to improve their

before entering the workforce. We also are implementing

quality of life and those of their families.

the Bilingual International Sustainable Model, which is only available in 16 universities in Mexico. UTG is the second

Q: As UTG’s Rector, how are you shaping the university,

university in Sonora to use the model.

taking into account the industry's needs? A: I have implemented new processes addressing specific

Q: What more can UTG do to become a pillar for growth

industries and opening doors to further collaborations. For

in the industry?

instance, our partnership with Kuka Aerospace will certify

A: The aerospace industry is essential to the region

students to operate and repair robots. Similar partnerships

because it attracts companies from other areas, such

with Festo and Siemens, companies that are relevant to

as manufacturing, hotels and tourism. As the industry

the aerospace and automotive industries, have also been

grows, we will analyze its needs and develop programs

implemented.

accordingly. At this point, our focus is to consolidate the four programs already in place and to complete the

I promote programs and handle scientific communication,

construction of our facilities. With Festo, we also are

foreign

and

building the Center for Innovation and Manufacturing for

technology for the Regional Consultancy Councils for

scholarships

and

funding

for

science

the Aerospace Industry (CIMIA), which will cater to 1,200

Science and Technology, a CONACYT organization.

students.

This council is composed of 10 representatives from universities located in the state of Sonora, 15 mayors

The university has 346 students but our facilities have the

from local districts and five industry coordinators. Its

capacity for 900 so I plan to double our enrollment for the

goal is to strengthen the triple helix model by bringing

2016 fall semester. We also are finishing our laboratories,

government, academia and companies together to

which will incorporate the certification programs for Kuka

bolster industry growth.

Aerospace, Festo and Siemens.

171

ROUND TABLE

OPTIONS FOR PERFECTING PRODUCTION Sonora is home to the country’s second biggest aerospace

region. The state's history also reassures potential

cluster, with over 60 companies that generate over 10,000

investors of the existing expertise and infrastructure

direct jobs, according to COPRESON.

awaiting their arrival to the state.

Government and association efforts have supported

Here, leading players from the industry discuss their

attempts by businesses to complete the supply chain

concerns and what they see as the key issues facing the

while the state also shares similar opportunities to

sector, along with the emerging opportunities for the state

improve with other aero clusters in Mexico. Sonora

and the country as a whole to expand its presence in the

benefits from its proximity to the US and this attracts

aerospace industry, as well as to improve its reception of

companies with operations that the North American

incoming companies.

172

In Mexico, the supply chain has posed a challenge for Daher Aerospace. While local industry is improving, it is still difficult to find suppliers in Mexico. For that reason, we opened our plant in Nogales to be close to the US supply chain. For the parts that we do not produce in Nogales, approximately 70 percent are purchased here in Mexico but only 5 percent of raw materials are bought locally. We would like to help develop the supply chain in Mexico, especially for engine

PASCAL NEAU

parts to strengthen local industry and make it more efficient.

CEO of Daher Aerospace Mexico

To pull companies toward the state, national and international market and economic conditions must favor their entrance. Companies in Mexico are facing numerous changes to fiscal regulations. These, while necessary, were not properly implemented and placed a significant burden on businesses that have used specific processes for decades and are now forced to overhaul these processes rapidly. Moreover, the country severely lacks qualified technicians. This is the case in Sonora

MARIA ELENA RIGOLI President and CEO of Collectron International Management and Sonitronies

where new companies need a large number of personnel. It is necessary to fully understand the companies that are coming to Mexico, their processes and needs to properly support them. For instance, we have identified a need for more experts in mechatronics.

Through our experience in the state, we identified that aerospace companies needed Tier 3 and 4 companies to support them because businesses higher up the supply chain had to send their products to the US for final treatments. To address this issue, we have incorporated several companies to the country. For instance, Bodycote in Empalme, Sonora manages heat treatments and Incertec offers anodizing processes and plating. In Guaymas, Ellison Surface Technologies provides two processes that are unique in Mexico, namely high-velocity oxygen fuel and plasma spray.

ARMANDO LEE QUIROGA Director General of the Offshore Group

The state still has a lot of room for growth and several areas must be addressed to advance. Some notable areas of opportunity are secondary treatments, such as anodizing.

Our technologies are developed in the US for about a year and then transferred to Mexico. We have tried to develop here before but there is just not enough expertise yet in Mexico to operate full aerospace engineering programs. Local engineers need to be familiar with technical engineering materials and CATIA software. They must also have a strong background in aerospace to make the development phase a reality.

FRANKLIN GAXIOLA Plant Manager of Ducommun Incorporated

Without a doubt, the supply chain presents the greatest hurdle. It is hard to find appropriate aerospace suppliers in Mexico in spite of a surfeit of suppliers for our other divisions. Local companies prefer to manage large volumes and aerospace manages low numbers of highly specialized parts. Even with established TE Connectivity dealers, we have to compete for suppliers with other divisions that manage larger volumes.

ARNOLDO FRANCIS General Manager of TE Connectivity

It is of the utmost importance to build the local supplier base for the aerospace.

173

EMERGING AEROSPACE HUBS

The aerospace industry has become widespread in Mexico but the development of the industry has not been uniform. Though states such as Baja California, Chihuahua, Nuevo Leon, Queretaro and Sonora have a well-developed and established industry, others are on their way to becoming proper hubs. In total, there are 18 states that host at least one aerospace company. Though the development of the industry in places like Jalisco, State of Mexico, Coahuila, Tamaulipas and Mexico City is not at the same level of other hubs, it will not be long until they achieve greater relevance.

This chapter provides a deep dive into the companies located in Mexico’s emerging aerospace hubs and the projects they are developing. The chapter also includes reflections from industry leaders on the challenges companies face, how they are responding and how the development of their states is different from that of other centers.

175

CHAPTER 8: EMERGING AEROSPACE HUBS 178

ANALYSIS: Potential Hubs on the Rise

180

VIEW FROM THE TOP: José Torres, Tata Technologies

181

VIEW FROM THE TOP: Rodolfo Martínez, Indumet

182

AIRPORT SPOTLIGHT: AIT

184

VIEW FROM THE TOP: José Mustre, CINVESTAV

185

UNIVERSITY PROFILE: Forging Talent

186

VIEW FROM THE TOP: Adonai García, Mirka

187

VIEW FROM THE TOP: Soledad Garrido, SENER in Mexico

188

VIEW FROM THE TOP: José Osorno, DECSEF

189

VIEW FROM THE TOP: Eugenio Marín, TechBA Madrid-Montreal & TechBA Aerospace

190

VIEW FROM THE TOP: Raúl Fernández, Oaxaca Aerospace

192

VIEW FROM THE TOP: David Magaña, Radiocomunicaciones SAKDA

193

INSIGHT: Rudolf Hess, R.H. Shipping

194

ROUND TABLE: Need-to-knows for SMEs

177

ANALYSIS

POTENTIAL HUBS ON THE RISE Most of Mexico’s aerospace sector is clustered in five

The existing infrastructure and manufacturing capabilities

states but the industry also is growing, albeit more

of some states are leading aerospace firms to regions

slowly, in other regions. Unsurprisingly, the areas of

where there is no specific aero cluster to support them,

greatest attraction are often those states that already

yet this has not been an impediment to their growth.

have a strong manufacturing side on which aerospace companies can capitalize in terms of infrastructure,

JALISCO

people, processes or logistics.

Jalisco is best known as the birthplace of tequila but it is also gaining recognition in different manufacturing

178

Businesses in the industry can often take advantage of

sectors including IT, telecommunications and automotive.

the existing buildings and local talent that exist thanks to

The state is rapidly gaining international recognition as

the automotive, oil and gas, electronics and technology

an attractive destination for foreign direct investment

sectors. Rymsa, which has experience in the appliances,

(FDI) and received the second largest amount of FDI

automotive and oil and gas industries, is using these

during the first quarter of 2016, totaling MX$1.45 billion,

experiences to branch into aerospace. “The correlation

according to the Ministry of Economy.

between the oil and gas and aerospace industries is not instantly clear but both sectors are similar,” says

Jalisco has a booming technology sector and is the proud

René Trulin, Operations Vice President of Rymsa. “Some

owner of the largest technological cluster in Mexico,

oil and gas areas have significant need for advanced

according to UNAM, and in Latin America, according to

technologies and have strict safety requirements due

Aristóteles Sandoval, the Governor of Jalisco.

to the elevated risk associated with certain operations, which is comparable to the aerospace industry.”

The state shares sixth place in quantity of aerospace companies with the State of Mexico and also has a

Federico de la Hoz, Subdirector of Promotion of the

blooming space sector. In late 2016, the state hosted the

Aerospace Sector at Bancomext, also points out

67th edition of the International Astronautics Congress

that aerospace companies entering the country can

alongside the Mexican Space Agency (AEM), bringing

piggyback their auto counterparts. “While these two

together members of major global aerospace agencies

industries differ in volumes and standards, they share

including NASA and the European Space Agency (ESA).

processes, plant layouts, problem solving skills and

Jalisco hosts 12 aerospace companies including TATA

sustainability practices.”

Technologies, Hydra Technologies, Mercury Aircraft de Mexico and AVNTK.

AEROSPACE COMPANIES IN MEXICO BY STATE IN AEROSPACE COMPANIES IN MEXICO BY 2015 STATE IN 2015

STATE OF MEXICO The State of Mexico can be an attractive destination for all manufacturing sectors. It holds third place for state investment in manufacturing after Coahuila, another nonofficial hub, and Queretaro, the rising star, according to León Sametz Ramba, President of Index Metropolitana. However, the state appears to struggling to attract new investment to the manufacturing sector, Sametz says. While in 2014 the state was the second largest recipient of FDI with MX$3.19 billion, in 2015 that dropped to MX$2.67

Coahuila Nuevo Leon Others 23.6% Baja California 3.3% Mexico City Mexico City Chihuahua Puebla 17.3% Sonora 2.3% Coahuila Tamaulipas Queretaro Yucatan 13.6% Queretaro 1.6% San Luis Potosi State of Mexico Sonora Guanajuato 11.6% Chihuahua 1.0% Guanajuato Jalisco Baja California San Luis Potosi 10.6% Nuevo Leon 1.0% Yucatan Source: FEMIA and ProMéxico. 4% Jalisco 0.6% Puebla 4% State of Mexico 3.6% Tamaulipas Data Source: FEMIA and ProMéxico

1.3% others

billion. During the first quarter of 2016 it received only MX$699 million, placing it fourth, according to data from the Ministry of Economy. The State of Mexico is well known for its auto sector, having the country’s largest number of automotive companies, 236 in 2015, according to INEGI. Some manufacturers in the state are branching into the aerospace industry, including Indumet, which specializes

in CNC machining and now counts aerospace giants Bombardier, ITP, Aernnova and Bell Helicopter among its clients. Besides these two companies, the state also counts on Raytheon Aircraft Services México, Dupart and

“Emerging aerospace hubs are being built on existing

Aerovics for aerospace operations.

infrastructure and capabilities,

NORTHERN STATES: COAHUILA AND TAMAULIPAS

with companies that have

Similarly to Baja California, Sonora, Chihuahua and Nuevo Leon, northern states Tamaulipas and Coahuila can capitalize on their closeness to the US to strengthen their manufacturing sector. Furthermore, the volatility of the peso-dollar exchange rate is actually strengthening

been operating in Mexico for years” Benito Gritzewsky, Former President of FEMIA

the manufacturing industry near the border, says Julio César Almazán, President of Tamaulipas Federation of

capabilities. In fact, according to data from INEGI, the

Commerce Chambers, Services and Tourism (Fecanaco).

number of manufacturing companies in the capital city

These two states are below Baja California and Chihuahua

has decreased annually from 2007 while the city grows

but above Sonora in terms of FDI and manufacturing

as a business center. For that reason, Mexico City is home

companies.

to mostly commercial offices for international companies including Airbus Helicopters, Safran, SENER, TATA

Tamaulipas received MX$173.2 million in FDI in the first

Technologies and Mirka. But it also hosts other services

quarter of 2016 and in June 2016 held 6.6 percent of

providers, including MROs such as Mexicana MRO and

manufacturing facilities in Mexico, according to INEGI.

Servicio Técnico Aéreo de Mexico, and even technology

In 2015, FEMIA counted 11 companies with aerospace

developers like DECSEF, a front-end software designer

activities in Tamaulipas, including Chromalloy, Eaton

for defense aviation.

Controls, Corning Cable Systems and Cinch Connectors de Mexico. Coahuila is below Tamaulipas in FDI during

“Emerging aerospace hubs are being built on existing

that same period with MX$121.9 million but above

infrastructure and capabilities, with companies that

in manufacturing companies with 7.2 percent of the

have been operating in Mexico for years,” says Benito

country’s total.

Gritzewsky, the former President of FEMIA. “This makes it much easier to obtain certifications that are quality-

June

2016,

Coahuila

was

fourth

place

for

manufacturing companies and personnel, according to

control oriented and explains why aerospace companies are flourishing in several states in Mexico.”

Manufacturing, Maquila and Export Industries (IMMEX). Coahuila also places second in state manufacturing investment,

35.2

percent,

according

Index

Metropolitana. The state had seven companies with

FOREIGN DIRECT INVESTMENT BY STATE FOREIGN DIRECT INVESTMENT BY STATE (Jan-Mar 2016) (FIRST TRIMESTER 2016

aerospace activities in 2015, including Exova, Senior Aerospace Ketema, GSC International and Howmet de Mexico.

MEXICO CITY Mexico’s capital also is its major economic center and leads the country in several areas. The city is in first place in employment generation, creating 71,771 new jobs in the first half of 2016 according to the Ministry of Employment and Social Prevision (STPS), and in FDI Others

Querétaro

Estado de México

Morelos

Puebla

Nuevo León

Sonora

9.9% Nuevo Leon

Veracruz

San Luisof Potosí 8.9% State Mexico

Ciudad de México Chihuahua 1.5% Coahuila

Coahuila de Zaragoza 6.1% Baja California

Guanajuato 1.2% San Luis Potosi

Tamaulipas 4.5% Guanajuato

of Economy. Baja California 1.1% Sonora

attraction, receiving MX$2.18 billion in the first quarter of

27.6% Mexico City

2016, according to the Ministry of Economy.

14.5% Jalisco

Historically, Mexico City has been a strong attractor of FDI reaching an accumulated MX$95.4 billion between

2.9% Puebla

2.3% Queretaro

Jalisco 2.2% Tamaulipas

Source: Ministry

1999 and 2016, which more than doubles the FDI of

4.4% Chihuahua

1.1% Morelos

the first runner up, Nuevo Leon with MX$41.87 billion.

3.5% Veracruz

8.3% others

However, Mexico City is not known for its manufacturing

Data Source: Ministry of Economy

179

VIEW FROM THE TOP

SHIFTING WITH THE TIMES JOSÉ TORRES Aerospace Manager of Tata Technologies

180

Q: How has Tata Technologies adapted to the changing

and low-density industry, aerospace is low-volume and

landscape for aerospace in Mexico?

high-density. Quality standards are much more stringent

A: Tata Technologies came to Mexico by acquiring INCAT

in the aerospace industry and safety regulations are

in 2005 and operated largely as an off-the-shelf broker

considerably stricter. This is becoming a problem for the

for CATIA software, which proved to be a very productive

aerospace industry because the emerging opinion globally

business. However, the company was forced to change in

is that if regulations become harsher they will impact the

response to the market. Most, if not all, aerospace OEMs

sector’s profitability.

today are direct accounts, meaning they purchase software directly from the developer, so we shifted our primary

Q: What is the company’s main focus for expanding its

focus from products to services. While we continue to

market share?

sell software, we also provide training, support, consulting

A: Our focus continues to shift toward becoming a more

and implementation services focused on product lifecycle

service-oriented company, which is happening across

management.

Tata Technologies at a global level. Mexico’s branch was more product-oriented so the change has not been

Through

our

global

engineering

centers,

have

easy. We would like to augment our services with digital

thousands of engineers available for onsite, nearshore or

manufacturing capabilities and expand our computer-

offshore projects. As Tata Technologies grew in Mexico,

aided design (CAD) and computer-aided manufacturing

it had the vision to branch into the aerospace sector

(CAM) offerings.

even before the industry boomed. Support from Tata Technologies’ large network of experts in England and

We are trying to create a small aerospace design center

the US has been critical in establishing our proficiency

in Mexico. Tata Technologies has generated strong

in aerospace. Now, the aerospace sector represents 40

aerospace R&D globally, though not in Mexico. To start

percent of our business here. We have offices in Jalisco,

R&D operations in the country we would need to create

Nuevo Leon and Mexico City, which can provide services

a partnership with an OEM or large supplier willing to

to the Queretaro cluster due to its proximity.

introduce that segment of their production to Mexico. An ideal project would be to design a stabilizer or landing

Q: To what extent was the company able to transfer its

gear for an OEM developing aircraft in Mexico.

main products, services and expertise in other industries to the aerospace sector?

Q: What is your outlook for Tata Technologies in Mexico?

A: We are still selling CATIA and we provide training for a

A: Even though the Mexican branch represents less than

variety of software products. While an OEM may acquire

1 percent of global sales and employs seven engineers,

their software directly, they still need to train their users

the company considers Mexico a strategic launch pad for

locally to use it, which is where we can help. By providing

entering the Latin American market and is pushing for

training for the platform itself and on-the-job training, we

a more proactive approach to the aerospace sector. We

enable our clients to get the most out of the software and

are implementing several small projects while continuing

develop better products.

to pursue larger ones that will allow us to expand our workforce and operations and open a design center.

In other parts of the world, Tata Technologies provides a diverse range of products and services for multiple

Locally, Tata Technologies has grown in the past few years

industries. However, it has not been possible to apply this

and our goal is to continue expanding at an exponential rate.

expertise, not even from automotive applications, to the

Our estimate for growth as we close 2016 is a conservative

aerospace industry. While automotive is a high-volume

10 percent but we want to be much more aggressive.

VIEW FROM THE TOP

SLOW START LEADS TO FAST GROWTH RODOLFO MARTÍNEZ Director General of Indumet

Q: How did Indumet’s business model evolve to overcome

Bombardier supplier and the first aerospace company in

challenges in the aerospace sector?

the State of Mexico. Now, we produce two of these pieces

A: Our first aerospace client was ITP. Working with them

every week for the company under lean manufacturing

was challenging at first but after successfully providing

practices that produce no swarf. 181

them with complex machining that other companies were unable to supply, we decided to work with the aerospace

Q: How can the company capitalize on its strengths to

industry, although it was not easy to enter the sector. We

continue growing?

had to develop extremely intricate components and now

A: Indumet can manufacture almost anything. Some

we manufacture pieces that no other company in Mexico

companies are experts in one specific piece and cannot

can produce.

make changes to their manufacturing process. Our greatest strengths are our versatility, our ability to work

Our growth in the aerospace sector started slowly. After

with a diverse number of different metals and to develop

an important investment in a metrology laboratory

complex machining processes quickly.

with controlled temperature capabilities we acquired the AS 9100 certification. Now, all the components

We are trying to work with Bombardier on bigger

we manufacture are certified by Indumet. Logistics

problems but the OEM tends to prefer large suppliers

represented another barrier at the time because we did

and we are a small company. To increase our capabilities,

not have the appropriate measures in place to export,

Indumet opened a manufacturing plant in Queretaro in

making it necessary to develop a network of distributors.

2014. This plant is already operating and uses advanced

We can now export and have clients in the US. In 2015

technologies. We plan to introduce state-of-the-art

Indumet grew by 40 percent and we expect similar

machines, including 4 and 5-Axis CNC machines, and

growth this year.

Mastercam and TIA software. This plant also will place us closer to Bombardier and Siemens, two of our largest

Q: How big a market is aerospace for Indumet?

clients. However, the plant is on leased property so we

A: Indumet’s market is 30 percent aerospace, 30 percent

are looking to buy land to construct a new plant in the

energy and the rest is metal-mechanics. The company

state. Indumet is a family company and has grown faster

started in the metal-mechanic sector and then implemented

than we expected. We are too big for our current locations

a slow transition toward the aerospace industry. Our

and even expect to surpass the capacity of our plant in

aerospace clients include ITP, Bombardier, Aernnova and

Queretaro in less than three years.

Bell Helicopters. We work mainly with foreign suppliers and import a large amount of raw materials.

Q: What is Indumet’s next step to consolidate its position as a leader in machining?

Similar to ITP, when we started with Bombardier, it wanted

A: We are implementing a new project with Eaton, which

a specific piece and the company had been unable to

will require the introduction of even more advanced

find any manufacturer in Mexico able to provide it. This

technologies. Eaton uses mainly foreign manufacturers

piece attaches the tail of an airplane and every aircraft

but the company plans to bring production to Mexico. We

requires only two but they must be made specifically for

are an attractive partner for Eaton because we have the

every single aircraft. Bombardier also required them to be

machines, expertise, certifications and the funds to invest

produced within 24 hours of a request being placed. We

in this project. Indumet can manufacture prototypes and

were the only company with the expertise to manufacture

pieces in a short time. We were able to manufacture the

this piece, marking the beginning of our collaboration

pieces that Eaton wanted for our first meeting, which

with Bombardier. Indumet was the first fully Mexican

impressed the company.

AIRPORT SPOTLIGHT

182

TOLUCA INTERNATIONAL AIRPORT (AIT) AIT has lost ground over the years to its cousin in Mexico City for overall traffic but in one area it is number one. Private aviation is a cornerstone for AIT, making it the top provider for executive flights in the country. For business travelers wary of the overcrowded conditions at Mexico City International Airport (AICM), AIT has become a comfortable alternative. Steady growth in the private aviation segment now sees the airport handling over 60,000 operations per year across cargo, commercial and private aviation. With a 28,000m2 passenger terminal, the airport can provide services for up to 7 million passengers annually while the runway has the capacity to manage up to 180,000 yearly operations. The 30-year-old 500ha airport has the country’s longest runway at a length of 4.2km. It can receive aircraft with wide fuselages such as the Airbus 340 and the Boeing 747. AIT’s infrastructure and its 25-minute accessibility from Mexico City’s Santa Fe neighborhood also make the airport a key gateway in the country’s domestic flight network. AIT has 16 business and tourism destinations, including Cancun, Puerto Vallarta, Veracruz, Huatulco, Zihuatanejo, Monterrey, Tuxtla Gutierrez, Oaxaca, Colima and Los Mochis. The airport’s role in easing the congestion from AICM has led to a passenger influx of about 8.7 million people in the past six years, though the airport has space to expand operations and cater to many more per year. It also has seen the growth of medium-sized airlines such as Transportes Aéreos Regionales (TAR) and acts as an alternative airport for Iberia and Lufthansa’s operations. Cargo aviation is another import aspect of the airport’s operations. AIT hosts FedEx' top shipping center in Latin America. Annually, FedEx ships more than 26,000 tons of cargo, surpassing US$1.5 billion in operations. AIT’s operations are certified by the ICAO and the DGAC. It is the only airport in Mexico that has a Category III Instrument Landing System, meaning the airport has the necessary electronic equipment to function in minimum visibility conditions. In 2009, the Latin American and Caribbean Air Transport Association (ALTA) awarded AIT the Rolim Adolfo Amaro Prize for its operational efficiency. It was the first Mexican airport to receive this acknowledgement.

183

VIEW FROM THE TOP

ALLIANCES, STUDENTS HELP SHAPE FUTURE INDUSTRY JOSÉ MUSTRE Director General of CINVESTAV

Q: How have alliances helped to structure CINVESTAV’s

of what is happening back to a base. We have begun

focus in the aerospace industry?

developing this project in France but not yet in Mexico.

A: Our Queretaro campus is dedicated to materials 184

science, with specific research into aerospace materials.

Q: What does the Aerospace sector represent for

Through our collaboration with CIDESI, we are tackling

CINVESTAV and its future growth?

specific problems regarding the deposition of thin film to

A: The aerospace industry is one of the most important

increase strength and flexibility. Intense knowledge and

in which to be involved. One of our principal missions

expertise exchanges have generated enough confidence

is human capital development. Through our ongoing

in our center that we have secured projects financed

academic relationship with French entities, we expect

by the US Air Force. Studies commissioned by the Air

more growth in this area.

Force are not solely focused on aerospace, however. Our Irapuato Campus works on the genomics of micro-

Our laboratory in Queretaro is focused on composite

organisms and plants, working with bacteria that can

materials for aerospace coatings including isolating

survive temperatures above 80°C and high-pressure

ceramics or extremely thin metal alloys. to achieve

atmospheres. This was commissioned and financed by

better aerodynamics, heat resistance or weight savings.

the US Air Force.

Our centers can offer high-tech lab equipment that is useful to aerospace companies for occasional processes

NASA is also contributing to our Center. Our Monterrey

but not economically viable for them to own. Offering

Campus is working on research for its operations.

our services in these cases broadens our involvement in

Understanding microbial behavior in low or zero gravity

the industry by helping at crucial moments as well as

environments, supported by NASA’s financing, is part

conducting research into new strategic fields. Our most

of how Mexican R&D can shape the aerospace industry

important goal is to open innovative projects in areas

of the future. Furthermore, through an alliance with the

that are not traditionally tackled at an industrial level.

Mexican Space Agency (AEM), our information technology department presented a White Paper on satellites last year.

Q: How are your students contributing to R&D efforts for the aerospace sector?

CINVESTAV signed an agreement with France’s Safran

A: CINVESTAV does research in all fields of natural

Group to do research in areas of interest to them. This

sciences and education at 10 campuses across the

offers students an opportunity to work on projects that

country. For three years, we have offered a Master’s

generate truly transferable skills. They have launched

degree in autonomous vehicles and CONACYT has

projects involving drones, for instance, inspired by the

approved our doctoral program in this area. We hope to

research we promote at CINVESTAV.

develop several students’ theses. One example is a drone that navigates using air thermals, allowing it to remain

Q: What applications do you envisage for the results

airborne much longer than average. Other students have

from your drone projects?

gone as far as to research the viability of engineering a

A: Several entities have shown interest in this project

convertible aircraft. One of our Master’s degree students

such as the Mexican Navy, which is keen to use drones

looked into the creation of an aircraft that would fly like

to comb risk areas, to survey poppy fields for example,

a bird, moving its wings. Unfortunately, maintaining a

or to view conflict zones from above before sending

certain altitude has been challenging for the unit when

troops in to control a situation. Primarily, drones must be

faced with cross-currents and other external conditions.

lightweight and have long battery lives so that a soldier

Continued R&D efforts are the only way to achieve

or officer can fly it quickly to a zone and send images

world-class developments.

UNIVERSITY PROFILE

FORGING TALENT After successfully wooing Bombardier Aerospace in 2005,

Ministry of Education (SEP), the French Ministry of

Queretaro’s government created the Aeronautics University

National Education, the Ministry of Communication and

of Queretaro (UNAQ) in 2007 to focus on aeronautics and

Transport (SCT), the National Institute of Professional

attract more foreign aerospace companies. The institute

Technical Education (CONALEP), Safran Group and

would provide them with a pool of local talent trained in

Airbus Helicopters.

activities needed at every step of the supply chain, ranging The French-Mexican campus aims to provide technical

from basic manufacturing to research skills.

training on the aeronautics industry with financial, Strategically located inside Queretaro's airport, UNAQ

technical and teaching support from the French and

is 45km away from the city of Queretaro. The university

Mexican governments and companies. The French-

has a warehouse that occupies an area of 18,500m to

Mexican campus provides the level of technical skills to

accommodate 11 workshops, their machinery, composite

comply with civil aviation international organizations.

materials, electric assemblies and structural assemblies. Eight aircraft are used as teaching laboratories and an additional aircraft is kept as a museum. The two academic buildings with a total 45 classrooms can accommodate 1,195 students. When first created, UNAQ only offered basic courses on technical skills. As the industry developed, the university also expanded its educational offering to provide a series

The institution was instrumental in pushing Queretaro rapidly from an aspiring aerospace hub to one of the largest clusters in Mexico

of graduate and undergraduate programs specializing in aerospace. As part of its Higher Technical University degree,

The compound of the French-Mexican campus is located

it offers courses on aeronautic maintenance, teaching

on a 4,600m2 area and hosts 10 different laboratories

avionics, glider and engine and precision machining. Its

for avionics, material resistance, thermal machines,

engineering programs focus on aeronautic manufacturing,

chemical treatments, aerodynamics, electronics and

aeronautic electronic systems and aeronautic mechanical

nondestructive testing. Eight workshops where engines,

design. Master degrees also are available in Aeronautic

electricity and batteries, thermal processes and welding

Engineering and Aerospace Engineering.

and metrology are studied also are housed next door to the campus’ two warehouses.

In 2008, an agreement between the Mexican and French presidents resulted in the creation of the French-

UNAQ is a one of a kind institution that contributes to the

Mexican campus for aeronautical studies. The agreement

growth of the aerospace industry by providing one of the

was signed in 2010 between representatives from the

most important components of its success: human talent.

185

VIEW FROM THE TOP

LEADER IN ABRASIVES EXPLORES MEXICAN AEROSPACE INDUSTRY ADONAI GARCÍA Territory Manager of Mirka

Q: How has Mirka’s integration in the Mexican market

abrasive and our dust-extraction equipment makes the

targeted the aerospace sector?

sanding process almost 100 percent dust-free.

A: When we entered the Mexican market, our core business 186

was directly with OEMs, Tier 1 and Tier 2 companies. The

While various dust elimination systems were already

OEM market accounts for 55 percent of our sales, the

available, they lacked efficiency and struggled to penetrate

Automotive Refinishing Trade (ART) segment is responsible

the market. Several clients made enormous investments in

for 15 percent and the rest is divided among other industries

dust extraction systems that remained unused and were

including the aerospace sector. Aerospace can be even

pleased when we brought our products. Of course, we

more demanding than the automotive industry. We began

do not solely sell abrasives. We want to understand our

by collaborating with UNAQ alongside several companies

customers’ needs to offer a long-term solution.

that offer complementary services and products, offering training courses on refinishing an airplane.

Q: What benefits did the Optimized Surface Preparation System (OSPS) bring to the ART segment?

Q: How important is the sector expected to be for Mirka’s

A: Mirka and its subsidiaries developed a process that

operations and how are you attracting clients?

could improve refinishing times and resource efficiency.

A: The aerospace industry is part of our development

No standard exists for refinishing activities and knowledge

strategy for Mexico. The country’s aeronautics industry

is passed from worker to worker, so a system for small and

now employs over 45,000 people and every day more

medium repairs that was easy to follow was revolutionary.

companies establish plants and operations. We have

Instead of specifying the grain size of each abrasive, we

negotiated with several MROs and work with Mexicana MRO.

branded them with numbers to follow a certain process.

The maintenance and repair company did not opt for our solutions until we showed them the benefits our dust-free

The abrasives are modified at each step to offer the best

technology could offer in terms of space and efficiency,

material-removing conditions and ensure the quality of

which eventually convinced them. Similarly, we approached

any refinishing service. Our system reduced refinishing

Zodiac Aerospace, a worldwide enterprise that specializes in

times by about 30 percent. Some companies focus on the

airplane interiors normally made with composite materials.

cost of the abrasive and look for the cheapest products in

Composites produce very fine dust after the sanding process,

the market. Since abrasives represent less than 1 percent

which can be harmful to workers. This was the driving factor

of the total cost of the refinishing process, we strive to

for them to take note of our technology, to provide better

improve efficiency instead of simply lowering prices. OSPS

working conditions for its employees.

is popular in Europe and the US and is gradually gaining traction in the Mexican market.

Q: What makes Mirka’s dust-free technology different from conventional sanding?

Q: How does Mirka promote its solutions to newcomers?

A: Our technology was developed in Finland, based on a net

A: Mirka employs a combination of different strategies, the

abrasive called Abranet. While most abrasives have a paper

most important of which is demonstrating our product to

or plastic base, Abranet’s construction consists of a dense

potential clients so they identify us as possible partners.

network of polyamide fabric threads onto which the abrasive

When we started this marketing strategy, most companies

grit is bonded. Because almost 50 percent of its surface is

thought our products did not work because there was no

empty space, it was a challenge to ensure the product was

dust after the sanding process. We had to illustrate the

truly effective. Having extracted the dust through the net,

process to convince them that it offered added value to their

we also prevented the abrasive from decomposing due to

operations. Once we won over some clients, others began to

the residue left after sanding. The combination of this net

show interest and to recognize us as a quality alternative.

VIEW FROM THE TOP

SATELLITE A WINDOW OF OPPORTUNITY SOLEDAD GARRIDO Aerospace Business Development Manager at SENER in Mexico

Q: How difficult has it been to enter the aerospace sector?

have allowed the aerospace industry to grow in many

A: SENER has four business units: aerospace; marine;

European countries and the communications satellite will

infrastructure and transport; and power, oil and gas. The

open a window of opportunity for Mexican industry to be

company has participated in important projects such as the

responsible for developing part of the unit. 187

construction of the electric train connecting Mexico City and Toluca and several combined cycle plants, including in

Q: What contributions can SENER make to the country’s

Agua Prieta, Sonora. Our success in the latter two divisions

air defenses?

encouraged SENER to take advantage of its existing

A: SENER has a reputation as a leader for the development

infrastructure to develop the aerospace and marine units.

of missile components in Europe, mainly for control and

Unfortunately, those markets are poles apart from our

actuation subsystems. The company has many defense

other specialties, which have grown enormously thanks to

capabilities available to the Mexican armed forces. In the

public investment in airports, highways, ports, hospitals and

last five years we have obtained expertise in upgrading

power plants. There also are fewer marine and aerospace

helicopters, including a program to extend the operational

projects because they are more selective. We are carefully

life of the Spanish Navy’s 45-year-old AB-212 helicopters.

analyzing the sectors and once we have concrete projects

The goal of this program is to keep the helicopters

we will develop industrial plans to cater to them.

operational for at least 15 more years. We redesigned and replaced the electrical system and developed a complete

Q: What are the main areas of interest for the company’s

cockpit solution with ultramodern avionics and equipment.

aerospace division?

The program included some additional mission systems

A: Our aerospace division focuses on space, defense,

such as surveillance radar, an EO/IR sensor, missile warnings,

aeronautics and aircraft. SENER has a very strong team

armor and weaponry and a tactical computer, allowing the

that works closely with aircraft manufacturers, delving

helicopter to operate in low and medium-threat scenarios.

into several niche markets to develop unique products, such as turnkey projects for complex tools and automated

manufacturing lines. These are used to manufacture parts

helicopters in other countries, mainly in Latin America.

and assemble aircrafts, such as the B787, A350XWB, A330,

Here in Mexico, we have presented proposals for the

A400M and Embraer’s KC-390. We also developed the

Mexican air force’s Bell 212 and UH-60L. Providing older

Muscle Atrophy Research and Exercise System (MARES),

helicopters with new-generation equipment can extend

which is the only physical training unit for astronauts on the

their operational life by over 15 years at a significantly

International Space Station that simultaneously monitors

lower cost than acquiring new assets.

now

offer

similar

modernization

solutions

for

the effects caused by microgravity on human muscles. Since our projects are one of a kind, they require time and research

Q: What are SENER’s plans to consolidate the company’s

to develop the necessary technologies. Fortunately, the

aerospace division in Mexico?

company is heavily committed to innovation, into which we

A: At SENER, we generate strategic plans that span

yearly invest 10 percent of our revenue.

three years. For 2017-2019 we will have to adapt to the many changes that have impacted the Mexican economy,

In Mexico, we are targeting two major areas, namely space

such as oil and dollar prices, and to a changing political

and defense. SENER is part of the permanent council to

landscape as a result of the next presidential election.

the Mexican Space Agency (AEM) and we want to be

SENER is a strong company that will excel in Mexico if we

involved in the new Mexican communications satellite

correctly determine which opportunities are feasible and

project, whose goal is to replace the Centenario satellite

dedicate attention and resources efficiently according to

that was destroyed in a failed launch. Projects of this type

the country’s needs.

VIEW FROM THE TOP

EXPERIENCE COUNTS FOR DEFENSE AND SECURITY JOSÉ OSORNO Planning and Project Director of DECSEF

188

Q: How have you attracted partners and clients such as

routes and air traffic management is three-dimensional.

SEDENA and SEMAR after only four years in the market?

The goal is to support air controller training through a

A: Experience is vital at DECSEF, so we hire retired

3-D system. This technology was developed using Belgian

military personnel who are knowledgeable in satellite

company Luciad’s base software and integrating our

communications, avionics, aircraft maintenance, air traffic

knowledge and standards with an eye on minimizing costs.

control, radar and electronics. They design original systems,

Luciad helped considerably by supporting our business

adapt defense technology to Mexican needs and train new

model, allowing us to develop aerospace products for

civilian generations. Some believe that innovative work of

different markets.

this type is not performed in Mexico but we are proof that innovation is happening. We must communicate this to

We hope to finish this particular product by the end of

encourage the investment and demand for services that will

2016 to permit training and testing at aviation academies

push us to keep improving. Regardless of the company’s

without risk. We also produce software systems that

age, the shareholders and engineers who make up DECSEF

collect aircraft information such as flight time, speed and

have more than 20 years of experience working with systems

real time location and visualize it on a 3-D platform. This

used in the defense market. We started in consulting and

modern and dynamic system must be designed so that it

integration services and now produce software.

is easily understood by a novice pilot or air controller and it must be available at an affordable cost. In May 2016,

Q: What security issues are the most pressing for Mexico

we had a major event for the Ministries of Agriculture

and the aerospace market?

(SAGARPA) and Education (SEP), alongside the Federal

A: Security intricacies in Mexico are different to those

Electricity Commission (CFE) and PEMEX to display our

of other countries so it is necessary to develop specific

systems.

solutions. The local aerospace market has several important issues to address. These include lowering production

Q: How does DECSEF attract its clients and what

costs and increasing the quality of aircraft component

companies are you working with?

installation and maintenance. It is also important to adapt

A: Our strategy is to participate in fairs and geospatial

technology to specific security issues for Mexico because

events. We are participating in forums related to different

companies do not normally make large investments in

sectors such as agroindustry, private aviation, education,

security or defense nor do they develop complex systems

oil, energy and disaster relief, particularly in cases where

for software or hardware.

geospatial information is involved. Thanks to FAMEX 2015, for instance, Luciad signed large projects for DECSEF.

Technological innovation is an important security issue

We also have approached some companies that are

and we can contribute by integrating and modifying

working with drones to map areas and generate valuable

technology items on request. We have been working with

geospatial information, including Hydra Technologies,

SEDENA, SEMAR and the federal police on 20-25 joint

a drone manufacturer from Guadalajara, Jalisco, to

projects. These have involved highly educated personnel

design the drone’s control system, communication and

from several universities, including UNAM and IPN, and

transmission.

have been financially supported by CONACYT. By the end of 2017, we plan to be developing equipment Q: What specific products have you developed for the

to diagnose and repair electronic avionics systems. Our

civil aviation sector?

experience in the last three years has led us to consolidate

A: We are developing software to manage 3-D information

our company, so we want to start jumping from software

for airports because the majority of information including

to the aerospace computer field.

VIEW FROM THE TOP

SUPPLY CHAIN GAP AN ONGOING CHALLENGE EUGENIO MARÍN CEO of TechBA Madrid-Montreal & TechBA Aerospace

Q: As the aerospace sector has grown in Mexico, what

A: It is important for our clients to understand that the

new challenges have developed?

aerospace industry takes a long time to see results. For

A: Aerospace manufacturing evolved quickly here.

example, an established company in a closely related

International investment started 10 years ago and

industry takes at least three years to build a business and

accelerated this growth. Talented professionals in the

action plan to migrate to aerospace. They must invest in

automotive

industries

certifications, new equipment and professionals. Their

paved the way for future leaders of aerospace in Mexico.

and

other

metal-mechanical

marketing efforts backed up with technical and business

But the Mexican industry is facing gaps in the supply

viability will eventually secure a contract.

chain, which we are trying to fill by providing necessary services,including

addressing

technical

needs

and

assisting companies with contract negotiations.

There is significant government funding available to these companies but the biggest challenge that businesses face in obtaining this cash flow is their lack of focused

Q: How does TechBA assist aerospace companies with

knowledge about their contracts and particular growth

the time-consuming certification process?

strategy. TechBA helps companies find the funds to

A: TechBA’s job is to assist companies through the process

acquire consulting, technical support and equipment.

to help them obtain contracts. Interested partners must

Once it is clear what our clients are looking for, TechBA

be solid manufacturing or engineering companies that are

runs an assessment and develops an action plan to

experienced in the type of services they are submitting

help them demonstrate their expertise with a prepared,

for approval. We help them to understand the market,

comprehensive business plan.

management, cost structures, technical skills and any other component needed to comply with certification.

Q: How can TechBA support the growth of Mexican

We also help to promote their brand to all aerospace

clusters and SMEs?

industries around the world.

A: We will continue to focus on small and mediumsized enterprises, although the company is developing a

When a Tier 1 or 2 company considers our client’s proposal,

program in Baja California’s cluster for OEMs and Tier 1

they check for potential financial difficulties and may

businesses to provide services to their ecosystems. We

demand that proposals be prepared with proper insurance.

would like to raise the cluster’s standards by certifying

If these instructions are followed correctly, manufacturing

its activities and thereby supporting its growth. This

companies have a chance to secure contracts in the

support model will be replicated with other aerospace

aerospace industry.

clusters in Mexico and abroad. Instead of focusing on each company as a single case, we are beginning to close the

Q: What are TechBA’s strategies to attract new clients?

gap in the supply chain by providing direct services to all

A: Many potential clients come directly to us for assistance

companies. For example, we are developing a service to

as our 10 years of experience precede us. Our consultants

assist in contract negotiations, which is a key aspect of our

from our Montreal, Madrid and Seattle offices also hold

acceleration processes.

workshops for potential clients in different states. These workshops help companies understand the market,

TechBA also is trying to work more closely with

educate them about their potential and the need to have a

associations, international entities and aerospace clusters

persistent and strategic mindset in the aerospace industry.

to help Mexican companies find foreign partners in the industry. We do this by helping companies find and

Q: What main challenges do SMEs face to secure

prepare their niche in the sector and then putting them in

aerospace funding from federal and local entities?

contact with potential clients.

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VIEW FROM THE TOP

FIRST MEXICAN AIRPLANE MAY COME FROM OAXACA RAÚL FERNÁNDEZ President of Oaxaca Aerospace

190

Q: What led a cinema company to become an aerospace

goal is to commercialize the Pegasus at approximately

firm intent on building an airplane?

US$2.5 million. There are plenty of countries in Latin

A: Our family was successful in the cinema business, and

America and worldwide that could use a more reasonably

our entrepreneurial experience led us to want to create

priced aircraft, especially for surveillance. The Pegasus has

something innovative, touching on the idea of building

vertical visibility of 300° and horizontal visibility of 240°.

an airplane. Our trailers plant had been operating since 1977 in Oaxaca and we were able to turn our hangar into

Mexico has not yet constructed a complete aircraft but

a workshop for our aircraft, Pegasus. We knew we could

we hope to be the first to do so and are well on our way

produce something similar to other airplane brands but

toward achieving this goal.

wanted to create a truly outstanding product. We are now in discussions with Safran and Continental, among others.

Q: Aside from being the first airplane created in Mexico, what makes Pegasus unique?

The Pegasus was designed to be a lower-cost airplane that

A: The principal problem with most aircraft is that their shape

would be more affordable for governments and the defense

generates drag. The Pegasus is unique because its shape

sector. A standard fighter might cost US$12 million but our

funnels air from the front of the plane into the motor. The

aerodynamic duct along the top of the fuselage reduces air

operational at all times, we also have to wait for an opening

resistance while recycling this air to propel the airplane. This

to use the runway. We are putting safety and quality before

design was my creation and I recruited the best aeronautical

punctuality but having full time access to a runway would

engineers in the country to develop the aircraft.

drastically accelerate the process. We are investigating Merida and Queretaro as options, we need a 3.5km long

We are in the eighth stage of the process, posterior to the

runway to begin practicing takeoffs and landings.

take-off stage. This stage is expected to be completed by the fourth quarter of 2016, once we have finished our

Q: How does Oaxaca Aerospace plan to commercialize

analysis of the propulsion system. To date the motor

the aircraft once it is launched?

produces 400hp but it will be unusually cheap to run,

A: Some companies in the US sell small units as

using only 56L/h. To meet future certificates from the FAA,

experimental or amateur-built aircraft, which do not

the Pegasus is designed to support 7G, or seven times the

require certifications. But if our clients plan to use the unit

weight of the aircraft. Oaxaca Aerospace is working to

to transport people or for nonsport-related activities, we

ensure the unit complies with all FAA and DGAC regulations

need to ensure that our aircraft is authorized. Our plane

before we reach the ninth stage of the prototype.

will be faster and safer than the majority of aircraft in this segment and it could be used to perform missions that are

We have leaned heavily on our trailer production site to help

assigned to fighter airplanes by the armed forces. Fighter

with the engineering and production of this unit. That plant

planes have not changed drastically in several decades

has machining and cutting capabilities but we also invested

but the Pegasus is designed to be different. Because our

close to US$6.5 million in the Pegasus project from our own

product is built to high-quality standards, it could enter

company’s pockets and have the support of CONACYT.

several sector niches.

Q: What is the missing element that is preventing Pegasus

The Mexican market may be a long way behind achieving

from being operational?

what Boeing and Airbus have built but Embraer has done

A: The aircraft can already take off but we cannot test

wonders in a short period so we know it is possible. Today,

it yet because we have to stick to the protocol DGAC

we are pleased to have identified a market for the Pegasus

has approved. Because Oaxaca International Airport is

and we are excited to see our plane in the air very soon.

191

VIEW FROM THE TOP

COMMUNICATING THE IMPORTANCE OF TECHNOLOGY DAVID MAGAÑA Director General of Radiocomunicaciones SAKDA

Q: What does Radiocomunicaciones SAKDA offer the

by using only this system. We are working with AICM’s

Mexican aerospace sector?

current administration to ensure it is in the new airport.

A: The aerospace industry represents an important 192

challenge for us because its technology evolves every

Q: What problems do aviation companies face in Mexico?

day. Our managers travel constantly to the US, China

A: Clients have entirely different needs but AICM’s

and Germany to be up-to-date on the latest innovations.

oversaturation is a common problem for airlines. This is

Having begun almost three decades ago in the area of

caused in part by the introduction of low-cost airlines and

communication systems with commercial, marine and

the low-cost services by the main Mexican airlines, such as

radio navigation broadband connections, the company

Aeroméxico. These companies have greatly reduced the

consolidated its commercial broadband operations as

cost of flying, making it more accessible to a larger number

Radiocomunicaciones SAKDA 14 years ago. Today we work

of individuals. While beneficial, this is causing problems

with six divisions of Aeroméxico, with Interjet, Volaris and

because radio frequencies have also become increasingly

Aeromar. We also manage several direct sales or projects

saturated. As the number of airlines and flights rises so do

for companies within AICM, including Passenger Movers

their needs for radios, which has increased a hundredfold.

de México and many private security companies. A similar problem occurred in the US when technologies Q: On what criteria does the company base its selection

evolved toward digitalization from 2002 and US authorities

of business partners?

decided to eliminate analog devices by 2011. The introduction

A: We choose our partners based on their brand’s presence

of repetition systems, which increase a radio’s reach from

in the market. Motorola, Kenwood, Icom, Vertex and

2km to 50km, went a long way toward solving the problem.

Hytera are the largest players here and Icom is the most

But Mexican legislation does not allow the introduction of

dominant brand in the aerospace sector for ground-air

new radio communications systems. Therefore, we went

communications. This company is the only one managing

from providing service for 10 radios to 500 using the exact

the radio navigation band which spans 118MHz to 134MHz.

same frequency range. The industry must enter the digital

All the equipment may seem similar but each is designed

age but a change in legislation is necessary.

for a different band segment and can be programmed to the user’s preferences. When an airplane is approaching

Q: What hurdles must the company tackle to continue its

its destination, it communicates with the airport to request

success in this market?

updates from the control tower regarding air traffic in the

A: We are already very large in the radio communications

area. We provide the equipment for this communication

sector as every single airport in Mexico has equipment

but our primary contact with airlines is when they require

installed by Radiocomunicaciones SAKDA. We are the third

maintenance assistance for their radio equipment.

largest distributor of Hytera in Mexico, among the top five for Icom and in the top 10 for Kenwood. The company is

Q: What new technologies are you developing for the

heavily dependent on support from manufacturers, few of

Mexican aerospace industry?

which provide maintenance services in Mexico. This makes

A: We are introducing an auxiliary services trunked radio

it harder for us to introduce new brands. We must reach

system, which acts as a central node for airport infrastructure

a middle ground wherein we represent them in Mexico

to communicate via 100 different sites on demand and

while they provide support centers for their products.

should allow airlines to rent communication infrastructure

All our sales are managed through distributors but we

from the airport. These airlines can use the same system,

are negotiating directly with manufacturers to eliminate

facilitating communication between airlines and airports.

intermediaries both for the brands we manage and for

The NAICM’s developers want to homogenize technology

potential brands that we may introduce in the future.

INSIGHT

CARGO SOLUTIONS FOR EVERY INDUSTRY RUDOLF HESS Director General of R.H. Shipping

Globalization and free trade agreements have allowed

its clients might need the company’s services. For oil and

the global cargo business to grow. Catering to the need

gas deliveries, it has developed alliances with steamship

for transport services in industries such as automotive,

lines for a complete array of offerings.

energy and oil and gas, the shipping and air freight firm RH Shipping is among the companies that have benefited

In the pharmaceutical and chemical industry, RH Shipping

from the open landscape.

combines its expertise of freight with technology. The company

offers

Envirotainers,

which

are

container

Mexico’s prime location next to the US has encouraged

solutions for pharma products, particularly for those that

the growth of air freight services, particularly for

need to be in a controlled environment.

industries managing perishable goods. In the context of constant competition between cargo companies and

As a IATA cargo agent, RH Shipping has access to more

couriers, the only way to stand out is to have a developed

than 250 member airlines, giving the freight company a

and extended network of distribution centers in the US

global reach. “Over the last four years, we have developed

and Mexico, says Rudolf Hess, the company’s Director

our domestic and international network by partnering

General. “Our footprint consists of seven Centers of

with suppliers and agents around the world,” says Hess,

Excellence in Mexico and one in the US, with specialized

discussing the global scope of the company.

staff to execute the services offered to our customers in the aerospace industry.”

The global reach of IATA’s accreditation allows R.H. Shipping to work around the world, from Houston in the

During

and

US to Katmandu in Nepal. It has specialized personnel in

transportation, RH Shipping has developed a series of

its

20-year

experience

logistics

customs to provide support and make sure every transport

airfreight solutions for import and export operations in the

process is conducted smoothly.

country. In addition to traditional air cargo services, the company portfolio’s includes air transport for dangerous,

To provide certainty to every client, RH Shipping provides

oversized and perishable cargo, door-to-door services,

insurance for products that are being transported. In case

chartering and hand-carry services and express services.

of accident, troubleshooting, theft, or weather conditions RH Shipping guarantees that the cargo sent will be backed

The company’s offering is designed to cater to the needs

up if needed.

of a number of industries. For aerospace, RH Shipping has developed a 24/7 customer attention service as well as

RH Shipping could not be considered a transports and

a tracking tool customers can use to follow up on their

logistics leader if it had not incorporated informatics into

packages. “In the aerospace industry, goods commonly

its services. In addition to tracking, the company integrated

cross the border two or three times during the production

a Transport Management System, which concentrates all

process,” says Hess. “To support these processes, we have

the data regarding the shipping such as transportation

established an extensive carrier network to ensure the

costs, expected time of delivery, route and probable stops.

cargo will travel safely and arrive on time.”

This platform can generate reports and alerts depending on the client’s needs.

Transport services for dangerous and oversized packages were planned for the energy and oil and gas sectors but

Hess sees the aerospace industry growing 15 to 20 percent

can be used by any business managing large delicate

in 2016 compared to 2015, boosted by the entry of more

cargos. The freight company has an office in customs at

companies to Chihuahua and the Bajio area. “We are ready

AICM as well as a warehouse in the airport in case any of

to grow together with the aerospace industry,” he says.

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ROUND TABLE

NEED-TO-KNOWS FOR SMES Small to medium-sized enterprises (SMEs) face more

obtain contracts with OEMs. Funds for consulting, technical

obstacles than large companies in any sector. Economies

support and equipment can be a barrier to entry, especially

of scale and established branding cannot be relied upon to

as the costs of these are particularly elevated in the

secure success as an initiating company in a new industry.

aerospace industry.

Moreover, companies with experience in other industries cannot simply hop from similar manufacturing operations as

Certain companies and associations are communicating

easily as into other sectors because aerospace expertise is

ways to enter the segment and offering support to those that

less common and quality standards are highly demanding.

want to make the leap. These entities help SMEs obtain the appropriate funding and certifications. They also help new

Fortunately, the Ministry of Economy has various incentive

companies secure contracts and manage their expectations

programs for companies to secure certifications such as

of return on investment, in the hopes of consolidating the

Nadcap and AS 9100 certifications. These are required to

supply chain and increasing aerospace's contribution to GDP.

194

The country must promote its quality supply chain. Tecmaq’s goal is to be a reliable supplier, above all, and we are confident that small to medium-sized companies will follow in our footsteps to strengthen Mexican manufacturing. Although we do not offer the cheapest product in the region, we can guarantee the best price-quality relationship. Tecmaq has held the AS 9100 certification for over eight years now and official certifications coupled with our successful alliances with companies such as Honeywell and Fokker build trust in Tecmaq, as well as in the Mexican industry

CARLOS RAMÍREZ Director General of TECMAQ

as a whole. These certifications are a must for smaller or new companies to gain the trust of OEMs.

SMEs must be aware of the importance of certifications for the aerospace industry. These processes can be extremely complex, especially for metal machining, forcing local companies to send their products north of the border for specific processes only to later bring them back to finish them. ProMéxico, among other organizations such as Bancomext, supports these companies through the certification process. We are also working with state governments to create awareness of existing subsidies and facilitate provisions for companies. Alternatively, SMEs may choose to

CÉSAR FRAGOZO Sectorial Director of ProMéxico

be guided by experts that may identify specific issues and help them work with the government. To obtain proper certifications companies can approach ProMéxico and we can help them determine which is appropriate for their plans. We can also put them in touch with the government to receive incentives.

We collaborated with the state and federal governments to position local companies. The cluster operated four projects with Nuevo Leon’s government to develop local suppliers, train human capital and to help companies acquire certifications. This represented an investment of MX$5 million (US$278,000) to help 45 companies. Before the cluster was established, the state government also created the Citizen Council for the Aerospace Industry in Nuevo Leon that met every three months

PAULINE MEDORI Former Director General of Monterrey Aerocluster

from 2003 onward to develop a regional strategy for the sector. This helped the supply chain’s creation.

Having focused on working with SMEs for nine years, we will continue in this direction. We would like to raise the cluster’s standards by certifying its activities, supporting its growth. We are closing the connection gap in the supply chain by providing direct services to all companies. For example, we are developing a service to assist in contract negotiation, which is a key aspect of our acceleration processes. SMEs must understand that the aerospace industry is unlike any other and that it

EUGENIO MARÍN CEO TechBA Madrid-Montreal & TechBA Aerospace

takes a long time to see results. They must invest in certifications, new equipment and professionals to eventually secure a contract. There is significant government funding available to these companies but the biggest challenge that companies face in obtaining these funds is their lack of focused knowledge for their contracts and particular growth strategy.

195

COMMERCIAL, CARGO & LOGISTICS

The aerospace industry involves more than just manufacturing activities. Mexico’s aviation and trade agreements and the population’s purchasing power have allowed the successful development of commercial, cargo and logistics airlines. Competition in these sectors is stronger than ever. Mexican commercial airlines have grown and matured and successfully compete internationally. The challenge ahead of them is to navigate the conditions in their own country once BASA’s resulting competition makes its way to the Mexican market. Cargo and logistics airlines also face the same challenge, namely to succeed in an increasingly competitive market. Mexico’s economic growth, combined with sensible market strategies should provide enough business opportunities for the existing players but also for new competitors.

Featuring interviews, analysis and insights from sector leaders, this chapter illustrates passenger trends, opportunities within the Mexican market and cargo operations.

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CHAPTER 9: COMMERCIAL, CARGO & LOGISTICS 200

ANALYSIS:

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José Garza, Interjet

204

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Miguel Cardona, Avianca

206

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Vincent Etchebehere, Air France-KLM Mexico

208

INSIGHT:

209

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Hector Iriarte, LATAM Airlines Group

210

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Rodrigo Vásquez, TAR Aerolíneas

212

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Jorge Badia, Magnicharters

213

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Octavio Hernández, Discover the World

214

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Francisco Ceballos, Despegar.com

215

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Rafael Driendl, Kayak

216

AIRCRAFT SPOTLIGHT:

Airbus A380

218

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Rafael Figueroa, Aeroméxico Cargo

220

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Agustín Picado, UPS Mexico

223

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Vitor Bocci, Kuehne+Nagel

224

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Francisco Pertierra, AeroUnion

225

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Eduardo Alba, Expeditors

226

AIRLINE SPOTLIGHT:

LATAM Airlines

Aviation in Mexico Tops LatAm’s Growth

Mauro Arredondo, Copa Airlines

199

ANALYSIS

AVIATION IN MEXICO TOPS LATAM’S GROWTH Aviation is a strong contributor to the global economy,

BUMPY RIDE

facilitating trade across cities, countries and continents

For many airlines, the route through the Mexican market

and increasing market access. Globally, commercial airlines

has been a bumpy ride. As El Financiero reports, between

have been growing at an accelerated rate after a short

1995 and 2015 about 20 airlines were created and almost

drop due to the 2008 financial crisis. While the speed of

20 airlines disappeared. Of the airlines that weathered this

expansion is slowing, expectations for the industry are

period, most are growing or are at least stable. This also

positive.

signaled the end of the oldest airline in Mexico, Mexicana de Aviación. This giant’s bankruptcy had deep effects on the industry as it freed highly contested slots in AICM,

on average since 1980. Between 2014 and 2015 revenue

which were quickly taken up by Volaris, Interjet and

passenger kilometers (RPK), the number of revenue-

VivaAerobus. While none of these airlines were operational

paying passengers in a craft per distance traveled, rose

before 2005, by August 2016 they held 63.1 percent of the

6.5 percent. Through the first eight months of 2016, the

national market between them.

sector expanded at a slower pace. In February RPK rose 8.6 percent globally in comparison to the same month in

Overall, the aviation sector in Mexico is growing. CANAERO

2015. By July, RPK had slowed to a 6.4 percent clip while

reports that during the first quarter of 2016 the number of

August saw it shrink to 4.6 percent, according to IATA.

passengers transported by air carriers rose 12.6 percent in comparison to the previous year. The chamber expects

It was a similar story for the rate of available seats and

2016 to end with 80 million passengers, up from 72 million

occupancy. Available seat kilometers (ASK), calculated by

in 2015, 41 million of whom flew with a Mexican airline.

multiplying the total seats available in an aircraft by the number of kilometers flown, globally climbed 5.6 percent

Grupo Aeroméxico, which includes Aeroméxico and

between 2014 and 2015. This number is used to measure the

Aeroméxico Connect, reported year over year ASK and

total capacity of an airline. In February 2016 ASK grew 9.6

RPK growth of 3.8 and 3.6 respectively during the second

percent in comparison to that month in 2015 but by August

quarter of 2016. During that same period, Interjet reported

this number had decreased to 5.8 percent. Passenger load

an increase of 12.1 and 8.3 percent in those two indicators.

factor (PLF), a number used to calculate the number of

Volaris, which measures assigned seats per mile (ASM)

airplane seats occupied by paying passengers, showed a

and revenue passenger miles (RPM), reported 19.4 and

subtle decline of 0.9 percent in August 2016.

24 percent rises, respectively. VivaAerobus reported the largest ASK ad RPK increases during the second quarter

Aviation in Latin America, however, is surpassing the

of 2016, 34.4 and 35.6 percent.

growth of the overall industry. In August 2016 RPK in the region expanded 6.7 percent, although available seats rose

In terms of occupancy, Mexican airlines’ PLF varies widely

1.7 percent and PLF was up 1.1 percent during the month,

from one to another. Magnicharters and Aeroméxico

according to IATA.

reported 82 and 79.1 in 2015, above Latin America’s average

AIR PASSENGERS WORLDWIDE AIR PASSENGERS WORLDWIDE (millions)

3,500 3,000 2,500

Source: World Bank, 2016

Source: World Bank, 2016.

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

1,500

2001

2,000

2000

200

Boeing says air travel growth has been a steady 5 percent

of 78.8 according to IATA. Volaris, VivaAerobus, Interjet and Aero Calafia were slightly below the region’s average with

DOMESTIC DOMESTICMARKET MARKETPARTICIPATION PARTICIPATION (DATA (Jan-Aug 2016) FROM JANUARY TO AUGUST 2016.)

reported 77.9, 77.8, 72.5 and 74 percent. TAR Aerolíneas and Aeromar

Aeromar lag well behind at 41.3 and 40.4 percent each. The international market is dominated by foreign airlines. While

Others

Aeroméxico holds the largest share among the country’s VivaAerobus

airlines, with 16.2 percent, Volaris and Interjet’s participation is in the single digits, at 7.1 and 4.8 percent.

Interjet Volaris

CARGO AND LOGISTICS Air cargo is an essential part of a globalized economy.

Grupo Aeroméxico

As global value chains become more complex, the

31.4% Grupo Aeroméxico

13.8% VivaAerobus

transportation of parts for processing across countries and

21.6% Interjet

1.2% Aeromar

continents becomes increasingly prevalent. If a product is

27.7% Volaris

4.2% others

urgently needed or perishable, air cargo can be the fastest and most efficient alternative, especially when it is time

Data Source: DGAC.

Source: DGAC.

or temperature-sensitive and has high value. Forecasts for

load and unload large cargo airplanes.” This forces cargo

the sector are mostly positive. Globally, IATA projects that

companies to either use smaller aircraft or to move

air cargo will continue to expand at an annual clip of 4.1

loading equipment to the final destination, increasing

percent until 2018, led mainly by emerging economies in

costs. Another hurdle is the saturation of AICM. Because a

the Middle East and Africa. Boeing forecasts a 4.7 percent

significant amount of cargo stops at Mexico City, the lack of

year on year growth until 2033, led by Asia.

slots poses a logistics problem. “In that sense, the NAICM will be beneficial since it would allow us to perform more

Domestically, air cargo has seen more timid gains over the

flights,” said Pertierra.

past few years. The sector enjoyed steady growth until 2008 but regressed in the wake of the global financial

Both commercial and cargo aviation are facing hurdles

crisis. The years 2008 and 2009 each saw transported

brought about by market slowdowns but the drop in oil

tons reduce 10 percent from previous years. In 2010, the

prices has been beneficial for the sector as fuel eats up

sector speedily recovered to pre-crisis levels but has

a big portion of costs. Jet fuel represented 35 percent of

flourished little since. According to DGAC, 2015 saw a total

total costs for Aeroméxico in the first nine months of 2014.

of 695,052 tons transported by air, a 6 percent upswing

During that same period in 2015 the percentage dropped

from 2014. Due to the close relationship between air cargo

to 25 percent, as the price of oil plummeted.

and trade, the prolonged period of limited growth can be related to a weak economy, both in the case of Mexico and

Another positive is the implementation of the Mexico-

its major trade destinations, and slow trade gains.

US BASA, which is expected to “offer important and attractive growth opportunities for both countries,”

Mexico has to tackle infrastructure issues. As Francisco

according to Miguel Peláez, Director General of DGAC.

Pertierra, the Director General of AeroUnion says, smaller

“The flexibility that will come as a result will generate new

airports “do not have the necessary infrastructure to

business opportunities for airlines.”

CARGO TRANSPORTED BY NATIONAL AND INTERNATIONAL AIRLINES (TONS) CARGO TRANSPORTED BY NATIONAL AND INTERNATIONAL AIRLINES (millions of tons)

800 700 600 500 400 300 200 100 0

2005

International Source: DGAC

2006

2007

2008

2009

2010

National

International

National

2011

2012

2013

2014

2015

201

VIEW FROM THE TOP

AIRLINE GOES AGAINST THE FLOW, WINS CUSTOMERS JOSÉ GARZA CEO of Interjet

Q: As a relatively young airline, what strategy did Interjet

market. As part of the Global Reservation Systems (GBS)

employ to become one of the largest in Mexico?

network, we have allied with Iberia, American Airlines,

A: For many businesses, including ours, going against

LATAM Airlines and British Airways, among others.

the flow of the sector is actually a good market strategy. 202

Interjet’s goal was take the opposite path from other

Q: To what extent do low-cost airlines represent

airlines and transform the aviation industry. This led to

disquieting competition for Interjet?

the creation of Interjet’s hybrid model, which has been

A: All airlines have to cover basic costs to operate. The

part of our DNA since the beginning. Many airlines are

minimum price per passenger is calculated by the number

sacrificing customer service for profit. We maintain

of seats multiplied by the expected occupancy. The

high-quality standards alongside affordable prices. This

average fare a low-cost airline receives from a passenger

strategy allows frequent travelers to compare our services

is usually much higher than the price they advertise.

against those of other airlines and, more often than not,

There are many misconceptions regarding the true

they return to Interjet.

fares that low-cost airlines offer because the advertised prices are often not final. Hidden charges for luggage,

The percentage of the population that travels by air has increased to near 20 percent from 2.5-3 percent in 2005

meals and many other services are added afterward. This model is only beneficial for those who do not require any additional services. The high price of extras compensates for passengers who do not pay for them. On occasion low-cost airlines even cut maintenance costs to generate revenue, putting the consumer at risk. Mexico does not have a strong flight culture because its citizens do not travel often and as a result many travelers are unaware of the final price having factored in all those services. Often, travelers are dissatisfied with the services

We also implemented changes to improve overall passenger

and fares they pay to low-cost airlines and we are certain

experience. For instance, we decided to remove first class

these customers will return to us.

and replace it with benefits for every single passenger on board in terms of comfort, space and luggage. These

Q: What main changes have you perceived in the Mexican

changes have been well received by passengers, from

aviation sector?

executives to families. Interjet’s goal is to provide the

A: When Interjet started, the local aviation market was

most pleasant experience possible, adapting to changes

immature, a trend that continues to this day because

in air travel. This is evident in our renovation of areas

aviation companies have not fully penetrated the

such as commercialization and product presentation. We

Mexican market. In 2005, Mexican airlines transported

wanted to create a product that suited the vast majority

well over 20 million passengers. That same year, 2.5-3

of potential customers across every socioeconomic sector.

percent of the population traveled by air but we are now

This has led us to generate a broad range of services that

much closer to 20 percent. This is the result of higher

exclude superfluous luxuries.

purchasing power and lower ticket fares. Mexico is far from reaching its full potential and we expect this

Interjet enjoys the added advantage of a solid brand

percentage to continue rising. In comparison, Brazil,

name, which was chosen to give the company a neutral,

Argentina, Chile, Colombia and Peru have a much higher

international image. It is helping us to open the international

rate of flights per capita.

Q: What are the major trends in the aviation market and

is a great opportunity for Mexico’s airlines to reaffirm

how is Interjet adapting its strategy to address those?

their market penetration because it opens up extensive

A: Mexico has interesting demographics, which result

opportunities.

in unusual market trends. The country has a very young population, with more than half its citizens under 25 years

Competing in the US market will be a long-term process

old. This population segment’s behavior is drastically

for all Mexican airlines. At this point, both Mexican and US

different to that of other generations. For instance,

citizens prefer US airlines because they believe them to

millennials do not get married and join incomes as early

be safer. But US airlines suffer from several disadvantages,

and they are more likely to wait to have a family, they

including having older fleets. We believe that once

have more spending money that can be used for travel.

passengers try our airlines they will prefer the newer fleet.

The country also has a growing number of people over

The authorities and airlines must create awareness that

65 who are retired and keen to travel. These individuals

our airlines are as good or even better than foreign brands.

enjoy advantageous fares because they can travel outside

In the meantime, local airlines can generate code-sharing

of peak summer and winter periods. A common problem

agreements with American counterparts, using their

during vacation periods is that airplanes travel to tourist

own fleet to shuttle passengers under a US airline’s full

locations at full capacity only to return empty. To address

endorsement. We have been implementing this strategy

this, we offer better prices to returning passengers and

for flights connecting the two North American countries

retirees often have no problem taking advantage of these

with great results, particularly for the route linking Los

less popular dates.

Angeles with Cancun.

Technology also is making a significant amount of information

Q: What are Interjet’s growth projections for the short

available to everyone, facilitating informed decisions. This is

and midterm?

completely changing the face of travel. From the beginning,

A: Interjet is experiencing double-digit growth. In 2015,

Interjet bet on digital platforms even though the sector at

we grew 12 percent and we expect similar numbers for

the time was dominated by travel agencies.

this year. However, such a high growth rate cannot be sustained forever so our long-term expectation is around

What

can

Mexican

airlines

strengthen

6 percent. This would still allow us to double our numbers

their position in the international market after the

in 10 years. We believe the market is king and that market

implementation of BASA?

forces will push the best company to the top. Because

A: The Mexican aviation market is perceived to be at a

some airlines penny-pinch on passenger comfort, travelers

disadvantage because it is smaller than the US market.

who have used Interjet will become loyal to our brand. In

However, foreign airlines have operated in Mexico for

the aviation business as with any other, customer loyalty is

decades and they have yet to overtake the market. BASA

essential for long-term sustainable growth.

203

VIEW FROM THE TOP

OLDEST AIRLINE IN LATIN AMERICA LOOKS FORWARD MIGUEL CARDONA Commercial Director of Avianca

Q: What is Avianca’s target market and how are you

For the Central American market, we are competing

capturing it?

with Aeroméxico, Copa Airlines and LATAM Airlines. For

A: Our goal is to be a full-service carrier, focused on

that reason, it is important for Avianca to have a solid

serving Latin American customers. Our target market is

presence here in Mexico.

corporate travelers who need a wide range of schedules 204

to choose from. We offer reliability by incorporating the

According to Mexican aviation authorities, Avianca moved

latest technology in our airplanes and additional perks

approximately 750,000 passengers in 2015. Our goal is to

such as a frequent flier program, complementary services

increase that number this year by boosting connectivity

to customize each experience, such as extra baggage,

from Mexico City and Cancun to the rest of Latin America.

escorts for unaccompanied minors and transportation of

We offer attractive services from Mexico to our hubs in

sports equipment, among others to come. We also offer an

San Salvador, Bogota and Lima. So far, we have six flights

exclusive plan of discounts and elite benefits to enterprises

daily from Mexico City, three to our largest hub in Bogota,

that commit to work with us over time. With this full-service

two to San Salvador and one to Lima. This same plan

package plus technology and connectivity, we can provide

operates from Cancun but on a smaller scale. This way

a high-value product to the corporate market.

we offer diverse destinations to our passengers, while supplying a superior product. Q: The company moved to renew its fleet several years ago. How is that process going? A: Avianca’s future is based on the fundamental pillar of technology, not only to offer good passenger experience

Avianca moved approximately 750,000 passengers in Mexico during 2015

but to optimize performance, fuel efficiency and to have secure and reliable operations. We are in the top 10 for airlines with the youngest fleets worldwide. Avianca committed to acquire over 100 airplanes several years ago to completely renew our fleet and we have received several aircraft per year since then. We also want to

We also cover the tourist market with key destinations such

simplify our fleet because 15 years ago Avianca had more

as San Jose in Costa Rica, Havana, Aruba, Curacao among

than six types of aircraft. This complicated maintenance

many beaches in the Caribbean. To address these needs,

and the acquisition of spare parts, resulting in higher costs.

we have a program called Avianca Tours, a successful

We now have three types according to the route. We use

product that was originally launched in Colombia and more

Airbus to cover short, medium and even long distances

recently was adapted successfully in Central America. We

occasionally, Boeing and Airbus for transatlantic routes

expect this distinctive feature of Avianca’s service to be

and turboprop aircraft for short-distance regional flights.

implemented in Mexico in the near future. Our goal is to optimize our fleet to increase profitability Our strategy is to focus on improving connectivity

while

throughout the continent, from Toronto to Buenos Aires,

customers. This vision is complemented by having the best

and to take advantage of our European gateways in

talent in the region managing all customer interactions.

maintaining

superior

quality

service

for

our

Madrid, London and Barcelona. As the largest market in the Central and Caribbean region, Mexico is paramount

Q: Who is Avianca’s strategic partner for fleet renewal

for Avianca as it connects North and South America.

and which key features define this partnership?

A: Our strategic partner in this renewal is Airbus, which

a top choice for our destinations. The company also

supplies most of our aircraft. The OEM offers a large range

manages its own website with good promotions and

of airplanes for different purposes, from the Airbus A319

easy accessibility for Internet users.

with 120 seats, to the Airbus A321 with 200 seats. A highly important aspect of this partnership is delivery schedule

Q: How is Avianca dealing with economic challenges to

flexibility. To adapt our strategy to the uncertain market

ensure growth?

conditions regarding currency exchange and oil prices,

A: The airline business is both demanding and fragile. Any

Avianca decided to defer deliveries of some planes by

change in the exchange rate seriously affects revenue and

several years. This decision allows us to manage our financial

demand, particularly Mexican subsidiary businesses from

needs better while overall market conditions improve in

the US and in the leisure travel segment. Security issues

Latin America. In this context, Avianca will receive four or

also have dramatically slowed the Mexican travel sector.

five aircraft per year instead of an average of 10.

To face these challenges, Avianca observes the market closely and adapts to new trends. This year we have seen

It is also important for us to forge stronger commercial

solid performance in some of our key markets as air traffic

associations, such as our membership with Star Alliance.

in Mexico and Colombia continues to grow. We expect

We are a key player in this group of leading airlines

more traffic between Mexico and Peru as a competitor has

worldwide that offers a seamless travel experience to the

helped to create more demand.

customer. The alliance covers over 1,000 destinations, We will create the Avianca of the future in Mexico by

supplementing our 105 destinations.

redesigning our relationship with travel agencies to Q: What impact has the Internet had on the travel

stimulate the market with new incentives. The company

experience, especially in Mexico?

also is working to target new customers, such as university

A: Mexican clients are using online travel agency platforms,

students and the visiting friends and relatives segment.

such as Despegar.com, more frequently than other Latin

We have a distinctive combination of attractive fares and

American customers. About 60 percent of travelers in

a world-class experience with the Boeing 787. With this

Mexico purchase their tickets through traditional travel

next-generation aircraft, our goal is to offer a better flight

agents, a number that has been steadily decreasing as

experience with the flexibility of smooth transit in Bogota

online platforms grow in popularity among leisure travelers.

to reach key destinations like Buenos Aires, Santiago de

For traditional travel agencies to remain solid contenders

Chile and our European gateways.

in the market, they need to continue offering extra benefits and managerial support, especially to corporate travelers

We have committed to being a carrier that not only takes

who operate with limited travel budgets.

passengers from one point to another but that ensures the high standards that travelers expect. We need to be

We must be more competitive in many aspects besides

efficient to achieve sustainability and viability for the

our

work

future but we cannot sacrifice our relationship with the

proactively to have a relevant presence with online

customer to maximize this efficiency. Instead, we push

travel agencies in the markets we serve. We constantly

to find efficiencies in areas concerning internal processes

monitor and work with these sites to make sure we are

and responsiveness to the markets.

prices.

ensure

competitiveness,

205

VIEW FROM THE TOP

COLLABORATION LEADS TO MILESTONE VINCENT ETCHEBEHERE General Manager of Air France-KLM Mexico

Q: What market strategies is Air France-KLM following to

for a 10 percent increase in our seat offer between Mexico

excel in Mexico?

and Amsterdam, for up to nine flights per week. This was

A: The Mexican market has shown solid development

one of the first routes to be equipped with the renewed

during the last 10 years. Mexico has been a strategic

World Business Class cabin.

market for Air France-KLM and the group has been 206

strongly

for

Our market share for Air France’s first-class cabin,

intercontinental flights led us to inaugurate the Airbus

investing

here.

The

growing

demand

named La Première, to Europe exceeds 50 percent.

A380 on the route between Mexico and Paris. This was

This places Mexico among our most important markets

a milestone for the aviation industry in Latin America

for first-class tickets. The Airbus A380 business cabin

because it was the first time the world’s largest aircraft

increased its ticket sales by more than 100 percent. In

had been used on a route to the region. The introduction

the first half of 2016, Air France-KLM’s North America

of this airplane is the highest point of a collaboration

available seat kilometer (ASK) grew 3 percent while in

between Air France-KLM, Airbus, AICM and Mexican and

Mexico it rose 10 percent.

French authorities. Q: What advantages does the Air France-KLM Group offer its customers? A: Our route options have increased and here in Mexico we can provide our customers with more scheduling and pricing options. KLM has always stood out as an airline that constantly innovates in customer service. KLM provides the most answers to enquiries posted on social media even though the airline receives over 100,000

In less than six months Air France-KLM’s market share has increased by almost 10 percent thanks to the Airbus 380’s commercial success

messages through its social networks weekly. Last year, KLM launched a project involving a robot called Spencer in Schiphol airport in Amsterdam. Spencer helps passengers find their departure gates by scanning boarding passes. Using robotics to improve passenger experience is part of a long-term strategy to offer exceptional service. Improving operational services is also part of our combined benefits. Punctuality and client communication

The direct route between the Mexican and French capitals

add value to our product and KLM has been recognized as

has proven to be a commercial success. Demand for

the most punctual airline in the world. Due to the nature

routes between Mexico and Europe is growing, with an

of our business, which depends on weather conditions,

average year on year increase of 6 percent. In April and

disruptions from cancellations and delays can happen.

May 2016, Air France-KLM was responsible for almost 35

Our Air France-KLM Connect service keeps passengers

percent of the air traffic between Mexico and Europe, an

informed and offers alternative solutions.

outstanding market share for an international airline that makes us the number one airline group flying from Mexico

Q: What Mexican market conditions could impact

to Europe. In less than six months our share has increased

operations?

by almost 10 percent thanks to the commercial success

A: Although several external elements are affecting the

of the Airbus A380. Furthermore, a KLM flight accounted

Mexican economy, we are not concerned they will impact

our operations. We are closely following the exchange rate

add our brand new cabins, named BEST, to the Boeing

between the Mexican peso and US dollar as we are aware

777-300 that will operate between Mexico and Paris from

that it may affect the purchasing power of our Mexican

October 2016 to April 2017. We are very excited to offer this

clients.

new product which is highly appreciated by our customers on routes that are already equipped. The €1 billion (US$1.1

Regardless of the currency exchange, flights between

million) dedicated to BEST cabins makes them the biggest

Mexico and Europe continue to register high demand.

Air France investment. The BEST product will set us apart

During the April-May period our company registered a 17

in the industry in terms of comfort as they were developed

percent increase in traffic between Mexico and Europe.

around the concept of 3 F’s, meaning “full flat, “full access”

Our clients are not a homogenous nationality profile. For

and “full privacy.”

instance, tickets for the Cancun-Paris route are mostly bought by European citizens while the main buyers for

Our goal is to become the most customer-oriented

flights between Mexico City and Paris or Amsterdam are

airline in Mexico. We will continue to work on passenger

Mexican citizens.

experience and punctuality, as well as new European routes for our Mexican customers. KLM launched eight new

Q: What are Air France-KLM’s operational plans in Mexico

flying routes to Europe in the summer of 2016 to Inverness,

for 2017?

Southampton, Ibiza, Alicante, Valencia, Dresden, Genoa

A: Our priority for 2017 is to continue the success of 2016.

and Rennes. We intend to become the preferred airline for

The acceptance of the Airbus A380 has convinced us to

intercontinental flights between Mexico and Europe.

207

INSIGHT

CONNECTING THE WORLD ON TIME Copa Airlines has a mission. It wants to connect the

Copa Airlines’ passenger experience is not solely reliant

world through Panama’s Hub of the Americas, and to

on its punctuality, says Arredondo. “It is a combination

do it on time. The airline, already recognized for its

of the airline’s commitment to its collaborators and

punctuality and modern fleet, considers Mexico to be

passengers to always offer a world-class product,

central to its strategy.

regardless of the flight destination,” he says. Among the amenities offered by Copa is an inflight service

Targeting Mexico is an opportunity that needs to be

that includes complimentary food and beverages, a

seized, says Mauro Arredondo, General Manager of

three-language entertainment system and bilingual or

Copa Airlines. “The increasing global importance of

trilingual flight attendants.

the country and its geographically diversified touristdestinations made it a high-priority market that needed

Customer loyalty is rewarded through membership to

to be attended,” he says, adding that the relationship is

the Connect Miles program, allowing users to accumulate

mutually beneficial.

corresponding miles from their flights either with Copa Airlines or with other members of the Star Alliance

208

A key to its success and increasingly wide reach is the

program. It also grants access to VIP departure lounges

Star Alliance network. Copa’s membership in the alliance

in the Copa Club sites in Tocumen, Santo Domingo,

of 28 airlines gives it access to 1,330 airports in 192

Guatemala, San Jose and Medellin, as well as access to

countries, with a scope of 18,500 flights daily. It covers

the same VIP lounges of associated airlines.

almost the entire world, falling just short of the UN’s 206 listed countries. Rapid growth for the five founding

Arredondo points out that customer service is only one

members in 1997 to 28 in less than 20 years is proof of

facet of the airlines success, complemented by one of

the program’s success and acceptance, says Arredondo.

the most modern fleets in Latin America. Its fleet of 100

Through the Star Alliance, Copa Airlines can offer flights

aircraft consists of 14 Boeing 737-700, 63 Boeing Next

to almost the entire world. The airline operates directly

Generation 737-800 and 23 Embraer 190 AR. In 2015,

to 77 different destinations in 31 countries with the help

the company announced the decision to purchase 61

of its subsidiary Copa Airlines Colombia.

new 737 MAX 8 and 9 from Boeing. The acquisition has a total value of US$6.6 billion and deliveries will begin in

Copa’s quality service helped win the airline FlightStats’

2018. Some of the aircraft are destined to replace older

recognition as the most punctual operator in Latin

planes, while others will be expansions to Copa’s fleet.

America for the third consecutive year, as well as the

Copa will be the first airline in the region to operate the

Official Airline Guide’s acknowledgement as the second-

Boeing 737 MAX 9.

most punctual airline in the world, both in 2015. Copa was also the first Latin American airline to

By the 2nd half of 2018, Copa will be the first airline in Latin America to operate the 737 MAX 9

incorporate winglets on its planes. In 2014, the airline began the installation of the Split Scimitar winglet on 18 of its Boeing 737-800 planes. These particular winglets have a curved fin shape that increases fuel efficiency even more than a traditional winglet and will reduce fuel use by 1.7 percent. The airline expects that by 2018 a total of 55 aircraft will be equipped with the Split Scimitar. Throughout the years, Copa Airlines has confirmed its

The commitment displayed by Copa to its customers,

commitment to clients, its employees and the world

collaborators and the environment has earned it several

over and over again, according to Arredondo. The

awards. In July 2016, the airline took three Skytrax awards:

airline operates directly to 77 different destinations

Best Regional Airline in Central America/Caribbean, Best

in 31 countries with the help of its subsidiary Copa

Airline Staff in Central America/Caribbean and Best Airline

Airlines Colombia. Increasing operations throughout the

in Central America/Caribbean. In August 2016 Copa was

continent and the inclusion of new destinations add to

recognized by the company CFM International as the airline

the company’s goal of connecting countries through the

with the most reliable flying engines on the continent.

Hub of the Americas.

VIEW FROM THE TOP

LATAM DIVERSIFIES, ADAPTS TO ECONOMIC FLUX HECTOR IRIARTE Director General Mexico, Cuba and Central America of LATAM Airlines Group

Q: How is LATAM Airlines balancing the various

LATAM is the leading airline in Latin America and wants

economic fluctuations in Latin America?

to represent Latin America as a whole including all its

A: As an ambassador airline to Latin America we operate

cultures, traditions and destinations. The region is a

with seven subsidiaries performing domestic flights in

popular destination with travelers from all over the

Argentina, Brazil, Chile, Ecuador, Colombia, Peru and

world. Mexico has a strong economy and has been

Paraguay. From those locations, we also travel to Europe,

growing significantly over the past few years so it is in a

Oceania and the US. Our strategy for the region has

good position to take an increasing role in our network.

diversified to take into account economic fluctuations.

We will grow in Mexico with our existing network and our

Five years ago, Brazil was the strongest emerging

One World Alliance partners. Now that we have alliances

economy in Latin America but it is now facing a complex

with Interjet and American Airlines, we can connect

period. We trust it is working to turn this around but this

passengers from Latin America to many destinations in

year we reduced the number of flights to the country.

the US through Mexico.

The Rio Olympics, however, were advantageous. We transported about 25 percent of passengers traveling

Q: What is LATAM’s strategy to expand its reach beyond

to the Olympics, 30 percent of Olympic athletes and

the Americas?

15 percent of the world’s athletic federations, including

A: We are implementing an integral plan to expand our

all the Mexican athletes. Operating in such a large

global reach. Our goal is to create a network that connects

region allows us to diversify and to move and adapt our

and promotes all of Latin America. Such a network can

network to areas that are growing. For instance, Mexican

grow organically, by gradually opening more routes, or

travelers see Brazil as a business destination so we have

through alliances. LATAM Airlines Group shareholders

not seen a reduction of Mexican flights to Brazil. Other

have voted in favor of a US$613.2 million capital increase,

countries in Latin America are growing, such as Chile,

paving the way for Qatar Airways to acquire 10 percent

Colombia and Peru.

of the company’s stock. This acquisition validates our hard work and will strengthen our projects for the short,

Q: Which new routes will start operating and how is the

middle and long term. Having Qatar as an ally is an honor

airline planning to grow in Mexico?

for us and creates the potential to widen our destinations

A: We grew significantly in 2015 in terms of destinations.

in Asia and the Middle East.

Our network is based in four hubs: Sao Paulo, Brasilia, Santiago and Lima. The latter destination is important

Q: What characteristics define LATAM Airlines Group’s

for Mexico and is showing promising growth. Most

fleet?

remarkably, we are introducing our first flight to Africa

A: Our fleet is always undergoing renovations so we can

through a route from Sao Paulo to Johannesburg.

offer faster, safer and more environmentally friendly flights. LATAM’s fleet is 7 years old, making it one of youngest in

In Mexico, we operate from Mexico City and Cancun and

the region. We operate a variety of Airbus and Boeing

new destinations include daily flights from Cancun to

wide and narrow body aircraft. Our business model mixes

Bogota and Sao Paolo. We will focus on strengthening

cargo and passengers so it has to accommodate both

our operations to Cancun by introducing a more

efficiently. Distances in South America are long enough

efficient fleet with higher capacity. Along that line of

to require a fleet of large aircraft. Ours includes the

thought, we are now flying the Boeing 787 Dreamliner

Boeing 787, 767 and 787-900. We are the first airline in

daily from Mexico City to Santiago and we expect to do

America to fly the Airbus A380, of which we have three

this route next year with the 787-900, which can hold

and expect to receive six more this year. LATAM also plans

300 passengers.

to incorporate the Airbus A320neo.

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VIEW FROM THE TOP

YOUNG AIRLINE GROWS WITH REGIONAL CONNECTIVITY RODRIGO VÁSQUEZ Director General at TAR Aerolíneas

210

Q: What are the biggest challenges TAR faces with its

sound example. There are other solid structures such

operations in Mexico?

as the Cuernavaca, Palenque and Chichen Itza airports

A: Mexican civil aviation law does not distinguish

that are not used for commercial aviation. Those

between different types of airlines. All airlines, from the

airports need a commercial airline to set up operations

largest carriers such as Aeroméxico to smaller companies

because many are a good match for TAR and represent

operate under a federal concession that contains the

opportunities. Since we fly smaller jets, we do not

exact same terms. This makes it proportionally much

deal with the same problems that larger aircraft may

more expensive to be a regional airline.

encounter with airport operations.

We have asked for some kind of recognition of the

TAR does not fly to Mexico City’s airport because it is not

distinction because the regional aviation industry has

part of our strategy. We are trying to define opportunities

different requirements to legacy aviation. For example,

outside the capital, which is the only airport in Mexico

Unique Airport Tariffs (TUA) do not distinguish between

that receives complaints in terms of slots. We do not

route lengths, making TUAs a restriction to cheaper

experience any landing or takeoff slot problems in the

tickets. We have discussed these problems with DGAC

airports we fly into. There is much untapped potential

and, while they do recognize these issues, they cannot

in almost all the regions in the country for low-density

easily differentiate between the two route lengths to

international operations.

date. Although it might take some time for this system to change, we are sure that it will in the future.

Q: How can regional airlines like TAR Aerolíneas help spur economic development in lesser known regions of

Q: How is the evolution of the Mexican aviation sector

Mexico?

influencing the company’s business strategy?

A: Since we have a low-density target, it is easier for us

A: Mexico is going through an important stage of

to set up flights that larger carriers cannot manage as

development that affects the whole country and that

easily. There is a huge opportunity for TAR to meet the

has created new opportunities for the aviation industry.

needs of some of the newly developed zones in Mexico,

Originally, all legacy carriers in Mexico were founded

such as connecting the popular manufacturing locations

to cater to Mexico City. TAR, on the other hand,

in the Bajio region with northern cities. We are analyzing

was conceived to draw on opportunities in regional

the strategic component that companies in this location

connectivity. We do not impose a specific model on our

require from the aviation industry and uniting forces

clients. Instead, we visit each region to ascertain the

with local governments and entrepreneurs to create a

type of aviation product they need.

plan to cater to this segment.

The company has divided the country into six strategic

Local governments and airport groups play an essential

regions and keeps the characteristics of each in mind for

role in developing a unified strategy to generate flights

all routes. We target market niches, including fishermen

to previously overlooked destinations. Authorities must

who go on seasonal leave and retired travelers.

support commercial airlines to strengthen connectivity. This will provide more options for travellers.

Q: Considering the many locations in which TAR operates, how much of a challenge does local airport

To increase our presence, we are taking advantage

infrastructure present?

of technology and we began operating a web-based

A: Mexico has fantastic infrastructure for aviation,

reservation system as a ticketless company. TAR

taking Queretaro Intercontinental Airport (AIQ) as a

connects with its customers through technology.

Q: Why does TAR prefer Embraer aircraft over other units to form its fleet? A: We chose our aircraft after a comprehensive analysis

TAR transports 50,000 passengers per month but plans an increase to 80,000 passengers a month in 2017

of our target market, for which we implemented an origin-destination and multi-segment structure. Each aircraft makes around eight landings per day, so they have eight daily segments. Embraer aircraft were designed to match this specific type of operation. We transport 50,000 passengers per month but this figure is growing. We plan to increase to 80,000 passengers a month over the next 12 months. In 2017, our target is to fly over 1 million passengers a year.

received. In the future, we want to complement our TAR is a focused project and if we stick to the concept,

services with value from other service providers, such

we will remain in very good shape. Despite the many

as hotels, car companies and so forth.

distractions that exist, we have the conditions to continue down this road. This type of aviation has a lot

Q: What are TAR’s next steps to consolidate in terms of

of potential and that should protect the project.

growth and expansion? A: TAR serves 29 national destinations with 10 aircraft.

Q: As a relatively young airline, how does the company

In the short-term, we plan to expand the fleet by 15 or

balance competition and collaboration with major

20 aircraft to cater to existing demand more effectively.

commercial airlines?

In the final quarter of 2016, we will launch our Imagine

A: Commercial airlines do not pose any competition to

World operations, which will be strictly focused on

our operations because they have different strategies,

business flows arising from this region. The model is

airplanes and business visions. Therefore, they target

focused on business but also targets tourism, which

different customer segments. We see ourselves as

requires good connectivity with North and Central

a complement to these legacy carriers and there

America as well as Europe. The latter destination will

are significant opportunities for everyone. We plan

operate through the Caribbean.

on collaborating with larger carriers, both local and international, because locating a distribution platform

We want to continue growing, specifically with our

here in Mexico could be beneficial to every player in the

Embraer 45 aircraft, and then establish our international

industry.

operations, which kicked off in summer 2016 with a route from Queretaro to San Antonio. The company

Taking advantage of our strengths in Mexico, we are

will continue strengthening its international presence

analyzing the development of an international market,

by increasing its number of aircraft operated to include

first to the US. We have just received our international

90-seater and 70-seater Embraer. These will be used

certificate from the FAA. TAR operates similarly to a

to create direct connections from Mexico to some

franchise so we would like to look into the possibility

destinations in the US.

of establishing operations in the Latin American market where a need for this type of airline exists. Mexico has

Our internationalization strategy will be defined in

been successful in exporting aviation services to the

2017. It is a major step forward for us that poses a lot

world so we can certainly be successful if we comply

of challenges. The most critical factor in an aviation

with US regulations, which would allow us to compete

company is security so we are moving toward getting

almost anywhere.

the AIOSA certification from AIATA, which ensures that TAR complies with all international regulations,

Q: How has your Star Club been received and how has

processes and certifications.

it been growing? A: We are always looking for ways to add value to

We also plan to start an MRO near Queretaro’s airport.

our services. Star Club grants our frequent customers

We want to differentiate our brand through our close

specific advantages, such as getting on or off the

contact with customers. We do not treat them as

plane before anyone else. In this type of aviation, we

numbers, we treat them as people with specific needs

know our customers by name, which creates plenty of

that we need to meet and the company is very focused

opportunities to offer added value in terms of service.

on providing a high-quality service to all passengers

Star Club was a great idea that has been very well

that travel with TAR Aerolíneas.

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VIEW FROM THE TOP

FROM MEXICO TO THE AMERICAS JORGE BADIA Deputy Director General of Magnicharters

Q: How does Magnicharters differ from low-cost airlines

aircraft, which was an established brand among Mexican

in the tourist segment?

airlines. Changing to Airbus at this point is not a feasible

A: Low-cost airlines are growing as an attractive choice

strategy because it would involve extremely high training

for passengers interested only in transportation from A to

expenses as well as new tools and storage.

B. Our model is vastly different because we focus on the 212

tourism market niche overlooked by other airlines, instead

Q: What are Magnicharters’ plans for growth and new

of targeting corporate travel. Catering to the tourism

areas of expansion?

niche means we must offer much more than an airline

A: Magnicharters is three companies in one: an airline, a

ticket. We offer comprehensive services for trips including

shipping enterprise and a charter company. Commercial

transportation, hotel and tours. Our objective is to provide

aviation accounts for 95 percent of our revenue and 5

excellent customer service at all times from the moment

percent from charter services. We have not taken advantage

the ticket is sold, at the airport reception, during the flight,

of our potential as a shipping company but we hold all the

the reception at the hotel, tours provided and during return

necessary permits and that is something we will implement

journeys. To ensure we adhere to our promised quality

in the future. We are commercializing chartered services for

standards, we handle all customer service at the airport

large groups, which is economically more feasible for them.

and hotel and stay in direct contact with passengers at all

The company performs its own maintenance services and

times. An interest in strengthening our service chain led

having these in-house increases our competitiveness.

to our focus on touristic routes, including Mexico City to Merida, Cancun, Acapulco, Huatulco and Zihuatanejo. Our

The company plans to continue offering competitive

main hubs are Mexico City, Monterrey and Guadalajara.

prices. Due to low oil prices and a more expensive dollar, the Mexican economy is facing one of its most difficult

Q: How does Magnicharters plan to renew and expand its

periods. We expect this trend to turn around and that

existing fleet?

individuals will increasingly travel for pleasure. Mexico has

A: We have 11 Boeing 737 aircraft: two 737-200s, eight 737-

faced many crises but always recovers. As an airline we

300s and one 737-500. We are replacing the 737-200 for

are betting on the country’s recovery as the foundation

the 737-300, which employ midlevel technology and is

on which to expand. We also will focus on widening our

still being used by many airlines in the US. The company is

international reach. We have some partners in South and

implementing a five-year plan to modernize our entire fleet,

Central America with whom we will need to increase

probably with 737-700 or 737-800 models. This will require

exchanges once we expand to these regions. In the US, we

several training courses for our personnel from maintenance

would like to generate new partnerships with hotel chains.

workers to flight attendants. Once this renovation is implemented, we will analyze whether to expand to the US

Magnicharters is the second oldest airline in Mexico. Having

and to Central and South America using the same tourism-

begun with two pilots, five flight attendants and three

focused business model. We will also expand our fleet to

mechanics, we now have over 1,100 employees. We also

20 aircraft within the next five to 10 years. The new, modern

are the only airline in Mexico to have recovered after an

fleet will allow us to reach greater distances and optimize

operations suspension, thanks to our excellent workforce

airplane use as modern aircraft require less maintenance.

and administration. We are capitalizing on our experience

While this is a large investment, it is necessary to remain

to continue growing. The company is part of the committee

competitive, especially after the implementation of BASA.

for the construction of the New International Airport of Mexico City (NAICM) and we have already negotiated

When we acquired our aircraft, Airbus’ fleet was young

several adjustments with the developers, including larger

and untested in the country. We leaned toward Boeing

waiting rooms and hangars close to the landing tracks.

VIEW FROM THE TOP

DISCOVERING, UNLOCKING OVERLOOKED MARKETS OCTAVIO HERNÁNDEZ Director General of Discover the World

Q: How does Discover the World help airlines overcome

Now they have all the necessary information available at

the most common challenges on entering a new market?

a click. The Internet has increased passenger access to

A: Airlines face challenges ranging from regulations to public

aviation service providers and gives users information

perception. The highest hurdle is finding representatives in

to make informed decisions with alternative payment

the country capable of handling these processes on their

methods, which changed the operating model for airlines. 213

behalf. Airlines can struggle to adapt their product to the local market so Discover the World has been in charge

Q: What are the main advantages that Discover the World

of generating new markets for foreign airlines in various

can offer airlines?

countries since 1981. To enter a new market, airlines have to

A: We have a strong administrative and legal team able

invest in market research and marketing. We simplify this

to capitalize on opportunities in areas previously not

process by offering them a comprehensive solution before

considered. Airlines interested in entering the country

they even touchdown in the country. This business model is

can contact us for support but we also approach airlines

convenient for airlines as they only pay us per ticket sold.

to illustrate the potential market they would have in

Discover the World supports airlines through regulation and

the country. We have a team that searches for clients

approvals processes, helping them penetrate new markets.

at many international events. We represent airlines worldwide, including Air New Zealand, Etihad Airways,

Once the market is strong enough, airlines begin flying

GOOL, Icelandair and Singapore Airlines. The market

into the country and often prefer to continue working with

will continue growing organically but we help it grow

us. Some success stories include America West Airlines

even faster. Arab airlines represent a market niche that is

and Air Berlin. This latter airline had a sound reputation

growing significantly and has potential to grow in Mexico

in Europe and came to Mexico as a charter airline for

but remains unknown in the country. We capitalize on

European passengers. After Air Berlin acquired Etihad

overlooked areas to support the growth of an airline.

Airways its business model for Mexico changed to that of a regular airline but most of its return flights did not have

Q: How would you describe your growth in Mexico for

enough occupancy to remain competitive. In this case, we

2016, in spite of low periods?

strengthened their Mexican market reach by creating an

A: In terms of revenue by the middle of 2016, our

interest to visit these countries among the local population.

Mexican offices were 11.5 percent from reaching the total growth the company obtained in 2015 and we will have

Q: What changes have you perceived in the global and

incorporated four more airlines by Jan. 1, 2017. Mexico has

Mexican aviation market?

many opportunities for growth in aerial travel because the

A: Mexican travelers represent a small percentage of the

country is positioned as the strongest emerging market in

population but they are a proportion of a large number.

Latin America, evidenced by our company’s growth. Low

IATA travel agencies sold US$2.1 billion dollars in Mexico.

periods do not impact us heavily because we adapt to the

That shows higher dollar prices are not significantly

fact that what some entities consider a low season is high

impacting the aviation industry, which is prepared for

season for another. For instance, December is perceived

these fluctuations. We expect BASA between Mexico

as a good month but the preceding and following months

and the US to generate many opportunities for all airlines

less so. While an airline may face a stronger season during

operating in Mexico.

one period, another airline in a different location may find the opposite phenomena at the same time. It is feasible

Modern technology, is making the world smaller, simplifying

for us to shift our focus between airlines depending on the

processes related to flying. Decades ago, travelers would

time of the year. We also promote corporate travel during

spend a longer time evaluating before acquiring a ticket.

low seasons to counteract low tourist travel trends.

VIEW FROM THE TOP

CONNECTING MANY SERVICES, OFFERING MANY OPTIONS FRANCISCO CEBALLOS Mexico Country Manager at Despegar.com

214

Q: How is Despegar.com capitalizing on Mexico’s growth

We have alliances with promotors at international

in air passengers?

destinations, such as Visit Las Vegas and Visit Orlando,

A: Mexico ranks third in importance among the 21 countries

and national entities in Riviera Nayarit and Cancun. In

in which Despegar.com operates, after Brazil and Argentina.

Mexico, destinations such as Las Vegas and Orlando are

We are betting on a combination of a wide touristic offer,

extremely popular so we want to continue developing

competitive

the

alliances of this kind. We also have smaller partnerships

technology that backs our platform to keep our position

prices,

financing

opportunities

and

with technology developers, including Oracle, to develop

as industry leaders and to help us increase our client base.

automated service and operations solutions.

One of the main advantages of the tourism sector is that it can be automated easily. We believe our online sales

Q: How can Despegar.com shield itself from local and

strategy will allow us to maintain our double-digit growth

global economic fluctuations?

for the next few years. Despegar.com will capture the

A: As a company, it is necessary for us to diversify our

natural increase of the tourism industry and attract clients

product and distribution because that allows the company

from less efficient sales channels.

as a whole to continue growing even if some areas shrink. We are working closely with the promotional councils of

Q: What are the main advantages that Despegar.com

the destinations we work with to find ways to support

offers over its competitors?

them. In most cases, these efforts crystallize in alliances

A: As the largest travel agency in Latin America, we are

with the destinations, permitting us to offer additional

in an advantageous position to create agreements with

discounts to visitors. Our ultimate goal is to provide

various suppliers. Through these agreements, we can offer

customers with the best possible available offer.

quality products all over the world. Our strategy focuses on variety and price. We are trying to reduce the steps

In Mexico, we are in an excellent position due to varied and

to acquire a product, both on our webpage and through

high quality local destinations. We have seen migration

our app. Mexico has the largest number of sales through

toward domestic destinations that pushes their growth. This

mobile devices in Latin America. Twenty-three percent of

is the case for Cancun, which has high occupancy rates and

our sales were performed through tablets and cellphones.

is growing as a tourist destination. Local alliances help us

This high percentage can be explained by the ease of use

to weather global economic instability. It is always possible

of the platforms and the offers we make available.

to use exchange rates to manage this risk through financial instruments. An IPO is a priority for us but not a necessity

Q: Which alliances were necessary to support your

as we have solid financial and market positions. We will

operations?

become public when necessary according to our strategy.

A: We have connected 200,000 hotels at a global level but our agreements extend beyond hotels and flights, including

Q: What are Despegar.com’s short-term goals?

arrangements with several banks to offer interest-free

A: In 2017 we will focus on three areas. The first will be

credit. We are pioneering an e-wallet application alongside

cellphone technology to increase our number of users.

Bancomer, which will generate a temporary credit card

The second is product personalization. We want all our

number while an online sale is performed to ensure a

services to target individual users directly and according

simple and safe process. The company also is developing

to their preferences. The third is the generation of dynamic

a co-marketing strategy to allow customers to pay with

packages to include airplane tickets, hotel reservations,

points. Banks are essential for the industry and associating

car rentals and tickets to local shows with flexible dates.

with a financial product allows us to increase sales without

All this will be backed by technology that automates

sacrificing our profit margin.

processes to generate savings while increasing sales.

VIEW FROM THE TOP

ARMING TRAVELERS WITH DIGITAL TOOLS RAFAEL DRIENDL Country Manager Mexico at Kayak

Q: What was Kayak’s strategy to penetrate the Mexican

percent of accesses to our page are from a smartphone

market?

in Mexico, a model that we have monetized perfectly. We

A: Kayak is focusing on Mexico since the country is a

expect this percentage to keep increasing. The only problem

first-class business center. Mexicans consider traveling

we have encountered in Mexico is connection speed.

important but they had few options to search for ways to do so. They were already using the US version of Kayak’s

Q: What are the main trends you have perceived in the

platform so it made sense to create a Mexican version.

Mexican market?

After the acquisition of Kayak by The Priceline Group,

the internationalization strategy took shape. Mexicans

superfluous but the panorama has changed. Travel has

now have the necessary tools that allow them to look for

become a real possibility for many citizens. Mexicans

international trips from the comfort of their own homes,

mostly search national beach destinations. The most

with a greater range of options than a travel agency.

popular city in Mexico is Cancun both for domestic and

Twenty

years

ago,

traveling

for

Mexicans

was

Latin American tourists. It is even more popular than Rio It was important for Kayak to establish a strong presence

de Janeiro was during the Olympics. Cancun also is one of

considering the potential and reach of Mexican companies,

the most popular searches from the US. The top 10 most

such as Aeroméxico. Our strategy was to enter Mexico

popular destinations in Latin America include four Mexican

with a large investment and local alliances. For a time,

cities, making the country a world-class destination. There

these alliances were negotiated from abroad but Kayak

has been a significant shift in Mexican travel patterns, with

understood the importance of adapting to local culture

an increasing number of national flights.

to create stronger bonds. Our core business is to index travel partners. These include airlines, travel agencies, hotel

Q: Which new programs is Kayak incorporating to its

chains, car dealers and tour providers.

platform? A: We have many programs in beta version. Our app will

Q: How is Kayak working with other online travel

provide real-time information on the status of flights and

platforms?

reservations without the need to access an email account.

A: Rather than competing we work closely with other online

We also have a beta platform that allows clients to interact

platforms in the US, Europe, Brazil and Mexico. Despegar.

with Kayak by voice. The Priceline Group recently acquired

com is one of our largest partners. This relationship allows

OpenTable, which may one day permit the introduction

clients to compare different platforms and grants them

of restaurants to the platform. US users can book flights

access to lesser-known international platforms. Travel

from their Facebook account and this feature may be

agencies are our partners and they chose to include their

introduced to Mexico in the future. We cannot promote a

services on Kayak’s platform. They often offer packages

single hotel or airline but we can provide a compilation of

that include return flights with the same airline. At Kayak,

data to help users decide.

we can offer the return flight with a different airline, which may represent lower costs for the user.

Q: What are Kayak’s main goals for 2016? A: Kayak is now the largest metasearch engine in the

Q: How does Kayak plan to overcome Mexico’s less

world. Our goal is to be at the forefront of Mexicans

commonplace Internet use?

travelers’ minds and develop the necessary tools to

A: Mexico is among the Latin American countries with the

support them in anything they need. For this year, our

greatest access to smartphones so Kayak is betting on its

goal is to incorporate more local brands to our platform,

mobile platform. If we were to launch the company today,

reflecting Mexican user preferences. We plan to grow

it would be a fully smartphone-based company. About 40

through events and promotional campaigns.

215

AIRCRAFT SPOTLIGHT

216

AIRBUS A380 The Airbus A380, the longest passenger airplane in the world, provides a one-of-a-kind traveling experience for passengers, whether they fly economy or premier class. Within its 72.72m overall length the aircraft can accommodate 544 passengers in four different classes. Its main deck is 6.5m wide and its upper deck 5.8m wide, stretching the space per passenger. The A380 has a four-class standard layout with 18in-wide seats in economy class. The premium economy section has additional space to accommodate the growing demand for this particular traveling-class. Even though its business class full-flat beds are distinguishable features, the firstclass cabin interiors have truly unique characteristics that stand out from every angle. First-class interiors accommodate private suites and social areas, designed to make flights as comfortable as possible. Air France flies the A380 daily between Mexico City and France. Innovation and improvement is not exclusive to the passenger experience. The A380 has reduced fuel consumption and noise levels, emitting 75g of CO2 per passenger kilometer and lower NOx emissions. The use of advanced aluminum alloys and glass fiber increases the aircraft’s efficiency and makes it 15 tons lighter than an entirely metal airplane of the same dimensions. The airplane’s efficiency lowers operating costs, offering 15 percent cheaper direct operating costs per passenger than its competitors. When used on high-demand routes, it can increase an airline’s profitability by up to 65 percent. The A380’s 60 percent larger capacity per slot in comparison to the Boeing 747-8, its closest competitor, allows airlines to replace multiple flights with smaller aircraft in a single plane. The A380 also features Airbus’ brake-to-vacate technology that allows pilots to approach and land more effectively, reducing runway occupancy time by almost 30 percent. Additionally, the aircraft’s two engines make landing and departure quieter, contributing to the reduction of noise. The cockpit’s design includes the latest technologies displayed across eight interactive screens that can be controlled with a track-ball cursor. It also features a heads-up display that increases pilots’ situational awareness every step of the way. Even though the A380’s cockpit features the latest technology, it shares common characteristics with the rest of the Airbus aircraft family, reducing the training needed for the crew when they fly different Airbus airplanes.

217

VIEW FROM THE TOP

LEADING AIRLINE EXPANDS ITS CARGO OPERATIONS RAFAEL FIGUEROA Director General of Aeroméxico Cargo

218

Q: How does Aeroméxico Cargo contribute to the growth

To handle this growth most airlines are increasing their

of the country’s economy?

capacity, which has caused a reduction in transport rates.

A: Aeroméxico Cargo plays an essential role in the entire

Much of our operational costs are dollar based and the

supply chain. In the domestic market, one of every two

increasing value of this currency is posing a challenge. We

kilos of cargo is transported by Aeroméxico. We strengthen

used to capitalize on lower jet fuel prices but the dollar has

Mexico’s

international

been reducing these gains. These costs have increased for

commerce by transporting one of every five kilos of imports

exports

market

and

support

pure freighter flights. Thus, while we expect to transport a

and exports. Aeroméxico Cargo is the main exporter of

growing amount of merchandise, revenue will be impacted

Mexican perishables, technology and fashion and we

and we have to increase efficiency and productivity

support local industries including automotive, aerospace

to reduce operational costs and remain competitive.

and pharmaceuticals. No other airline or consolidator moves

However, Grupo Aeroméxico is receiving 10 more wide-

as much cargo as Grupo Aeroméxico. Our business model

bodied Boeing 787-9, greatly increasing our capacity and

uses mostly the cargo belly of our passenger airplanes but

market penetration.

we have one specific aircraft for cargo. Another significant part of our strategy is to improve our Q: What challenges does the air cargo industry face and

load factor because all unused space in the cargo hold

how does the company overcome those?

is waste. In 2013, our load factor was 54 percent but we

A: The global air cargo market has grown for the past two

have improved it to 67 percent and expect it to continue

years as the amount of shipped merchandise has increased.

rising. Our fleet has one of the highest load factors

globally, even though we have a significant number of narrow body aircraft. Q: How is Aeroméxico Cargo addressing specific needs

Aeroméxico Cargo has grown more than 100 percent in three years

for different manufacturing industries? A: We direct our logistic solutions to different markets

than 100 percent in three years. This was achieved by the

and we have strong alliances with many members of

continuous improvement of our market share and better

the production sector. Aeroméxico Cargo works with

and more reliable planes including the Boeing 787-8.

the aerospace industry because it also requires specific solutions, such as the delivery of landing gear from Mexico

Q: What alliances were necessary to consolidate the

to Europe. We are working with clients at five aerospace

company’s global presence?

clusters and we expect to continue offering a solid product

A: We have partnerships with almost all airlines in the

to this buoyant industry.

world. For instance, if we want to move an object from Tuxtla Gutierrez in Chiapas, to Lyon in France, we fly it

Q: How is Aeroméxico Cargo identifying and addressing

first to Mexico City and from there to Paris, where we have

client concerns to improve its services?

an agreement with Air France to continue the dispatch to

A: Aeroméxico Cargo prides itself on providing the

Lyon. Alliances of this kind allow us to connect with areas

best customer service in Mexico. Three years ago, we

to which we do not have direct flights. We have other allies

developed a methodology to measure client satisfaction

that transport merchandise by land from the airport to its

and performance on our operational key performance

final destination.

indicators (KPI). Our timely deliveries were at 88 percent, a significant number considering the amount of cargo we

Our existing alliances with UPS, FedEx and some

manage, but this number has grown to 95 percent and we

pharmaceutical companies are one of our greatest

have the most punctual delivery in the market.

strengths and we expect this collaboration to keep growing. Our challenge is to create different alliances

To increase our profitability, we are investing in improving

that address different market niches, such as our recent

our systems and training our human capital to empower

partnership with Lumen to cater to customers who

our team and provide the best service. Standardizing

want to mail documents. They can conveniently print,

customer service protocols is a complex process as it

sign and mail them from a single location. We also are

involves over 1,000 direct employees and almost 2,000

targeting high value niches, such as the cold chain and the

indirect employees. Aeroméxico Cargo has grown more

pharmaceutical industry.

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VIEW FROM THE TOP

IMPROVING LOGISTICS EVERY STEP OF THE WAY AGUSTÍN PICADO Country Manager at UPS Mexico

Q: In what ways do UPS’ services as a logistics provider

such as Target Search, which allows the organization of

facilitate local manufacturing?

companies under certain criteria. UPS has developed

A: We have a comprehensive solutions portfolio that

several technologies to streamline these procedures,

includes air, ground and ocean transportation for packages

which are already in use in many countries.

of all sizes and weights. In Mexico, we are emphasizing the 220

optimization of cross-border solutions as 76 percent of

Q: What solutions is UPS developing for manufacturers

national exports go to the US. Our UPS Exports in Mexico:

and how are they being developed?

Challenges and Opportunities study of Mexican exporters

A: Last year we surveyed over 470 decision-makers from

found that half of the surveyed decision-makers were

the aerospace, technology and automotive industries who

using one logistics provider and the other half used two,

ranked speed and reliability of deliveries as their main

three or more. Among the first group, 95 percent reported

concerns, followed by product integrity and efficiency in

satisfaction with the service, while only 55 percent of

customs procedures. Our portfolio of solutions is aligned

those that use two or more logistics providers were

to solve these challenges. Clients are often unaware they

satisfied. This indicates that involving a larger number of

are using incorrect logistics solutions and they incur

transport companies increases complexity in the supply

costs as a result. Recently we spoke with an aerospace

chain, hence the possibility of discontent with the services.

company in Queretaro that thought they were using the incorrect logistics solution. By optimizing its processes,

Ground cargo to the US represents US$20 billion. Beyond

the company reduced its costs by 15 percent annually. We

ground, air and maritime cargo, UPS offers warehousing,

have helped many clients find the appropriate logistics

after sale, redistribution and inventory management. We

solutions to their needs. In addition, by choosing UPS as

have aerospace facilities to increase speed, flexibility and

their only customs agent, companies can reduce waiting

efficiency to meet the needs of the sector. Likewise, UPS

times and third-party participation.

has distribution centers specialized in other industries such as automotive and pharmaceutical.

Since the process at the border can be long and complex, most export companies prefer to make a single trip.

Q: What are the main challenges Mexican makers face

Therefore, they often need to consolidate several suppliers.

when exporting?

When more than one supplier is used, customer satisfaction

A: Mexico has improved its road infrastructure but there

can be impaired. UPS offers diverse guaranteed services

are still some obstacles on major highways. One of the

to avoid this need for several providers.

challenges for Mexican exports via road and air is the efficiency of customs procedures. This is one of the

When it comes to the aircraft manufacturing industry, a

most difficult areas for the logistics industry because

missing part can stop a production line, causing immense

truckloads repeatedly may have to wait weeks at the

financial strain. The local aerospace industry requires fast

border before they can cross. Along with other logistics

and specialized solutions to ensure that essential pieces

companies, we are approaching government officials to

arrive on time and UPS can provide them. When exporting,

help them understand the needs of our industry and to

it is necessary to analyze both the size of the package and

promote streamlined processes, which would facilitate the

its urgency. Transportation time can range from a day to

movement of aerospace exports and imports.

a week depending on these factors. Some clients prefer to spend up to US$80,000 in charter flights to send a set

Customs would benefit from establishing preclearance

of pieces in a day and avoid production loses. However,

processes to expedite the transport of products. Another

they could shift to UPS Worldwide Express Freight, which

solution would be to incorporate new technologies

provides this overnight service at a fraction of the cost.

221

This service is growing strongly, as emergencies are

benefits to transportation companies and their clients. For

common in a sector without a consolidated supply chain.

UPS, it will also reduce the need for extra trucks during peak season, before Christmas, for example.

Q: What were the main advantages of UPS’ acquisition of the company Coyote Logistics?

Q: What are the company’s plans to grow alongside local

A: Coyote Logistics is driven by technology and not

aerospace companies?

based on assets. With its acquisition, UPS coordinates

A: The structure of the aerospace industry is comprised of

the transport of goods across the border. Many major and

a few OEMs supported by Tier 1s that are in turn supported

medium suppliers send their loads to Mexico or the US

by Tier 2s and so forth. While Tier 1 and 2 companies

and return with an empty truck. Coyote Logistics has a

generally have a global presence, Tiers 3 to 5 can be of any

database to identify the origin and destination of trucks.

size, even SMEs. We hope to improve the way products

With this information, it can connect clients without a

are transported. Carriers sometimes wait up to a week

truck fleet interested in transporting their products. This

for a truck to be full before crossing the border, upping

creates extra profit for truck owners who would have

inventory costs, which are not usually considered. UPS

made the trip either way. Coyote Logistics used to operate

uses a method of Supply Chain Mapping to optimize the

mostly in the US but after its acquisition, we are building

logistics procedures of companies to reduce expenses and

a Mexican client database. This will bring immeasurable

position their products anywhere in the world.

222

VIEW FROM THE TOP

GLOBAL EXPERIENCE TO SUPPORT LOCAL GROWTH VITOR BOCCI Vice President of Airfreight at Kuehne+Nagel

Q: What is Kuehne+Nagel’s national strategy for the

composition, transporting almost 500 tons of cargo. This

Mexican aerospace market?

is obviously well below the industry's potential. We expect

A: The aerospace market is very attractive and the need

our aerospace revenue to grow 30 percent this year.

for specialized logistics solutions will become more pressing when considering the market’s expected double-

We are making a significant investment to develop our

digit growth. Globally, we are placing great importance

aerospace participation by training and certifying our

on the aerospace sector and on being recognized as a

personnel. Through events, cross-selling among other

specialized logistics supplier that understands the vertical

worldwide Kuehne-Nagel offices and customer visits, we

needs of several industries.

continuously communicate what Kuehne+Nagel can do for the sector, the shelters and for the aerospace clusters.

One of Kuehne+Nagel’s specialized products for the aerospace industry is KNEngineChain, a product designed

Q: Why is connecting the clusters important and how will

for turbine transportation and engines, which is now

the company achieve that?

available in Mexico after an extensive internal certification

A: The lack of connection between Mexican aerospace

process. We also are implementing specialized services in

clusters translates to significant costs and logistics

this area for Mexico to deliver differentiated value along

inefficiencies for customers. By connecting the clusters,

the entire aerospace supply chain, from MRO services to

we can generate a better and more cost-effective solution

Aircraft on Ground operations. An optimal combination of

for all involved parties. Queretaro is definitely a focus

sea freight, airfreight, warehousing and trucking will be vital

for us so we have placed a key account manager for the

to develop a competitive strategy for the aerospace sector.

aerospace industry in the state but the US-Mexico border area is also a key in our strategic plan.

Kuehne+Nagel’s core differentiator is the consolidation of different commodities from various industry verticals,

Aerospace customers usually demand special services

converting them into the best possible service and cost

such as next-day deliveries, expedited solutions and 24-

conditions. Globally, more than 70 percent of air cargo is

hour customer service. These are common in the industry

consolidated but the combination with different products

but not always cost effective, leading local clients to rely

can be a plus for some industry verticals. In Mexico, we are

on expensive courier services to handle simple logistics

targeting markets such as automotive, pharmaceuticals,

requirements. Again, we see the US-Mexico border as the

perishables and obviously aerospace.

center of many logistics opportunities so the company will open in 2017 a new office in Chihuahua with a complete

Q: What is the company’s sector penetration?

commercial and customer service structure to deliver

A: In Mexico, aerospace is not our most representative

all local market logistics requirements and connect

vertical in terms of cargo tonnage but it is attractive due

Chihuahua’s cluster to the rest of our network.

to interest in this area from the country and also in the US. As US production keeps growing so will ours. Some

Q: How can Kuehne+Nagel help its clients to optimize

Mexican aerospace clusters have ambitious plans for the

their logistics and save costs?

construction of an airplane in Mexico, which would be a

A: We can connect Mexican companies through our

great opportunity for us. The aerospace industry frequently

gateways in Mexico, such as Mexico City and Guadalajara,

requires specialized logistics products because aircraft

as well as through US cities such as Los Angeles, Dallas

parts often require urgent delivery to avoid the expensive

and

costs of having an airplane out of operations. Aerospace

services and routes to increase logistics alternatives for

represents only 1 percent of our total airfreight business

the Mexican aerospace market.

Houston.

Kuehne+Nagel

always

developing

223

VIEW FROM THE TOP

FORMER CHARTER SERVICE TAKES CARGO HOLD FRANCISCO PERTIERRA Director General of AeroUnion

224

Q: What is the extent of AeroUnion services in Mexico?

is cargo infrastructure for smaller airplanes, the structure

A: After more than 20 years in the industry, we are leaders

needed for our Airbus 300 and Boeing 767-200 models is

in the cargo business. Unlike our competitors that use

almost non-existent. For instance, we had to invest almost

passenger planes for their cargo operations, we have six

US$500,000 in the Bajio region to perform the loading

cargo airplanes for imports and exports. Our main service

and unloading operations required. As of today, only

is international air cargo transport. Our flight routes to

Merida, Cancun, Mexico City, Queretaro, El Bajio, Tijuana

Central and South America primarily end in Guatemala,

and Toluca airports have the necessary loading bays.

San José, Managua, Panama, Bogota, Quito and Lima. To the US, we usually fly to Los Angeles, San Francisco and

Q: How could the federal government contribute to

Chicago, although Detroit also is a popular destination for

improving cargo operations in the country?

automotive industry content.

A: For AeroUnion’s operations, the federal government could support us by completing the construction of

AeroUnion started as a charter service company for other

the NAICM on time. AICM is our operating base, which

cargo airlines. Since we were operating flights for other

means that almost 95 percent of our flights depart from

airlines and knew which destinations most needed our

and arrive to Mexico City. Having our base in AICM is

services we decided to initiate our own operations. That

somewhat problematic. Since we perform nonregular

led to the route between Mexico City and Los Angeles.

flights, we are required to operate during the least

It was a heavily neglected route, so we decided to take

saturated hours. This means flying between 11pm and

the step toward operating it on our own. At first we

6am giving us a total of seven hours to operate. This is

only operated routes we knew to be profitable but our

not always enough to make roundtrips and that leads to

business has evolved and now we design our flights to

inefficiencies and reduces our competitiveness. In that

meet industry needs. For instance, the Bajio region

sense, NAICM will be a plus because we will be able to

needed flights to Asia so we used our interlineal tariff

perform more flights.

agreement with 14 Asian airlines to move products Q: What are AeroUnion’s growth expectations for 2016?

between companies in the Bajio and Asia.

A: We expect that by the end of 2016 we will have We still provide charter services but that only represents

grown 2-3 percent. Among the reasons for this small

20 percent of our annual income. Our retail operations

percentage is the US dollar exchange rate. Our export

with large cargo operators in the country account for the

operations benefit from the current price of the dollar

remaining 80 percent. All the economic sectors of the

but imports are suffering, which reduces our growth.

industry benefit from AeroUnion’s services, including the

Even though low jet-fuel prices have allowed us to

perishable food products sector and the high-technology

improve our tariffs, this does not compensate for our

industry. We transport equipment for Sony, Samsung, LG

lower rate-related income. As a countermeasure, we are

and Apple among others.

prioritizing cost savings and controlling expenses while optimizing our resources.

How

infrastructure

challenges

impact

the

company’s operations?

The company has healthy finances and we are confident

A: The lack of infrastructure is an impediment. We

that the period of turbulence will not last any longer than

sometimes cannot help customers because there is no

six or eight months. We expect that by 2017 we can start

infrastructure in their local airports to load and unload the

fleet renovations and the company plans to have at least

airplanes. This forces us to move our own equipment to the

two more fuel-efficient Airbus 330-200 to move almost

site, increasing the cost of our services. Even though there

70 tons of cargo.

VIEW FROM THE TOP

DIFFERENT SOLUTIONS, A SINGLE CORE EDUARDO ALBA District Manager of Expeditors

Q: What is Expeditors doing to establish a deeper

platform. This ensures a clear strategy for human resources.

presence in Mexico’s aerospace industry?

We hire mainly from Mexican schools. The company has an

A: Expeditors’ relationships with aerospace companies

internship program, in-house training that motivates our

in the US are more established than those in Mexico. We

employees and a very low turnover rate. Our staff’s low

are only beginning to make waves in this industry. One

turnover creates stability within the company, which is as

of the reasons for opening the office in Queretaro was

important as client retention to a company’s prosperity.

to create a closer relationship with these businesses. As a service integrator, we want to provide flexible and

Q: What are the main challenges you face here and how

varied services to our customers. For this need to develop

do those impact your operations?

strong partnerships with a wide variety of companies. We

A: Infrastructure presents the main challenge, especially

have excellent relationships with all the airlines, trucking

for airfreight, which has been developing at the pace of

companies and warehouses and have developed solid

the country’s growth. The inadequate number of direct

partnerships with companies not related to airfreight.

international flights from most Mexican cities results in expensive and time-consuming cargo changes. Old

Our Mexican operations are the fastest growing of all

infrastructure, such as AICM with its limited customs

Expeditors’ facilities around the world. The airfreight

holding areas, also make it more difficult for companies

market is increasing in Mexico at a quicker rate than the

that manage airfreight.

rest of Latin America. Our market penetration here is similar to our market share in the rest of the world and

Q: What specific solutions have you created for

the company is growing because we can offer integrated

manufacturing industries?

solutions to clients and promise excellent customer service.

A: Although airfreight is our strongest sector, we consider

Expeditors is a company that organically grows based on

ourselves logistics integrators. The more our business

opportunities and we have a strong sales presence that

solutions department can integrate different areas for

is based on expert knowledge and experience. While the

customers, the stronger our offering will be. We have

company’s market share in the country is below 5 percent,

a department that integrates end-to-end solutions for

there are enormous opportunities for us to grow.

automotive customers and we manage a large number of airfreight operations for this sector because we have new

Q: How does Expeditors capitalize on its global network

technological tools to help them with reliable tracking. We

for its operations in Mexico?

are working closely with automotive companies because this

A: We have a number of solutions for all industries but at the

industry will always require airfreight services. They must

core is our single platform and business solutions department

react quickly to changes and orders to keep production

implemented across all branches. When customers do

going. In addition to vehicle manufacturers, Tier 2 and Tier 3

business with us, they work with one single system no matter

companies also require airfreight solutions.

where they are in the world. The platform is electronically integrated, giving us a wide variety of customer data. It is

Q: What are your expectations for 2017?

reliable and gives real time information for tracking.

A: We have very high expectations for next year. Our customers’ growth has not slowed and this is encouraging

Q: What strengths are fueling Expeditors growth and how

for our business. Our own growth in the past five to six

does this apply to Mexico?

years has been rapid and there are still some industries

A: Our main strength is our organic growth with our systems

and markets we intend to penetrate. We expect 2017 to be

and staff. The fact that we have not sold, bought or merged

a big year for Expeditors in Queretaro and we hope to gain

with other companies has allowed us to have a single

more business in the Bajio region.

225

AIRLINE SPOTLIGHT

226

LATAM AIRLINES With 130 years in the aviation industry between them, in 2010 LAN and TAM airlines publicly declared their intention to marry both companies into one single holding: LATAM Airlines Group. The merger was formalized in 2012 and the group unveiled a new brand image in 2016. The merger between the Chilean LAN and the Brazilian TAM created one of the largest airline groups in the world. LATAM Airlines employs more than 40,000 people, has an aircraft fleet of 328 units and offers flights to 136 cities in 24 different countries, in addition to its cargo services to 140 different destinations in 29 countries. In Mexico, LATAM operates from Mexico City and Cancun. All the companies that were part of the LAN Airlines Group and its subsidiaries in Peru, Argentina, Colombia and Ecuador are now under the LATAM umbrella, along with TAM Airlines, TAM Air Transports of Mercosur, TAM Airlines Paraguay and cargo companies LAN Cargo, LAN Cargo Colombia, ABSA Cargo Airline and MasAir, now part of LATAM Cargo. In Latin America, the airline is responsible for moving twothirds of all passengers. It is one of the top three airline groups in the world. The marriage also has a financial benefit: a 5 percent expected reduction in operating costs in 2018. The strategy followed by LATAM is based on network leadership, brand leadership and customer experience, cost competitiveness and organizational strength. LATAM is the only airline in the world with seven subsidiaries in addition to its international operations: Argentina, Brazil, Chile, Paraguay, Colombia, Ecuador and Peru. Its main hubs are located in Santiago, Lima, Sao Paulo and Bogota. Lima is especially important for connections with Mexico and flights between both locations are growing promisingly. Environmental concerns are important for the group. For example, the paint used on its airplanes is 25 percent lighter than conventional paint, which will help reduce each craft’s weight by 20kg on average. This weight reduction is expected to reduce CO2 pollution by 3,900 tons every year. The group’s extended presence in South America, its diversified revenue base, a low-cost business model for domestic operations, its modern fleet and loyalty programs are among the company’s strengths. In May 2016, the first planes with LATAM’s new branding took off. The airline expects to have around 50 airplanes branded by the end of 2016, with the entire fleet sporting the new look by 2018.

227

EXECUTIVE TRAVEL

Years ago, few would have imagined that Mexico was about to become the world’s second largest market for private aviation. Mobility conditions, security worries and efficient time management all have been factors to boost the development of executive aviation. In the past few years, the country has witnessed an increase in the number of private aircraft, including helicopters. According to DGAC data, Mexico has 6,893 aircraft that are used for executive purposes alone, which is 4,000 more than those that function commercially. The development of private aviation also has bolstered other sectors such as airports used exclusively for the sector, MROs and FBOs. In addition to the traditional model of owning or renting private jets, new and innovative business opportunities are popping up. Cabifly, for example, is exploring the possibility of bringing the use of private aircraft to ordinary citizens.

This chapter features the views of executive aviation companies and the advantages and growth opportunities they expect from the Mexican market.

229

CHAPTER 10: EXECUTIVE TRAVEL 232

ANALYSIS: Private Aviation Flying High

234

VIEW FROM THE TOP: Jorge López, Aeroélica

235

VIEW FROM THE TOP: Agustín Lanzagorta, Avemex

236

VIEW FROM THE TOP: Emma Cruz, ICCS

237

VIEW FROM THE TOP: Ricardo Weder, Cabifly LATAM

238

VIEW FROM THE TOP: Gilberto Ramírez, Jetpro

239

VIEW FROM THE TOP: María Hinojosa, Eolo

240

FBO SPOTLIGHT: Eolo

242

VIEW FROM THE TOP: Andrés Arboleda, Privé Jets and Go2Jets

243

VIEW FROM THE TOP: René Garza, Jet Mach

244

INSIGHT: Alexis Javkin, Aerolíneas Ejecutivas

245

VIEW FROM THE TOP: Samuel Garcia, HondaJet

Eduardo Vega, HondaJet

246

VIEW FROM THE TOP: René Marcos, ExecuJet

247

VIEW FROM THE TOP:

248

AIRCRAFT SPOTLIGHT: Aeroélica's TBM 930

250

ROUND TABLE: World Economic Influences on Private Aviation

Luis Rayet, Rajet Air Services

231

ANALYSIS

PRIVATE AVIATION FLYING HIGH As commercial flights become more accessible to the

were for private use, according to 2015 data from DGAC.

average traveler, airports are becoming more saturated.

The latter number includes both aircraft used by airlines

Those who want to avoid delays, to swiftly move through

catering to private aviation and those for personal use.

immigration and to get from point A to point B as quickly as possible are increasingly turning to private aviation.

Xavier Caballo, Director General of Avianet, says executive

The segment is on the rise and Mexico is among the

aviation is increasingly being considered a tool for

industry’s leaders.

corporate travelers and that models of aircraft ownership are changing. “Many years ago, executive aviation users

232

While it comes at high prices, from US$3,000 to US$10,000

including corporations and private owners preferred to

depending on the aircraft size and company, private

own their aircraft but the costs involved were too high for

aviation is a more efficient way to travel than its commercial

this to be convenient.” This led to the increased popularity

counterpart, especially in terms of time but also in price if

of other business models including joint ownership, which

flying with a group, says Humberto Lobo, Director General

reduces operational costs while maintaining the aircraft’s

of Grupo Lomex. “Infrastructure and security issues and the

availability, and sub-leasing, where owners leave their

commercial sector’s lack of aerial connectivity make the

craft in the hands of a company that manages it and

segment attractive,” he adds.

leases it to third parties.

The US, which has the largest fleet in the world, counted

THE BIG ONES

6,871 commercial aircraft in 2015 while aircraft for private

Some of the country’s 360 operational airports host

use numbered 203,880, according to the Federal Aviation

private aviation services but two locations stand out. The

Administration (FAA).

first is Toluca International Airport (AIT), which is the largest private aviation hub in Mexico. Due to its location

Mexico has the second highest number of airplanes

45 minutes away from Mexico City’s central business

globally. Discounting the 563 aircraft that are exclusively for

district, the airport has become an attractive center for

governmental use, the country has 9,188 registered aircraft

executive flight. The airport’s growth in this segment can

of which 2,295 were for commercial purposes and 6,893

be traced to a presidential decree in 1994 that prohibited

AIRCRAFT IN MEXICO of units) STACKE AREA CHART(thousands (THOUSANDS)

10 8 6 4

Commercial (XA)

Private (XB)

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

Official (XC)

Source:xxxxx Source: DGAC 2015

private aviation at AICM, forcing those airlines to move.

advantages. “ADN does not depend on any airport operator

By 2015, AIT was hosting 80,000 executive aviation

group so we do not have to pay the 15 or 20 percent fee

operations a year, translating to 90 percent of the volume

on total billing that MROs in other airports pay,” says Carlos

of the airport’s activity. There is no slowdown in sight.

Díez, Director General of ASENSA.

“Private aviation is expected to grow by about 3.5 percent on annual basis,” says Lorenzo Ochoa, former CEO of OHL

While the private aviation industry is growing here, it also is

Toluca and current CFO of AIT.

vulnerable to economic trends such as the dollar price. “We have seen that when the dollar increases, clients fly less and

The second main hub is Del Norte International Airport

any modification or plans they had to replace aircraft parts

(ADN). Located north of Monterrey, Nuevo Leon, this airport

are delayed,” says Díez. To overcome these hurdles, some

has the distinction of being the only airport in Mexico used

are relying on good service and client trust while others are

exclusively for executive aviation and thus offers many

diversifying and looking at new technologies.

233

VIEW FROM THE TOP

PLATFORM MAXIMIZES SALES, TRADE POTENTIAL JORGE LÓPEZ Cofounder and Sales Director of Aeroélica

234

Q: What are Aeroélica’s capabilities and main strengths

Q: How have global and local economic fluctuations

to support the sale of business aircraft?

impacted Aeroélica’s market strategy?

A: Aeroélica was founded in March 2015 with the goal to offer

A: Business aviation benefits the worldwide economy

an effective and dependable platform to sell, acquire or trade

by efficiently connecting companies and individuals

business aircraft. We provide expertise in business and pilot-

and providing jobs for thousands around the world. In

owned aircraft sales and acquisitions and we are authorized

Mexico, it further supports businessmen by reducing

distributors of the fastest single engine turboprop, the TBM

travel time to areas with limited aviation infrastructure.

930. In this aircraft, I found all the key ingredients to create a

The business aviation industry has undergone several

successful company. As brokers and advisers, we must have

economic fluctuations. After October 2008, aircraft sales

the knowledge and capability to coordinate all processes

decreased worldwide, aircraft offer increased substantially

of aircraft sales and acquisitions, including pre-buy, export,

and used aircraft prices started to plunge. The dynamics

import, registry, customs and airworthiness.

in the industry changed drastically as some brokers and dealers went bankrupt and new companies emerged. Now,

Q: What are the TBM 930’s competitive advantages?

Mexicans who already own an aircraft are benefiting from

A: The TBM 930 offers owners and pilots the advantages of

low jet-fuel prices but the increase in the exchange rate

climbing and cruising like typical light jets with the economy

has slowed domestic aircraft sales. Aeroélica has focused

and flexibility of a single-engine turboprop. It has a

its market strategy on promoting the sale of more efficient

maximum cruising speed of 330 knots, making it the world’s

and modern business aircraft.

fastest certified, pressurized single-engine turboprop. The TBM has a unique ability to take off and land in hot and

We try to educate our customers to focus primarily on

high and short runways and still fly more than 1,350 nautical

operating costs and resale value. In the long run, when

miles with maximum useful load. It achieves unrivaled

our customers choose a newer, more fuel efficient and

quality through a mix of 31,000ft with a 19-minute climb

lower operating cost alternative within his budget the

rate, over 320 knots of cruise speed and an average fuel

buyer’s expectations are met or even exceeded. Mexico

consumption of only 60 gallons per hour. This pilot-friendly

has the second largest business jet fleet in the world

aircraft offers an integrated Garmin 3000 avionics suite, the

after the US but the percentage of aircraft older than

first ever touchscreen-controlled all-glass flight deck with

30 years is considerably high. This means there is an

high-resolution displays. A new E-copilot system has been

opportunity to renew and decrease the age of the

incorporated to ease the pilot’s workload and to increase

Mexican business aircraft fleet. Aeroélica’s goal is to be

safety features such as Angle of Attack (AOA), Under Speed

part of this transition.

Protection (USP), Enhanced Stability Protection (ESP) and Emergency Descent Mode (EDM) on the autopilot.

Q: What are Aeroélica’s plans for 2016 to consolidate its market participation?

The TBM rounds up with a sporty, sleek and aerodynamic

A: Our plan is to continue promoting and increasing sales

exterior including the most powerful PT6A engine available

of the new TBM. The aircraft has a lot of potential in

today, flat-rated at 850 shaft horsepower, a five-blade

our region and sales have been increasing annually with

Hartzell propeller and new winglets. Daher is currently

positive feedback from owners. Pre-owned aircraft sales

manufacturing the TBM 900 and TBM 930. Their main

also are a priority. We are closing the year with almost 10

difference is the Garmin 1000 keyboard and the brand

aircraft sold and we intend to keep increasing our sales

new Garmin 3000 touchscreen avionics suite. The TBM

at a sustainable level without compromising service.

worldwide total fleet will reach 800 units in 2016 with more

We also are considering developing the TBM fractional

than 1,365,000 operating flight hours.

program in Mexico as one of our goals during 2017.

VIEW FROM THE TOP

MONTERREY OR GUADALAJARA MAY SUIT LONG-TERM PLAN AGUSTÍN LANZAGORTA Director General of Avemex

Q: How did the joint venture with Universal Weather and

services to use it, including pilots and certifications. We

Aviation help Avemex as an FBO?

operate mostly with hourly packages purchased by major

A: Our joint venture with Universal Weather and Aviation

companies, as our target market is enterprises interested

was instrumental to our growth due to the enormous

in using the benefits of private aviation to its fullest, not

traffic they generate as one of the largest aviation

casual users. This year we will focus on consolidating

companies in the world. This joint venture grants us

our existing capabilities. Taking our long-term strategy

access to many airports and even access to credit,

into account, it might be beneficial to open new offices

fuel and other services and has allowed us to become

in Monterrey or Guadalajara. We are evaluating many

leaders in the Mexican market. The partnership has been

possibilities for growth with local and foreign companies.

beneficial for both companies. Q: What unique advantages does Avemex offer to clients Alongside Universal Weather and Aviation we provide

interested in subletting their aircraft?

services to a large number of aircraft, not only in

A: One of our greatest advantages is the company’s

Toluca but in every airport in Mexico. Our FBO area is

prestige. Avemex has operated for many years and is

growing and while our offices are in Toluca, we have

well known by clients and regulatory authorities. As

representatives in all major airports in Mexico, including

representatives of Cessna, our maintenance is held to the

in Los Cabos, Cancun and Monterrey, but we also can

highest quality standards and we are certified by FAA and

work directly with clients in smaller airports. Another

DGAC. Our fleet is new and our pilots are trained in flight

strong area is aircraft sales, both new and used, and for

safety. Our reputation as a trustworthy company allows

25 years we have represented Cessna, which is now part

our clients to see us as the safest option, if not the least

of Textron. We also have a strong maintenance area that

expensive option. Companies that do not operate with the

operates exclusively with Cessna aircraft.

necessary certifications do not represent competition for us. We want to provide our clients with a safe and quality

Q: How is your business divided between FBOs, MRO and

service even if this causes a rise in prices.

aircraft sales? A: It varies year to year because when aircraft sales

Q: To what extent do economic conditions influence

accelerate they overtake any other operation. The sale of

Avemex’ operations?

aircraft fluctuates substantially, as one year we may sell

A: The global economic crisis also influenced our FBOs

10 airplanes and only two the next year. An ideal business

and MRO because individuals are flying less all over the

opportunity for us is a client that buys an aircraft and uses

world and the number of flight hours has decreased across

our MRO for maintenance and our FBO to provide charter

borders. In response, we are modifying our services and

services. All our business areas operate independently of

prioritizing those that see higher demand. Our FBO and

each other but they are all linked, for instance aircraft sales

charter services, for example, are prospering in Mexico

are negotiated alongside MRO or charter services. By

because airplane owners are less willing to sell their

increasing our service offering we convince clients that we

aircraft. We have analyzed the possibility of creating

are the best option. All three of our divisions have grown

alliances similar to those in the US to provide these

steadily alongside executive aviation in Mexico.

services but these business models cannot be easily applied in Mexico as the majority of such operations are

To date, we administer 27 aircraft and about 22 of those

clustered in Guadalajara, Monterrey and Mexico City, while

belong to private owners and are operated by Avemex.

in the US these operations are spread all over the country.

Companies that own a private airplane and want to use it as

This system is not functional for Mexico as it would require

an aerial taxi lease it to us and we provide all the necessary

many ferry flights to the country’s main airports.

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VIEW FROM THE TOP

LARGEST FBO NETWORK LOOKS TO EXPAND EMMA CRUZ CEO of International Cargo and Corporate Services (ICCS)

236

Q: In what main areas does ICCS support its clients?

What

alliances

have

helped

ICCS

expand

its

A: We directly address the needs of pilots, passengers

international network?

and aircraft when they fly to Mexico and Latin America.

A: Our clients’ needs led us to create alliances with

We handle all necessary paperwork and the payment of

Latin American FBOs. We have traveled to Colombia,

airport fees to save pilots the need to do so, and work

Costa Rica and Belize among others to discuss potential

to ensure that time spent in immigration, customs and

partnerships or acquisitions. Most of our international

health is as efficient as possible.

clients are corporate travelers so we are targeting areas with a strong manufacturing industry. FBOs provide the

We know that safety, reliability, efficiency, privacy and

added advantage of allowing travelers to have meetings

comfort are crucial for private aviation customers. The firm

at our facilities before flying to the next location, avoiding

is building areas expressly for officials to check passengers

the need to travel through city traffic and the security

and crew within our facilities in Acapulco, Monterrey,

concerns this implies.

Cuernavaca and Chihuahua. Our main advantage is our knowledge and experience in the Latin American market.

Q: What trends are influencing ICCS’ business strategy?

Most of our passengers visit many different destinations

A: The cargo market has contracted because manufacturers

in Mexico, Central and South America and we can offer a

use logistics companies and commercial airlines to lower

uniform service in all locations. ICCS owns and operates

transportation costs. Executive aviation keeps growing,

the number one network of FBOs and offices in Mexico and

driven by security concerns and the intrinsic problems

provides integrated ground support to any aircraft type.

associated with commercial aviation. Furthermore, the large number of flights to Mexico City International

While we travel to many aviation conferences, forums and

Airport exceeds the airport’s capacity, leading to delays

events to promote our services, most of our clients are

and cancellations that push business travelers away

acquired through word of mouth, which is a sign of our

from commercial aviation. A lack of aerial connectivity in

excellent and personalized service. Internationally, our

Mexico forces many travelers to stop at major hubs before

expansion strategy focuses on differentiating ourselves

reaching their final destination.

from the competition and promoting the Mexican brand. The executive aviation industry is constantly changing Q: How did ICCS adapt its strategy to market trends in

Mexico?

fluctuations. This is the case for both the business and

A: FBOs cater to the needs of executive passengers. We

tourism

are the largest FBO network in Mexico with nine locations

competitiveness as the US and Canada represent 70

to date. Through contracts with all Mexican airport

percent of our clients. Still, our Mexican client base keeps

groups, we can work in all Mexican airports.

growing and we are interested in expanding our FBO

responds

segments.

market

trends

High-dollar

prices

and

economic

increase

our

network to locations like Zihuatanejo, San Luis Potosi, FBOs are a relatively new concept in Mexico. As executive

Hermosillo and several more.

aviation grew in the country, FBOs also started growing. ICCS has been and will continue to be part of this development.

We now work with over 10,000 aircraft per year and

We began over 20 years ago providing services to Jugos del

provide around 3,000 services per month. Our growth

Valle. Once these services were developed, the company

for the past few years has ranged from 10 to 15 percent

decided to expand operations to cargo airplanes and to

annually and by the end of 2016, we predict additional

incorporate ambulance and corporate services, becoming

growth as a result of the completion of our new projects in

International Corporate and Cargo Services.

Acapulco, Monterrey and Chihuahua.

VIEW FROM THE TOP

SHARING ECONOMY TAKES FLIGHT RICARDO WEDER CEO of Cabifly LATAM

Q: How does Cabify apply its sharing model to private

as we believe iconic 15-minute flights for tourists over

aviation?

Mexico City have great potential. We launched these aerial

A: All areas of Cabify are part of a sharing economy, which

tourism services during 2016 in Mexico City, Monterrey,

for Cabifly involves extensive collaboration with aircraft

Queretaro, Toluca and Puebla and will introduce it to

owners. Just like our automotive fleet, our airplanes

six more cities throughout the year. After this service is

are part of this sharing economy and belong to private

completely established in Mexico we will expand to other

aviation companies. Through collaboration with these

countries in Latin America.

businesses we can increase the volume of services they provide to compensate the aircrafts’ downtime, making

Q: How do you expect demand for Cabifly’s services to

their services more efficient to maximize profit.

evolve over the next few years? A: The corporate market for private aviation grew

Our fleet includes the Hawker 800, Gulfstream III and IV,

throughout 2015 and will continue growing as prices

Learjets 31 and 35, the Agusta 109 and both the Bell 206

become more accessible. The 2009 global financial turmoil

and the 407. This fleet was chosen after a thorough market

sparked a cultural change in that it was considered negative

analysis. Cabifly manages a diverse range of services, from

for executives to use private jets when their companies

single trips to rentals for longer periods of time. Last-

were facing a crisis. At the time many companies owned

minute helicopter trips are common while airplane services

airplanes, shared the ownership of an aircraft or hired a

are planned much further in advance. Our most popular

determinate number of flight hours. However, it does not

helicopter route is Mexico City to Toluca’s International

make sense for companies to acquire something they

Airport. Working with aircraft rather than cars requires us

underuse. We provide a more flexible solution.

to follow much stricter safety, maintenance and quality regulations. For that reason, we only work with companies

Similarly, we believe the private helicopter experience has

that have a commercial pilot license.

not been well implemented. While some companies do sell experiences, their core business is not to sell flights.

Q: What market opportunity in Mexico pushed the

Effective implementation of this concept would involve

company to develop its Cabifly division?

working with a high volume of clients, by ensuring full

A: We are developing solutions to link all our mobility options

capacity is reached reducing operational costs so prices

and aviation was the logical next step after private vehicles.

become more accessible.

Customers often require armored cars, helicopters or jets. Response to Cabifly has been extremely positive, especially During the development of Cabifly we noticed two

from corporate clients. These travelers prefer our services

distinctive market segments: private users and corporate

because it is simpler for them to work with a single provider

clients. The first consists of individuals who are interested

for all their transportation needs. Cabifly’s expansion has

in experiencing a private flight for tourism or a special

been slower than that of Cabify. Fortunately, this allows

occasion, in enjoying a helicopter ride as a first-time

us to adapt to the needs of our clients as we develop our

experience, and tourists who want to see Mexico City

business model. Mexico is becoming a manufacturing hub

from above. Corporate clients are executives who use

for the aerospace industry, which also is helping Cabifly

these services for work and range from political leaders

to become more competitive. Improving mobility is

to celebrities. Among our corporate clients we noticed a

extremely important because one of the largest influences

need for greater mobility services than cars can provide,

on an individual’s quality of life is their daily commute. The

especially between states. However, the idea to promote

introduction of Cabifly broadens Cabify’s services and

aerial tourism was developed following our own analysis,

further increases the mobility options we can offer.

237

VIEW FROM THE TOP

FLIGHT ADMIN TAKES TIME, SKILLED PERSONNEL GILBERTO RAMÍREZ Director General of Jetpro

Q: What is Jetpro’s value proposition to Mexican clients?

aviation will continue growing and become accessible to

A: Jetpro was founded in 1999, building on my previous

a larger segment of the population. MRO providers and

experience as a pilot and in the aerospace industry through

schools are expanding under the DGAC’s watchful gaze,

jobs with service providers. We began by providing

improving the sector’s competitiveness.

administration and crew services for a single airship and 238

sublet some services from other companies to complement

Q: What does Jetpro consider when looking for new

our own, gradually developing a client base. Today, we

commercial partners?

administer aerial taxis, offer counseling to companies

A: While several of our clients recommend us, we have to be

interested in renting their aircraft and provide support for

careful when contacting new clients because we only work

the sale and acquisition of airplanes. We help our clients

with those who are committed to keeping all permits up to

find the aircraft that best suits their needs because they

date. This rule protects our clients and our fleet's image.

may under or overestimate each unit’s capabilities. Our services are similar to other companies’ offerings but We work closely with DGAC and other international

we prefer to work through mutually beneficial alliances.

regulators. Our main strength is regulations management but

There is little direct competition in the state as each

we also provide crews, maintenance and ground-handling,

company has clear and defined strengths that differentiate

encompassing every service that an airplane needs to fly.

it. Therefore, we form alliances with these companies to offer a broader range of services. We have partnerships

Q: What are the most complex tasks for aircraft

with Redwings among other aerial taxi companies.

administrators? A: One of the more complex areas of airplane operations

Q: What services does Jetpro offer that differentiates the

is dealing with DGAC. This organization has been updating

company from its competition?

its processes to adhere to international regulations,

A: We adapt our services to our clients’ needs. Some prefer

which has increased its complexity and bureaucracy. Our

to use their own crew, in which case we only provide ground

administrators visit its offices daily to acquire permits

handling, while others want the complete package. Many

and update operations and maintenance manuals. The

clients ask us to sublet their airplanes when they are not

DGAC is aware of the problem and is working to simplify

using them but others prefer them to be available at all times

its procedures, including the possibility of submitting

and only use our services to manage them on the ground.

documentation online. There is room for improvement. The whole operation would be more efficient if the number of

Our fleet consists of eight airplanes and we manage

different departments involved in every procedure were

another eight for third parties. This fleet is stored in

reduced.

different hangars from those of Avemex, Eolo and SAE. We are Safety Management System (SMS) and IS-BAO

We complete all the paperwork for our clients but we do ask

certified and were exempted from DGAC’s Technical and

them to comply with certain basic requirements to prove to

Administrative Verification for the past three years, a yearly

DGAC that the aircraft is safe and that its owner is reliable.

revision by the organization applied to all aerial taxis.

Q: What trends are prevalent in the private aviation market?

Jetpro has 17 pilots, seven of whom are employed full-time.

A: Private aviation reflects the state of the economy. When

All our pilots practice at least once a year in a simulator,

there is a recession, private owners sell their aircraft and

which is a DGAC and insurance companies’ requisite. We

when the economy is booming, they acquire more. Local

have created alliances with Aeropersonal and Redwings and

manufacturing also has reduced aircraft prices. Private

work with SAE which supports our maintenance services.

VIEW FROM THE TOP

ELITE SERVICES FOR AN ELITE CIENTELE MARÍA HINOJOSA Director General of Eolo

Q: What is Eolo’s target market and how does Toluca’s

We do background checks on prospective clients, which

airport serve that goal?

guarantees the safety of all Eolo’s high-profile flyers.

A: Eolo targets clients who want luxury, exceptional service while traveling. These travelers seek to travel efficiently, with

Our service-focused profile led Jetex Flight Support to

minimum time and effort. Our clients’ time is worth more

choose Eolo as its Mexican business partner. Co-branding

than the cost of flying privately so our corporation strives to

with a leading international company encouraged us to

offer an exclusive service, providing anything a client needs.

maintain our quality standards. This joint venture also was a nod to the trustworthiness of our company. We

encourage

Toluca

International

Airport

(AIT)

have always been transparent in our operations and the

authorities to continue promoting general aviation in

joint venture demonstrated that our ethics and principles

Mexico and ensure that regulations and fees reflect their

matched those of Jetex. This alliance provides us with

interest in supporting Mexico’s growth. In spite of capacity

global exposure and projects a positive image of Mexico

at Toluca exceeding the number of aircraft, Eolo focuses

to international investors. We also expect to take on Jetex’

on securing high-profile clients, rather than simply signing

clients, which will increase our operations volume.

contracts to increase customer numbers. Our challenge is obtaining quality clients rather than quantity as many

Q: What challenges has Eolo faced?

firms try to do. Offering personalized luxury management

A: Operationally, the DGAC demands processes be

to a select few allows us to retain clients long-term.

certified, so we have focused all our efforts implementing the Safety Management System as well as being IS-BAO

Q: How do the company’s periphery services complement

and Wyvern Wingman certified.

its FBO and air taxi operations? A: Our core services include hangar space, ground handling,

The greatest test of our abilities has been modernizing

fueling, trip support and an in-house training center. We

local aviation. The limited number of industry players has

strive to offer all manner of extra amenities, including an

led to flaws in the industry. Our input has injected youth

art gallery. We also have a talented chef. In our pursuit to

and energy into the sector, which implies innovation and

attend to our clients’ every need, Eolo has a fully equipped

long-term vision. The co-branding alliance with Jetex

gym with showers and locker rooms. Frequent flyers may

is part of this vision. We maintain extraordinary levels

often be private individuals but the importance of operators

of service without losing focus on our roots in Mexico.

must not be overlooked. Pilots also are our clients and we

Demand for executive aviation exceeds supply, such that

offer them the same A-Z services under one roof.

all Mexican companies have a window of opportunity to pursue different market segments. Eolo targets an elite

For clients who need to do business or hold meetings on

clientele but we are keen to see the whole industry excel.

our premises, our facilities have mobile offices equipped with smart boards and video conference apparatus. Our

Q: How is the company innovating in the aviation industry?

offering even stretches to long-term rental opportunities

A: Eolo’s goal is to raise the bar for service personnel. We

for companies that use our hangar but office spaces can

could not locate any aviation school that trains hangar

also be reserved at short notice.

staff to the standards we expect. When we saw that our professionals were not taking full advantage of training

Q: What methods does Eolo use to contact new clients

courses it motivated us to launch a training center to

and broaden its customer base?

raise awareness about how important education is when

A: We aspire to an elite client base, such that we solely

talking about aviation. There is a possibility we will open

promote Eolo’s services to members as a type of club.

the school to external students in 2017.

239

FBO SPOTLIGHT

240

EOLO As airports become more and more saturated by tourists taking

advantage

increasingly

accessible

flights,

businesses increasingly are turning to private aviation to shuttle busy executives across the country. Eolo is among the companies that are helping to serve this demanding segment, providing services with the aim of ensuring a smooth experience. Located in Toluca, the Mexican heart of private aviation, Eolo is driven to meet the growing needs of executive travel. The company’s goal is to provide aircraft groundhandling services held to the strictest and highest quality standards, while delivering personalized services to passengers and crewmembers inside Eolo’s luxurious FBO. Eolo’s FBO offers aeronautics services such as fueling, ramp services, including guidance for aircraft into and out of Eolo’s hangar, water cartage and luggage handling, among others. It also provides counseling regarding maintenance services with highly trained and experienced personnel. The FBO service is complemented by two closed hangars that accommodate aircraft parking and maintenance services. Aircraft cleaning, storage and overnight parking with permanent security personnel on site is available. Eolo also operates its own fuel truck as part of its strategy to make traveling as smooth as possible for its customers. For air charter services, Eolo has a fleet of three models: a Challenger plane that can accommodate up to 12 people, a Hawker 800 with capacity for eight people and a Learjet for eight passengers and a pilot. Two helicopter models, an Agusta Koala and Agusta Grand, make up Eolo’s fleet. Every aircraft features the AvTrak maintenance system. Eolo’s quality service helped lead the company to an alliance with Jetex, a flight support business based in Dubai that offers services such as ground handling, aircraft fueling, concierge services, a weather briefing for pilots and trip planning, among others. The alliance gives Eolo expert input on FBO updates and serves Jetex’ purposes of expanding its business operations in Latin America. The alliance also adds an international component to Eolo that will aid the company in becoming an FBO for global operators and international operations. The co-branding of Eolo’s FBO with Jetex also increases the international exposure of the Mexican company, helping to increase its volume of operations and the country’s recognition as a high-quality center for private aviation.

241

VIEW FROM THE TOP

FLYING ‘TRAVEL AGENCY’ READY AROUND THE CLOCK ANDRÉS ARBOLEDA Co-Founder and Director General of Privé Jets and Go2Jets

Q: Which markets does Privé Jets expect to target?

Mexico’s enterprises, limiting our participation to a little

A: Our excellent customer service positions the company

over half of the total supply. We are very cautious when

as an elite brand in both our private aviation and private

choosing destinations and partners, keeping the safety of

yacht services. We like to be considered a travel agency

each track and airport in mind.

with round-the-clock availability. From a marketing 242

standpoint, we do not limit our sales to Mexico where our

The private jet market is narrow in Mexico and new clients

operations are established. We can still offer our services

rarely come into play. The whole market demand comes

to foreign markets, maximizing the vehicle’s usage even

from 200 families and around 1,000 companies. Although

when abroad. Therefore, we must have logistics plans that

those numbers are subpar compared to the US or Europe,

are focused on optimizing vehicle airtime.

Mexico remains by far the leading private aviation market in Latin America, followed by Brazil.

In October 2015, I co-founded the first alliance for private jet charters, Go2Jets, which ensures aircraft

Q: How does Privé Jets plant to build on the steps already

availability is never an issue. We have a fleet of nine

taken?

units, which we expect to increase to 12 units by the

A: We have not yet been successful enough in improving

end of 2016. They will service the US, Mexico, Colombia,

the image of Latin American companies. We believe that

Argentina, the Caribbean and probably Peru. Privé Jets

Go2Jets will contribute to changing this perception and

and Go2Jets play two different roles for us. Privé Jets

expect that by 2017 between two and three more companies

secures any type of plane needed for a customer’s flight

will be added to our offering. We want to market Go2Jets

schedule while Go2Jets makes sure that top-notch

in a more direct manner here in Mexico. Privé Jets is stable,

aircraft always are available. We are responsible for

supported by its solid track record and customer base but

offering units that meet the highest industry standards.

it also needs to change subtly from within. We want to

Although Go2Jets began operations in Mexico, it is now

improve our internal structure by further supporting our

Miami based. Its success has led to a significant increase

providers and training them to higher standards.

in sales for its partners, such as Redwings’ 60 percent rise in international flights.

Q: What makes Privé Jet’s services unique? A: We are the only company in the world that covers the

Customers often ask for the provision of three main

yacht, private aviation and travel agency experiences.

elements: US$100 million liability insurance, Wyvern

One phone call gives clients access to a broad range of

Wingman and the IS-BAO audits. Unfortunately, Mexican

services of the highest quality. Our employees are required

service providers do not cover all three, meaning the market

to travel around the world for at least four weeks every

must resort to foreign solutions. We look forward to helping

year. In return, they have a real understanding of the hotel

the Latin American market overcome this shortcoming.

and tour promotions and can offer personal experience as a basis to comprehend our clients’ needs.

Q: How do Go2Jets’ and Privé Jets work together? A: The two companies address different market areas.

Privé Jets also supplies vehicles for war zones, humanitarian

Go2Jets works exclusively with Redwings in Mexico but

aid and air ambulance services. We were one of the few

Privé Jets works with 60 percent of Mexico’s private jet

companies that aided the Cabo San Lucas community

enterprises. The latter has fewer restrictions and those

during its last hurricane, rescuing people and taking them

customers do not demand US$100 million in insurance or

out of harm’s way. After Haiti’s devastating earthquake,

double audits. Privé Jets does have stricter requirements

Privé Jets supported the cause with three to four daily trips.

for its partners than those that can be met by most of

In fact, we were the first charter flight to reach the area.

VIEW FROM THE TOP

RENEWED STRATEGY FOCUSES SOLELY ON CLIENTS RENÉ GARZA President and Director of Jet Mach

Q: What prompted Jet Mach’s shift in focus after working

flights. By the end of 2016, we plan to double the number

specifically with Bombardier products?

of aircraft we manage and to continue aircraft sales at the

A: Jet Mach was founded to commercialize executive

same rate as previous years.

aircraft in Mexico and developed different divisions over the years. For almost 11 years, our only focus was the sale of

Q: What is the general profile of private aviation users in

Bombardier aircraft from the Learjet, Challenger and Global

Monterrey and what are they looking for?

families, of which we sold a total of 45 new aircraft to Mexican

A: Private aviation users in Monterrey are corporations

corporations and private end users. Due to market shifts and

and highly qualified individuals who want a safe, efficient

the development of new technology, the company decided

and transparent service. We have three different kinds of

to focus entirely on clients and to developing mechanisms

clients. The first are those who own aircraft and contact

to support them during the sale and acquisition of aircraft.

us to manage the asset for them. The second are clients

This meant broadening the number of brands we handled to

who bought a percentage of an aircraft as part of a group.

include Falcon, Hawker and Citation among others. We also

Finally, there are clients who do not own an aircraft and

branched into helicopters through a commercial alliance

want to purchase hourly sublease packages. Our aircraft

with Airbus Helicopters. Jet Mach also developed a strategic

administration program helps us manage the needs of these

alliance with Dassault Falcon.

types of clients. So far we have five aircraft under this model.

Q: What are the main objectives of your partnership with

There are two different types of travelers, pleasure and

Dassault Falcon?

business, and this also is the case for executive aviation.

A: Our goal is to help them develop a larger client base in

Recently the percentage of pleasure travelers has risen,

Mexico. The target market for this type of aircraft is large

which may be problematic. Business travelers often return

corporations that use it to transport upper management.

within the same day, leaving aircraft available for further

We focus on operators who are not historically Dassault

trips. Pleasure travelers, on the other hand, often leave the

Falcon clients. Large aircraft like these have a smaller

aircraft grounded for the duration of the trip, at a significant

target audience but Mexico is a strong and growing market

cost to the aircraft provider. Pleasure trips also usually carry

for Dassault Falcon. The company is one of the three main

more people and luggage, demanding larger aircraft.

players in Mexico for large jets. Jet Mach’s main strength is it specialization in selling new, big, business aircraft that

Q: What are your expectations for the Mexican market?

have a price tag to match their size.

A: The corporate market will continue growing at a similar rate but the change we expect is for the full-time use of

Q: How are partnerships expanding Jet Mach's business?

aircraft. As users look to fly more efficiently, fractional

A: In 2011, we renovated our hangar and began a

ownership and charter services are growing. Private

partnership with Aerovitro to improve our services. The

aircraft fly an average of 300 hours per year in Mexico,

renovation allowed us to include aircraft storage and

while the average for the US is close to 400 hours. To

now we also offer airplane administration services and

optimize aircraft use in Mexico, it is necessary to increase

subleases. We have a solid commercial partnership with

the number of flight hours.

Aerovitro because we complement each other. Our administration services are rather new in Monterrey and as

Our value proposition focuses on traditional users to help

we grow in this market, we will look to expand to Toluca.

them make optimal use of their aircraft while upholding the highest quality standards for safety and maintenance. This

This year we started a strategic alliance with VIP

translates to shared aircraft and commercial agreements

Empresarial to introduce aircraft operations and charter

among companies to use aircraft while owners are not.

243

INSIGHT

SAFETY FIRST FOR EXECUTIVE AVIATION In a world where lost time means lost opportunities,

Not being restricted to specific flight times is an additional

private aviation has become a necessity for businessmen

competitive advantage because it permits the company’s

rather than a luxury. This is Aerolíneas Ejecutivas’ working

clients to design their flights entirely by themselves,

premise. For over 47 years, the company has endeavored

including destinations, stops and route.

to meet executive mobility needs. “Business aviation allows executives to visit several cities in a single day and during

ARRAY OF OFFERINGS

their flights they can work or relax and be ready for the next

Continuing its wide array of offerings, Aerolíneas Ejecutivas

stop,” says Alexis Javkin, Director of MexJet at Aerolíneas

also provides MRO services. Thanks to a partnership with

Ejecutivas.

Beechcraft, it worked as an authorized MRO for the OEM’s units during 2015. The year also heralded the creation of Ale

244

Aerolíneas Ejecutivas’ fleet has been tailored to suit the

Service Centers , a number of workshops based in ADN,

demands of executive aviation users. The Hawker 400 XPs,

AIT and AICM. The centers allow Aerolíneas Ejecutivas

Learjet 45s and 75s, Premier 1As, Hawker 800s and the soon

to provide certified MRO services to Beechcraft, Learjet,

to be incorporated Challenger 605s are intended to meet

Challenger and AgustaWestland and will soon include the

client needs. Whether they require six or 12-seater planes,

HondaJet.

Aerolíneas Ejecutivas is committed to finding the aircraft that best matches the customer’s specifications.

The company’s main focus on comfort and safety for its clients has led it to pursue the strictest certifications. “The

Though Aerolíneas Ejecutivas’ investment in technology

ARGUS, IS-BAO and Wyvern monitoring of our operations

and safety measures has resulted in an extensive fleet

reflects our investment in safety,” says Javkin. In addition to

that provides its clients with a wider range of aircraft

the prior, Aerolíneas Ejecutivas has been the only non-US

and services, one model is preferred by almost everyone:

member of the National Aircraft Resale Association (NARA)

the Learjet75. The unit’s compliance with requirements

for five years. Members of this association undergo specific

for flights to Mexico and the US have made it the most

training and certifications, invest heavily in safety and

commonly requested aircraft by Aerolíneas Ejecutivas’

implement specific ethical codes. This reflects Aerolíneas

customers. In addition to the company’s traditional aircraft

Ejecutivas’ commitment to safety.

lease services, an important part of Aerolíneas Ejecutivas’ business includes sales of new and used planes and

Emphasis on generating quality service for its clients

helicopters. The company has positioned itself as the most

has led the company to grow and order new aircraft.

important broker in Latin America with a sales department

“We placed orders for six new Learjets, two Challenger

that handles the aerospace industry’s top brands, including

605s and three HondaJets at the beginning of 2016.

Bombardier, Beechcraft, HondaJet and AgustaWestland.

Our fleet’s average age is four years, which will be even lower after the arrival of the Learjet 75,” says Javkin. The

The company developed the MexJet program so that

arrival of new aircraft will permit Aerolíneas Ejecutivas to

Aerolíneas Ejecutivas could offer its services and the

attain 10-15 percent annual growth. “External factors have

benefits of plane ownership at a much more competitive

also influenced our growth. While the current exchange

cost. By effectively managing aircraft and customers, the

rate with the dollar has not favored us, low oil prices are

program generated 10 percent growth in flight hours for the

good for our business, especially as jet fuel prices have

company in 2014, an increase that saw it reach about 15,000

dropped prices are good for our business,” says Javkin. The

hours of flight in 2015. MexJet is expected to help boost

downside is that as a business matures its growth peaks

hours every year going forward. The program also allows for

are smaller. But for Javkin, limited road infrastructure and

personalization of services. It manages almost 30 airplanes.

the time consumed using commercial aviation will continue to boost demand for private flights.

To provide personalized services, Aerolíneas Ejecutivas has developed strategic alliances with airports across the

Executive aviation has grown over the past 10 years as

country. Part of its strategy is to have its fleet located as

new companies have emerged in the market thanks to the

close as possible to its main client bases. “Toluca’s airport

country’s positive culture toward the sector. Aerolíneas

is only 20 minutes from Santa Fe, so if the client is on an

Ejecutivas still considers itself a market leader. “Aerolíneas

extremely tight schedule we can provide them with a

Ejecutivas launched business aviation in Mexico and we are

helicopter to reach the airport in five minutes. These services

by far the largest provider of these services in the country.

allow us to greatly reduce total travel time,” adds Javkin.

Our goal is to spearhead the industry,” says Javkin.

VIEW FROM THE TOP

BLUE-SKY THINKING LEADS HONDA TO JET

Samuel Garcia Sales Director at HondaJet

Eduardo Vega Sales Manager at HondaJet

Q: As a successfully established automotive company

SG: The HondaJet has been popular among our clients,

entering the aerospace industry, how does Honda plan

their excitement when they see or fly it speaks volumes.

to disrupt the existing market?

They appreciate the clean design of the cabin and

SG: Honda is a mobility company and regularly invests in

cockpit and the low noise levels. Our jet appeals to

the development of future technologies and innovations.

those who value having their own aircraft rather than

The HondaJet is an example of our blue-sky thinking,

having to spend time at the security checkpoints of

resulting in an advanced light jet developed from a

commercial airports. Instead of being salespeople,

clean sheet design. The jet incorporates advanced

we strive to become our clients’ strategic advisors,

technologies, including an over-the-wing engine mount

providing clear and simple facts for them to weigh

configuration, natural laminar flow wings and nose and a

against their priorities.

composite fuselage. These innovations combine to make the HondaJet the fastest, highest flying, most spacious

EV: Clients flying single turboprops and smaller entry-

and fuel-efficient jet in its class. It also features a highly

level light jets are often interested in our product. Buyers

customized avionics suite, the Garmin G3000.

consist mainly of entrepreneurs and SMEs that need efficient transportation to destinations not served by

Q: What alliances allow Honda to operate globally in the

commercial aviation. Twin turboprop owners also show

aviation market?

interest because the HondaJet can fly above bad weather,

SG: To support our customers, Honda Aircraft Company

saving time at a lower operating cost.

established a worldwide dealer network in 11 territories in North America, South America and Europe. Each dealer

We are witnessing exciting times for aviation in Mexico.

is prepared to provide unsurpassed sales, service and

As the middle class expands its purchasing power, we

support for the unit. In Mexico, Aerolíneas Ejecutivas

will see more people looking for different transportation

runs a HondaJet repair station, which is DGAC and FAA

options and I trust business aviation, particularly the light

part 145 certified. This business unit effectively supports

jet segment, will greatly benefit from this.

our aircraft sales business. Honda Aircraft Company identified Aerolineas Ejecutivas as a pioneer of Mexico’s business aviation market, operating over 60 HondaJets. After the aircraft was certified by DGAC in March 2016, Aerolíneas Ejecutivas received the first HondaJet in service in Mexico. EV: Aerolíneas Ejecutivas meets all potential clients and helps them understand the benefits of using certain units. Mexican operators are cautious and want to see and fly the aircraft before they make a decision. Our market is no longer solely smaller airplane owners looking to upgrade to a jet. Operators of larger business aircraft are now looking for lower operating cost options and efficiency has become an important factor. Q: What spurs clients to choose HondaJet over other aircraft?

245

VIEW FROM THE TOP

A FOCUS ON PRIVATE OWNERS RENÉ MARCOS General Manager of ExecuJet

Q: What impact has Luxaviation’s acquisition of ExecuJet

varies is their needs. Our location at Del Norte International

had on the company?

Airport (ADN) is one of our strongest competitive

A: ExecuJet offers a broad range of services that are

advantages as we are the closest to the apron, which

adaptable to the Mexican market. We have offices in Toluca

reduces our response time and facilitates operations.

and Monterrey, the latter location being our strongest. To 246

strengthen our smaller presence in Toluca we will continue

Q: How do the company’s services differ between its

to invest in the area.

global and local markets? A: Our Mexico operations are slightly different from those

Last year, Luxaviation acquired ExecuJet, which kept its

at ExecuJet’s main offices but we operate under the

original name to retain the benefits of its global brand

same umbrella. Standards for branches are equal across

recognition. ExecuJet’s goal is to provide excellent service,

the board. Locally we provide FBO services, aircraft

taking advantage of the economies of scale resulting from

storage and MRO services but we are focusing more on

the acquisition by Luxaviation that nearly doubled our

aircraft administration for private owners. In these cases,

fleet to over 250 aircraft. We are now the second largest

we handle maintenance, regulations and pilot training,

executive aviation company worldwide. The acquisition

among other services. We also sublease the airplane while

allowed us to offer better insurance policies and lower fuel

ensuring it, or a similar unit, is available in case the client

prices. It also granted clients access to a global network

needs it and we manage aircraft from Toluca, Queretaro or

of services with guaranteed quality and full client support.

even outside of Mexico.

ExecuJet has experience in executive aviation and can provide comprehensive services to our clients. We handle

Our hangar is the largest at ADN. It is divided in two:

all documentation and paperwork here and anywhere in

one area is for airplane storage and the other is for FBO

the world. Our clients only have to make one call to us.

services. We separated our offices to increase privacy and security, which are important concerns for our clients.

Q: What are the main distinctions between clients and

Our services are safe and extremely discreet as we treat

operations in Toluca and Monterrey?

our client’s information with the utmost confidentiality.

A: Our client profiles in the two cities are slightly different.

Our infrastructure is large enough to allow growth and to

Toluca caters toward corporate and governmental clients

receive more clients.

while Monterrey receives more tourists as well as corporate clients because the city has prominent industries and hosts

Q: How is ExecuJet adapting to current economic

the headquarters of many international corporations.

challenges and what role have these played in your expansion plans?

Proximity to the US also changes our operations in certain

A: Mexico is undergoing several economic challenges,

ways. In Monterrey, for example, we can operate with

such as the fluctuating value of the dollar. We are

smaller aircraft than Toluca. There is almost no difference

thoroughly analyzing both the global and local economic

between a jet and a turboprop for short distances but

environments to adapt our services to any economic trend.

for flights longer than two hours, larger aircraft become

We also keep a close relationship with each individual

a necessity. In Monterrey, most of our clients fly within

client to ease any concerns and to create specific solutions

the two-hour limit for which a turboprop is appropriate.

for them. The company worked considerably on expansion

Several clients there also have rural properties and they

in the first half of 2016, mainly for our FBO. Now that

want smaller aircraft that can be stored at these locations.

the work is finished, we are promoting the competitive

Our services are not dependent in any way on the client’s

advantages we gained. For the rest of 2016, we hope to

location or their aircraft preferences. The only aspect that

reap the fruits of our labor.

VIEW FROM THE TOP

BROAD AIRCRAFT RANGE GIVES FLEXIBILITY, VARIETY LUIS RAYET CEO of Rajet Air Services

Q: How did Rajet evolve from a cargo carrier to executive

easily use the alternative airport and vice versa. These two

aviation?

airports are at very different altitudes so it is rare for them

A: Rajet divides its business between Aerotaxi and

to be closed simultaneously. The proximity of the two is

FBO and aerial taxi services. The two business areas

an important advantage for us because it allows us the

complement each other but are entirely separate. Rajet

flexibility to provide a wider range of services.

has adapted to the times. We began as a cargo airline when the automotive industry was at its highest point in

Saltillo International Airport also is unique in its offerings,

the state of Coahuila. The sector was expanding due to the

such as service for all commercial, cargo and executive

arrival of General Motors, Chrysler and their suppliers but

airlines 24 hours a day, 365 days a year. Its consolidation

no companies in the area catered to their specific needs.

was made possible by joint efforts from all members of its

We saw an opportunity and created the first FBO in Saltillo

local ecosystem, including Airport Estate Services (SEA),

to service their fleet.

the local government and the companies operating in it. Through this collaboration, the airport has evolved its

Afterward, we incorporated emergency services and

services, support equipment and processes, encompassing

consolidated Rajet as an executive aviation airline with

the renovation of control towers, airways, platforms,

the clear objective of maintaining the highest standards

terminals and other buildings.

of safety and punctuality across all operations. Executive aviation is by nature a much more demanding sector

Q: How important is the DGAC to the aviation industry

as each individual’s specific requirements can vary so it

and how can it improve?

requires a high degree of involvement to retain clients.

A: The DGAC recognizes the importance of private

This made it unreasonable for us to continue offering our

aviation for the economic development of the country and

cargo and emergency services.

its policies have permitted the diversification of services and airlines in Mexico. The DGAC has been involved in the

Q: Why did Rajet choose Saltillo International and Del

regulations of aviation activities and has shown significant

Norte International airports for its FBOs?

support for the industry as a whole. But the association

A: Our goal is to provide a comprehensive service and

is understaffed. Mexico has the second largest number of

flexible options for clients. Each airport complements

aircraft in the world after the US but this is not reflected in

our services at the other location. In light of our success

staff numbers at the DGAC. The entity lacks the necessary

operating in Saltillo we opened a second FBO at Del Norte,

personnel to optimize its processes.

despite the short distance between the two airports. This second FBO allows us to service Monterrey’s industry

Q: What are Rajet’s plans for growth in the short term?

without neglecting our clients in Saltillo. We pride

A: Our growth plan includes the continued acquisition of

ourselves on the quality of our hangars at every location

aircraft based on our clients’ needs. Rajet’s diverse fleet

we set our sights on.

ranges from turboprops to transatlantic airplanes because every mission requires a different type of airplane.

While we receive a significant number of passengers

Turboprops are suited to short distances, light jets are best

from the west of Monterrey, some individuals have the

for medium distances and heavy jets for long distances.

misconception that Saltillo is much farther away. Journeys

This broad range of aircraft allows us to cater to many

from the west of Monterrey are almost equidistant to

different clients and further diversifying would broaden

both airports. Saltillo International Airport functions as a

our reach. We are also studying the possibility of opening

complement to airports in Monterrey and if they are closed

two more offices in strategic parts of the country, taking

for bad weather or any other reason a private airplane can

Chihuahua and Guadalajara into consideration.

247

AIRCRAFT SPOTLIGHT

248

AEROÉLICA'S TBM 930 Daher’s experience as a systems and aircraft manufacturer is on full display with the TBM 930, a descendant of the 2014 TBM 900. Featuring the most advanced avionics, the aircraft has an enhanced interface, while offering comfort and an array of amenities to passengers. The Pratt & Whitney Canada PT6A engine powers the TBM 930 and its easy maintenance, efficiency and low operational costs are selling points for Aeroélica, which commercializes the unit in Mexico. The engine’s presence in more than 100 aircraft models is illustrative of the PT6A’s reliability. The PT6A-66D, the version of the engine used in the TBM 930, has a thermodynamic rating of 1,825hp, making the aircraft the world’s fastest certified single-engine turboprop. The TBM 930 has a maximum range of 1,730NM at a speed of 380mph. The engine flaunts its power at takeoff. When departing from sea level at its maximum weight capacity, the TBM 930 can climb up to 31,000ft in 18 minutes. The aircraft also has short field capacities, meaning that it can easily and safely depart or land on short and unpaved surfaces of less than 1,500ft. The five-blade composite propeller enhances the TBM 930 take-off distance while reducing the takeoff sound level to 76.4 decibels, meeting international noise standards. Navigation provider Garmin supplies the TBM with the new G3000 digital avionics deck, a three-display, glass touchscreen – a first for light turboprop aircraft. The G3000 also comes with the GTC 580 controller, which allows the pilot to access systems and sensors and accommodates a menu structure suited to the pilot’s needs to monitor the intercom system, transponder codes, electronic checklist entries, flight plan entry, mapping, traffic and weather. Garmin

also

onboard

with

its

Synthetic

Vision

Technology (SVT) that enhances situational awareness. SVT offers 3-D topography and realistic images of ground and water features, as well as obstacles and traffic. The 10.7m-long aircraft can accommodate up to six passengers, with the possibility of having just four seats to add up to 230kg of baggage capacity. For passenger comfort, the aircraft features 14/24 Volt and USB charging sockets, iPod linkup and SiriusXM satellite music and radio. A partnership with Scheme Designers allows TBM owners to personalize their aircraft with unique seat leather and external paint patterns and colors.

249

ROUND TABLE

WORLD ECONOMIC INFLUENCES ON PRIVATE AVIATION The private aviation market is subject to regulation changes

FBOs to sell jet fuel. Current regulations only allow Airports

and is as equally influenced by international economic factors

and Auxiliary Services (ASA) to do this, according to Luis

as commercial and cargo aviation. Executive travelers’

Rayet, CEO of Rajet Air Services. Moreover, regulations and

habits can be even more price-elastic than large companies,

permits unsurprisingly limit certain operations but several

such that these global changes are often reflected almost

companies are collaborating to help passengers overcome

immediately. The dollar to peso exchange rate is a common

obstacles to travel and to simplify these operations. Here,

topic among leaders of private aviation companies, as well as

leaders of some of the companies helping in this aspect

changes to the price of oil. The Energy Reform has opened

highlight the primary ways in which global economic

several opportunities, including a change that would allow

conditions affect private flights among Mexican clients.

US DOLLAR EXCHANGE RATE (MEXI-

CRUDE OIL PRICE PER BARREL IN US

US DOLLAR EXCHANGE RATE (MX$) CAN PESOS)

CRUDE OIL PRICE PER BARREL (US$) DOLLARS

110 100

250

80 70

60 50

40 30

2012

2013

2014

2015

Source: Bloomberg

2016

2012

2013

2014

2015

2016

Source: Nasdaq

Source: Bloomberg

The rise of the price of the dollar has had a small impact on business as Mexican companies that operate in pesos may think twice before acquiring an airplane. Clients who use private aviation services operate in dollars, as the aircraft and all related services, excluding jet fuel, are valued in this currency. While our personnel is Mexican, they are trained abroad, so international economic changes even affect our staff acquisition and their professional training. The global economic crisis has influenced our FBOs and MRO because individuals

AGUSTÍN LANZAGORTA Director General of Avemex

are flying less all over the world and the number of flight hours has reduced across borders.

Latin American private jet users often own their personal aircraft or they know someone who does. But these private units are not always up to par, nor are the pilot’s skills. Piracy has become our greatest competitor in Latin America although Mexico’s and Brazil’s governments are now taking matters into their own hands. Charter aircraft must be certified with an XA registration number and Mexico is one of the few countries that can recognize a unit’s legality using its license plates. Still, Mexico’s regulations must be stricter, considering the large number of aircraft in the territory. Though costs are greater for companies that respect regulations, legality

ANDRÉS ARBOLEDA

across all enterprises helps the industry as a whole. There is a clear interest from

Co-Founder and Director General of Privé Jets and Go2Jets

the European and Middle Eastern markets for our services, reflecting global trust in Mexican aviation, but our internal structure is not yet ready for that.

Private aviation reflects the state of the economy. When it is in recession, private owners sell their aircraft and when the economy is booming, they acquire more. We have identified certain trends by country that also affect our operations. Brazil has a strong private aviation industry but their approval processes are too slow, which makes traveling to the country harder. Permits to enter Brazil have to be submitted a week in advance, much longer than the time required to enter Mexico, making the South American giant one of the most complex countries to fly into. Mexico, on the other hand, has recently strengthened its entrance policies for flights from Latin

GILBERTO RAMÍREZ

America. Flights from those locations have to make a mandatory stop in Cozumel

Director General of Jetpro

or Tapachula. The only way to avoid this stopover is by acquiring a Safe Flight certification and by certifying all the passengers and crew members. We ensure that all our passengers have this paperwork to simplify their trips.

251

HELICOPTERS

Mexico is home to the manufacturing activities of OEMs such as Airbus Helicopters and Bell Helicopter. While the weaker peso against the US dollar has created difficult conditions for several economic sectors, the helicopter segment has in fact benefited. Taking advantage of the country’s lower costs resulting from the exchange rate, companies are increasing their manufacturing operations in Mexico. Though the constraints impeding the oil and gas sector hit the industry, there is optimism regarding Mexico’s role in helicopter manufacturing. The challenge ahead for most OEMs is keeping their production and unit orders stable, regardless of international conditions.

Views and insights regarding the performance of the helicopter sector in Mexico are featured in this chapter. In addition, it offers a perspective on the business opportunities that are arising across the country.

253

CHAPTER 11: HELICOPTERS 256

ANALYSIS: Oil Price Plunge Knocks Helicopter Market

258

VIEW FROM THE TOP: Francisco Navarro, Airbus Helicopters in Mexico

260

VIEW FROM THE TOP: Luis Azúa, Bell Helicopter at Textron International Mexico

261

VIEW FROM THE TOP: Humberto Lobo, Grupo Lomex

262

VIEW FROM THE TOP: Alexander Mikheev, Russian Helicopters

264

AIRCRAFT SPOTLIGHT: Bell 429

266

VIEW FROM THE TOP: Enrique Zepeda, Transportes Aéreos Pegaso

268

VIEW FROM THE TOP: Paul Herzberg, PEMSCO Helicopters

269

INSIGHT: Spinning Business Opportunities

270

INSIGHT: César Moreno, ENTEC

271

VIEW FROM THE TOP: Yousefh Pineda, Cramex

272

ROUND TABLE: Flying into New Opportunities

274

AIRCRAFT SPOTLIGHT: Airbus H175

255

ANALYSIS

OIL PRICE PLUNGE KNOCKS HELICOPTER MARKET While part of the aerospace industry, helicopters operate

HELICOPTER WORLDWIDE MARKET HELICOPTER WORLDWIDE MARKET SHARE 2015 SHARE 2015

in an entirely different fashion from aircraft and have a separate market and manufacturing chain. The global civil helicopter segment is valued at US$7.88 billion, according to Visiongain, and dominated by Airbus Helicopters. Although the OEM held 45 percent of the market in 2015, 1 percentage point up from the previous year, it faced a 16 percent reduction in deliveries to 395 from 471 between 2014 and 2015, the 2014 figure itself was a decline from 2013’s 497. Bell Helicopter, a subsidiary of Textron, is the second largest player with a 19.5 percent share. The company delivered 175 aircraft — 52 Bell 429s, 12 Bell 412s,

Others 45% Airbus Helicopters

99 Bell 407s and 12 Bell 206L4s — in 2015, most of which

19.5 % Bell Helicopters

went to North America. The same year, Bell Helicopters

Russian Helicopters 18.5% Finmeccanica

broke its own orders record for a single client with the 256

newly launched Bell 407GXP, of which the buyer requested 200. The Italy’s Leonardo-Finmeccanica, which absorbed AgustaWestland on Dec. 31, 2015, ranks third at 18.5 percent. In fourth, with 9 percent of the market, is Sikorsky Aircraft,

9% Sikorsky Helicopters Finmeccanica 5% Russian Helicopters 3%Helicopters Other Bell

Helicopters

Sikorsky

Airbus Helicopters

Source: Airbus Helicopters.

COMMERCIAL HELICOPTER DELIVERIES COMMERCIAL HELICOPTER DELIVERIES BY USE 2015 BY USE

which was bought by Lockheed Martin in 2015 from United Technologies Corporation (UTC). Russian Helicopters stands fifth, followed by a series of smaller makers. The existing helicopter market is dominated by the light single category, referring to helicopters with a single motor and capacity for one to five passengers. This segment represents 62 percent of sales, according to IBA Group. The light twin model, which has two motors but is otherwise similar to its single-engine cousin, holds a 17 percent share. Medium models, with a capacity of seven to nine passengers, and heavy helicopters, which can carry over 15 passengers, follow with 13 and 5 percent, respectively. In the middle of those weights is an emerging category, the “super-medium.” These models, of which the Airbus H175 and AgustaWestland AW189 stand out, are designed to meet the needs of the oil and gas industry.

26% OilLAW andENFORCEMENT Gas 23% Emergency services

11% Law enforcement EMERGENCY SERVICES 19% Other

OTHER 21% Corporate/private use

OIL AND GAS

Source: IBA Group CORPORATE/PRIVATE USE

Source: Airbus Helicopters.

HELICOPTER DELIVERY HELICOPTERS DELIVERYBY BYCATEGORY CATEGORY2015 IN 2015

They mix the range and capacity of heavy helicopters — 19 passengers for the H175 and 16 for the AW189, for example — with a lower weight and thus have reduced fuel use and a smaller carbon footprint, says Aviation Week. Both the AW189 and the H175 were introduced to the market in 2014. By June 2016, 30 AW189 had been delivered, with 150 orders pending. Orders for the H175 exceeded 100 by mid-2016. The first H175 delivered to the Americas belongs to Mexico’s Transportes Aereos Pegaso and arrived on Aug. 29, 2016.

Medium Super Medium 5% Heavy 62% Light Single

OIL TROUBLE

17% Light twin

Heavily dependent on the oil and gas industry, the helicopter

13% Medium

market has faced headwinds since last year when the price

Heavy

2% Super Medium

Light twin

Source: IBA Group.

Light Single

of oil went into a prolonged tailspin. From its heady days

operating in the state factored into the decision, says

above the US$100 mark in 2014, the price of a barrel of

Francisco Navarro, Director General of Airbus Helicopters

crude now rests in the US$50 range. The knock-on effect

in Mexico. The location holds potential for the company.

has been explicit. The oil and gas industry is a main market

“Our plant in Queretaro is still growing and can increase its

for commercial helicopters, representing 26 percent,

capacity by four or five times,” says Navarro.

according to AgustaWestland. They are used to transport workers to and from oil platforms, a process that would

In Chihuahua, Bell Helicopter makes cabins and harnesses

be too time consuming in a boat, and to monitor remote

and does subassemblies for the Bell 206L, 407, 412, and

locations. When exploration and monitoring is reduced, so is

429 and cabins for the Bell 407 and 429. Luis Azúa, General

helicopter use and as the O&G industry fell back, helicopters

Manager of Bell Helicopter at Textron International Mexico,

sales took the hit. Manufacturers also suffered as deliveries

says the company chose the city thanks to its convenient

dropped. In the first quarter of 2014, when oil prices were

location, the time zone and the manufacturing expertise in

over US$100, 580 helicopters were delivered. The following

the state acquired from the automotive industry. While Bell

year, when oil prices fluctuated between US$50 and US$60,

Helicopter is strong in both civil and military aircraft, this

only 448 were delivered, according to Flight Global. This

plant only manufactures for civilian purposes. In October

year, Honeywell decreased its projection for total helicopter

2015, Textron opened its first administrative office in

deliveries between 2016-20 by 400 helicopters.

Mexico City from which Bell Helicopter will support clients in the region.

MEXICAN MANUFACTURERS The difficulties in the sector have helped make Mexico a

Mexico’s increasing expertise in the aerospace sector

more attractive location as manufacturers look to save on

alongside its lower operating costs, mean it continues

costs. Airbus Helicopters invested US$100 million to build

to be a cost-saving alternative for manufacturing

a 12,000m2 plant in Queretaro. A prime location, quality

companies across the world, despite the headwinds the

human capital and a number of manufacturers already

industry is facing.

257

VIEW FROM THE TOP

A HELICOPTER FOR EVERY MISSION FRANCISCO NAVARRO Director General of Airbus Helicopters in Mexico

Q: What strategic role does Mexico play in Airbus

to extend our footprint in the country by investing in the

Helicopters’ growth?

aeronautical manufacturing industry in Queretaro, where

A: Airbus Helicopters is a world leader, offering the widest

we produce high-technology aircraft components.

range of helicopters to suit all missions. Our company’s in-

258

service fleet includes close to 12,000 helicopters operating

Q: What are the main characteristics of your helicopters

across five continents and yet, it is extremely important for

and which MRO services are you developing to support

us to be close to our customers. Airbus Helicopters has

them?

offices in 21 countries and Mexico is a strategic country

A: For a long time, we have been implementing a long-

for both our commercial and industrial activities. From our

term strategy focused on not just being the largest but

Mexican offices we cover 24 countries in Central America,

also the best helicopter provider in terms of quality,

the Caribbean, and the northern part of South America,

safety, client support and aftersales support. We have

including Colombia, Venezuela, and Ecuador. In this region,

light single helicopters such as the popular H130 and

Mexico is our most important country by volume of units

H125, a family that has logged more than 5 million flight

and the number of operations in every sector. These 24

hours worldwide. Light twins like the H135 and the H145

countries now operate 450 Airbus Helicopters, of which

are especially appreciated for emergency medical and

approximately 40 percent are flying in Mexico.

police missions, the H175 is setting the standard for the super twins of high performance, comfort and cost effectiveness and the H225 in the heavy category is a global reference for offshore oil and gas as well as search and rescue missions. All our models also are available for military customers. In 2015, civil aviation, namely private operators, accounted for half of Airbus Helicopters’ market. The other half was

180 Airbus helicopters are owned in Mexico

in the military sector, primarily governmental emergency services and search and rescue operations. The number of helicopters in the civil sector is larger than that in the defense sector but defense helicopters tend to be much larger and require more load capacity, thus in volume both

During Airbus Helicopters’ 35 years in Mexico we have

sectors are roughly equal.

focused on consolidating the company and increasing our activities. We now have over 300 employees in the country,

Concerning services, in 2015 we launched the HCare,

180 are based in Mexico City and 140 in our manufacturing

a service support platform that offers our clients a

plant in Queretaro. Our MRO in Mexico City provides

quick response focused on helicopter operators’ needs.

much more than sales. It also offers maintenance, spare

Operators have access through this platform to our

parts distribution and technical assistance. This 10,000m

technical support, including spare parts and technical

workshop provides much more than MRO services.

publications. As part of HCare we now offer a three-year

guarantee and 2,000 flight hours, another unique offering We modify helicopters before they start operating and

from Airbus Helicopters. The company also launched the

install specific requirements such as Bambi Buckets for

web portal Keycopter to provide 24-hour access to all

firefighting. Three years ago, seeking more opportunities

technical documentation that operators and technicians

to further develop our global supply chain, we decided

may need for aircraft maintenance.

Q: Which companies represent Airbus Helicopter's primary market in Mexico? A: All our operators are important whether they have one helicopter or 10. One of our key operators, Transportes Aereos Pegaso, handles a variety of operations across the oil and gas and transportation industries with a fleet of over 30 Airbus helicopters, including the H130, H145 and H135 and will soon be the first operator in Latin America to incorporate the H175. We work with several governmental organisms such as SEMAR, which uses three H225Ms and four Panthers, and they recently signed a contract for 10 more Panther helicopters which will we start to deliver this year. The Mexican air force operates 11 models of the H225M and we also are working with the General Coordination of Presidential Aerial Transport, which operates an important fleet of Super Puma and H225. Up to 180 Airbus helicopters are owned in Mexico by approximately 100 operators.

Mexico to foreign companies or provide the conditions for

Helicopters are a great solution to mobility problems,

the creation of local Tier 2 and 3 companies.

259

especially for corporate travel, in areas such as Mexico City with excessive traffic and difficult transportation.

Q: What are Airbus Helicopter’s principal strategies for growth and innovation?

Q: Why did Airbus Helicopters choose Queretaro as a

A: During 2015, we launched new helicopters such as

manufacturing site instead of a larger cluster?

the H175, of which approximately 100 helicopters have

A: The state is in a strategic location, close to Mexico City

been sold to date. This year we began to commercialize

and other critical locations. One of the many lures was

the H160, a bi-turbine, medium-load helicopter in the US.

Queretaro’s broad range of talented human capital. While

Another recent development is the line manufacturing of

technicians to engineers are present in other areas in the

emergency and loading doors for the Airbus A320 family,

country, the proximity to UNAQ assured us there would be a

which is the most popular single-aisle aircraft worldwide.

continuous supply of qualified professionals. Moreover, the

Demand is so great for this plane that we have orders for

aerospace sector is growing rapidly in Queretaro due to the

the next 10 years. Thus, our manufacturing processes have

presence of many manufacturers and its administration is

to be fast enough to supply all the parts for these airplanes.

highly invested in the aerospace sector, so they are greatly involved in attracting and supporting new companies in the

Airbus predicts that over the next 20 years the demand

state. We have maintained close relationships with both

for aircraft will exceed 30,000 units, an opinion shared by

administrations and are highly satisfied with their work.

other OEMs and business analysts. For Airbus Helicopters, this means that our presence in Queretaro will provide work

In less than a year, we built 12,000m2 thanks to the company’s

for the next few decades, even considering fluctuations in

investment of US$100 million to produce components and

the economy and in the sector. Our plant in Queretaro is

parts for our helicopters, as well as for the Airbus A320 and

now offering certified products with high added value that

A321. Depending on market trends, our plant in Queretaro

will undoubtedly prevail over time.

could still increase its capacity by four or five times. Our goal is to reinforce our transformation plan in 2016, Q: What strategies has Airbus Helicopters implemented

including quality and safety, client satisfaction, quality

to support its suppliers, given the weak supply chain?

of services and cost policies. 2015 was a difficult year

A: Queretaro, just like the other main clusters in the

worldwide and Mexico has been overwhelmed as changes

country, is home to a list of strong Tier 1 companies.

in oil prices have complicated the situation. In our opinion,

However, it is true the network of Tier 2 and 3 companies

structural

is still lacking. OEMs entering the country, such as Airbus

administration will ameliorate these problems, as they

Helicopters, need immediate access to strong suppliers so

will encourage competition and prove beneficial for the

we have been forced to use foreign companies to begin

economy and thus, for Airbus Helicopters. 2016 and 2017

operations. Local supply is growing but it needs the

will be years of transition and evolution and we expect the

support of the government, which should either promote

economic situation to stabilize.

measures

introduced

the

presidential

VIEW FROM THE TOP

LOW COST NO LONGER MEXICO’S SOLE ADVANTAGE LUIS AZÚA General Manager of Bell Helicopter at Textron International Mexico

260

Q: What role does Mexico’s market play in Bell Helicopter’s

Q: How will Bell Helicopter continue expanding its

global strategy?

operations here?

A: Mexico is a vital asset for the Latin American region. Its

A: As this plant has been very successful, it is often

Mexico City office, opened in 2015, serves as one of the

considered for expansion by our headquarters. We do

company’s regional sales hubs. Although demand around

not have any concrete plans to date but we are studying

the world has decreased significantly due to a variety

various solutions that will lead to local growth. Market

of factors, including oil and commodity prices, political

analysis will indicate which new products and processes

changes and currency fluctuations, we continue to see

will be beneficial to our operations in Chihuahua and we

interest in our products across various market segments.

likely will increase harness production for the models we

Our clients include HeliServicio, ASESA, Grupo Condores

are manufacturing and incorporate production for other

and SEDENA, with whom Bell Helicopter has enjoyed a

models.

close relationship for the past 50 years. We also have a strong potential market in private aviation, especially in

Q: In what ways is the company helping to shape the local

Mexico City as the capital is plagued by traffic problems,

aerospace sector?

and helicopters offer an alternative.

A: Bell Helicopter is contributing to the aerospace industry in Mexico by implementing the newest manufacturing

Our commitment to sustainability led us to acquire the

techniques, such as lean manufacturing, and many other

LEED Silver Certification for our plant, the third building

lessons from the automotive industry, such as Kanban and

in Mexico to obtain this certification. Our commitment

automation. Lean manufacturing processes like these have

is to our employees’ safety and our goal is to have zero

allowed us to optimize our plant’s processes and we have

accidents. To accommodate our operations, we are

been recognized for our practices, on-time delivery and

working with INTERMEX under the shelter program.

our low inventories.

Q: Why did Bell Helicopter bring manufacturing to its

While all research and development is performed in our

plant in Chihuahua?

US and Canadian offices, several Mexican engineers are

A: Bell Helicopter has been in Mexico for over 65 years and

optimizing processes for our plants. In fact, our engineers

the company chose Chihuahua based on its convenient

have improved assembly instructions for all components

location and the time zone but most importantly

of the Bell 525.

because of the state’s manufacturing expertise. Mexico is a strong market for us. In light of growth in our

Q: How would you describe the education level of

commercial department, the company realized that

Chihuahua’s university graduates?

manufacturing helicopter parts in the country would

A: Graduates are very qualified as local institutions have

be beneficial. In Chihuahua, we manufacture cabins and

committed to adapting their syllabi to industry needs. We

harnesses and perform small assemblies for several Bell

collaborate with the local cluster to communicate what

Helicopter aircraft.

companies require of their personnel but the continuous improvement of education here is evident in their level

Our manufacturing focuses exclusively on commercial

of expertise after graduating. Bell Helicopter contributes

helicopters in Chihuahua but our commercial aircraft

with an internship program to support education, which

also are used in military and paramilitary operations. We

now has 10 students. Several interns even join the

recently delivered 15 Bell 407 helicopters to the Mexican

company long term on completion of this course. Many

air force. We also have two maintenance centers in Mexico

of our 300 employees were permanently contracted

City for testing and the repair of helicopter parts.

following a similar program.

VIEW FROM THE TOP

AN EFFECTIVE, TIME-SAVING AND COST-EFFECTIVE SOLUTION HUMBERTO LOBO Director General of Grupo Lomex

Q: What does private aviation represent for Mexico and

To change this negative image, private aviation users

how does it support the country’s economic development?

must use these services responsibly. It also is necessary

A: Private aviation is a driver for economic development,

to create awareness among the general population of the

investment

crucial

impact private aviation has on technological development.

transport links in every city and in Monterrey they push

and

management.

Airports

are

Many of the technologies found in commercial airplanes

forward economic development through transportation

were first used in cargo and executive aviation, such as

of raw materials, merchandize and individuals. Railroads,

composites. Private aviation also is a source of employment

ports and highways are also essential but airports permit

and brings indirect economic growth to entire cities. The

greater connectivity.

industry has not properly communicated these many advantages so we should encourage companies to do so.

Mexico is now second in the world for private airplanes, after the US. Monterrey is also in a privileged position

Q: How does Grupo Lomex’s value proposition for the

as the state has unique advantages thanks to Del Norte

private aviation market complement other sectors?

International Airport, which provides a reliable center

A: All our companies are founded on the pillar of safety,

for private aviation away from commercial aircraft. This

our number one priority. Our second priority is to provide

airport concentrates on training schools, MROs, charter

excellent service and to adapt our services to our clients’

companies and private planes and has greater freedom to

needs. Trained pilots ensure this service so we only hire

operate than a regular airport.

experts with many flight hours of experience and invest in their training. We also handle our aircraft’s maintenance.

As general aviation provides limited direct economic

We want Grupo Lomex to be the reference point for private

impact, this area has often been overlooked by government

aviation in Mexico, a market that will continue to grow. Grupo

figures and private entities. Airports often charge per

Lomex offers integral services, ranging from emergency

passenger so they prefer the much larger aircraft that

transportation to support for the oil and gas industry.

commercial airlines use. Mexico has a smaller number of airports per capita than neighboring countries because

Q: How were Grupo Lomex’s private aviation companies

aviation is underappreciated but the quality of those is

and their services developed?

high and they are equipped with the latest technologies.

A: Grupo Lomex incorporates four different aviation companies, which handle helicopters from Heliamérica and

Q: Private aviation can be a controversial topic. What

ASESA and jets for Transpaís Aereo and JetLife. ASESA is

needs to be done to improve this negative image?

over 40 years old and Transpaís Aereo is reaching the same

A: Private aviation is a vastly more efficient way to travel

milestone. During that time we have paid close attention

than commercial aviation, especially in terms of time.

to the market’s needs to develop our services such as

Its negative perception comes from some considering

JetLife, which was created to offer safe, fast and reliable

it wasteful. Mexico is a very large country that is still

transportation to those who value time over money.

facing infrastructure and security problems, making longdistance transportation difficult. In these cases, private

We provide maintenance services in several strategic

aviation is an effective, timesaving and cost-effective

locations in Mexico, including Mexico City, Monterrey

solution. The country also lacks aerial connectivity, forcing

and Campeche. Our workshops support Bell Helicopters

passengers to travel via Mexico City for connecting flights

and AgustaWestland and we represent Pratt & Whitney.

to their final destination. Aviation supports many other

We have a base in Monterrey and another in Toluca for

areas and private planes also can aid firefighting and

jets, from which we can fly internationally. Our fleet is

emergency services.

comprised of Embraer and Cirrus, among other aircraft.

261

VIEW FROM THE TOP

RUSSIAN HELICOPTERS DOMINATES REGIONAL FLEET ALEXANDER MIKHEEV Director General of Russian Helicopters

Q: How important is Latin America to Russian Helicopters’

globally for the number of military aircrafts and helicopters

global operations?

manufactured, accounting for almost 3,550 units, or 7

A: Latin America, including Mexico, is a valued market

percent of the global fleet.

for Russian Helicopters and the region has a long history

262

operating several types of Russian-made commercial

Q: Which models have the greatest potential for growth?

and military aircraft. Russian Helicopters mostly supplies

A: Regarding the military segment, Russian Helicopters’

medium and heavy duty helicopters to Latin American

Mi-28, Ka-52, and Mi-35M helicopters are very competitive

countries. Mexico specifically purchased a significant

in the world market. Through supply agreements for these

number of Mi-8/17 series helicopters in the 1990s and

three models, Russian Helicopters held approximately 35

today the Mexican army uses a fleet of more than 50

percent of the global market for military helicopters at

Mi-8/17 series helicopters as well as the heavy military

the end of 2014. The Mi-28NE Night Hunter is a modern

transport Mi-26. These helicopters play an important role

attack helicopter designed to carry out search and destroy

in combatting illegal armed groups in the region. Today,

operations against tanks, armored and unarmored vehicles

Russian Helicopters dominates the commercial class with

and enemy personnel, as well as low-speed airborne

a maximum takeoff weight of between 10 and 20 tons, and

targets. It also meets the latest international standards for

holds a 77 percent share of the regional helicopter fleet in

combat helicopters. The Ka-52 Alligator is a reconnaissance

this sector. The company also dominates 47 percent of the

and combat helicopter designed to engage with tanks,

military helicopter fleet in Latin America.

armored and unarmored ground targets, as well as other helicopters. This unit can provide cover fire for troop

Q: How is the company’s sales dynamic formulated

landings, fly routine patrols and escort military convoys

between its Russian and foreign markets?

while offering a high degree of protection to its crew and

A: In 2014, Russian Helicopters had a 14 percent share

advanced automated systems for ease of piloting. The

of global sales and accounted for between 230 and

multirole Mi-35M attack helicopter is a comprehensive

280 helicopters sent to various destinations per year.

modernization of the Mi-24. It offers guided and unguided

Today, there are over 8,500 Russian-made helicopters

weapons and is equipped with a modern navigation and

operating worldwide. At the end of 2015, a total of more

electronic display system as well as powerful engines.

than 2,500 Mi-8/17 series helicopters were in operation,

The helicopter is recognized for its first-rate performance

making it the second most popular military helicopter in

at high temperatures and over mountainous terrain. The

the world, representing a 13 percent share of the global

Night Hunter, Alligator and Mi-35M can all operate night

fleet. Orders reflect this. At the beginning of 2015 over

and day and in adverse weather conditions.

500 helicopters had been ordered by both existing and new clients. To meet this demand we intend to maintain

The helicopters based on the Mi-8 have the most potential

our manufacturing and sales levels at over 230 units per

to grow in the future. This includes the Mi-171, the newest

year in the short term. These figures show a positive trend

medium-sized multirole helicopter that combines the

in recent years, as the volume of deliveries exceeds the

unique operating experience of the Mi-8/17 helicopters

volume of units withdrawn from operations.

with the latest technology. This model also offers the highest levels of reliability, safety and comfort and

In the last three to five years, deliveries to Russian and to

provides broad opportunities for business. In the heavy

foreign markets were equally balanced and we intend to

helicopter segment, the Mi-26T2 series offers the biggest

maintain this proportion, which is ideal for risk mitigation

load-lifting capacity in the world. It combines all the best

as well as budget balancing. We are proud that Russian

features of the Mi-26 with the most cutting-edge onboard

Helicopters contributed to Russia being ranked second

radar system, communications and navigation systems

and avionics. This model is capable of transporting up to

complies with international aircraft standards FAR-29, CS-

20 tons of cargo internally or sling loaded and is used for

29 and AM-29.

various tasks such as transportation, medical evacuations Q: How does Russian Helicopters compete with other

and firefighting.

helicopter manufacturers? The multifunctional Ka-32A11VS is the leader in its class,

A: While many companies in the US and Europe invest

intended for cargo transportation, medical evacuations,

heavily in the development of new technology and products,

patrolling, complex firefighting and search and rescue

this carries certain risks. Many modern helicopters have

operations. The Ka-32A11BC can lift up to five tons of sling-

become so sophisticated and high-tech they are virtually

loaded cargo and operates efficiently in built-up urban

impossible to operate and service in the field, which results

areas, as well as mountainous and forested regions. It can

in certain competitive advantages for Russian Helicopters’

also land on small vessels, marine platforms and other

products. While they are equipped with up-to-date avionics,

hard to access sites. Finally, the light multipurpose Ansat

navigation and communications systems, they are easy to

helicopter boasts the largest cabin in its class and can be

operate, which has made them competitive aircraft. In the

rapidly reconfigured. Quick release equipment allows the

coming years we plan to begin production of the Mi-38,

Ansat to be adapted to a wide range of tasks.

Mi-171A2 and Ka-62 helicopters that will compete both in Russian and global markets.

Q: How has the company tackled the increasing demand for energy-efficient helicopters?

Without a prompt, modern servicing system, survival in

A: Our new Mi-38 is an excellent example of efficiency. It

the industry would be impossible. Achieving efficient

not only exceeds other helicopters of that class in terms

aftersales services for all our customers is a primary

of cargo and passenger capacity, it can compete with

objective for Russian Helicopters. The company is

small aircraft on some regional routes. The helicopter is

systematically improving its global service network to

extremely energy efficient and does not require large

match the highest international standards. This implies

helipads or expensive airport equipment. The Mi-38 is a

actively working to organize aftersales in several countries

new generation of helicopter that combines innovative

on every continent. We manage a large service center for

technology with progressive design and its onboard

Russian Helicopters in Mexico and are considering the

equipment

possibility of further developments in the region.

has

integrated

architecture.

The

Mi-38

263

AIRCRAFT SPOTLIGHT

264

BELL 429 The innovation and unique design features that have always characterized Bell are present in the Bell 429. Tailored for the corporate and VIP market, the Bell 429 merges technological features with sleek and modern exteriors and interiors that can be customized to passenger tastes and needs. Twin engines give the 429 a range of over 400 nautical miles and a speed of 155 knots. The high One Engine Inoperative (OEI)-rated transmission allows for Category A operations, meaning that each 429 engine works separately from its “twin,” ensuring the aircraft continues to work if one of the engines fails during takeoff or landing. The 4-axis autopilot allows the aircraft to perform steep approaches of up to 9 degrees. The helicopter features the BasiX Pro Integrated Avionics System, which can have up to three multifunction displays and an electronic data recorder that facilitates postflight analysis. The helicopter’s specialized software also performs self-diagnostics and monitoring of the aircraft’s performance. The Bell 429 is certified for single and dual pilot instrument flight rules operations, which means it can fly in conditions where visual references cannot be trusted due to weather conditions and flight deck instruments must be depended on to fly the aircraft. Its top-notch performance has made the 429 a police department favorite, particularly for border protection, search and rescue, natural disaster relief missions and road traffic monitoring. While the 429 was designed for the executive market, it can easily serve many other purposes. The Bell’s MSG3 technology protects the airframe and components from sea spray and salty air, so it is suitable for traveling offshore. Its interiors can also be customized to work as an ambulance or for special missions. The spacious cabin, the largest in its class, can easily sit the pilot and seven passengers comfortably. As an industry leader, Bell Helicopter has proven experience manufacturing and commercializing aircraft for both civilian and military purposes, as well as manned and

unmanned

vertical-lift

aircraft.

Its

experience

translates into complete trust in the quality of the products from clients. In June 2009, one month before it was certified by the FAA, the Bell 429 had already received 301 orders.

265

VIEW FROM THE TOP

RIGGED FOR POWER, RANGE ENRIQUE ZEPEDA Executive Director and CEO of Transportes Aéreos Pegaso

Q: What are the main performance parameters you take

our case our pilots do land the aircraft. The H175 also has

into account when choosing a helicopter?

automatic approaches to rigs, even in bad weather when

A: The most important parameter is performance because

visibility is diminished.

we operate in high-altitude conditions. Eighty percent

266

of Mexican terrain has high-altitude conditions so we

The range delivered by the H175 also is outstanding. We

need helicopters with a lot of power. Our operations

have flown up to 235NM on a roundtrip carrying three

have changed. Oilrigs are getting farther from shore and

passengers, for a total of over 400NM at a maximum

our helicopters need more range to comply with their

speed of 160kts. The H175 complies with the strictest

functions. Helicopters need more power to carry more

quality standards and is powered to perform Category

fuel farther, which led us to acquire the Airbus H175.

1 takeoffs, which means that if during takeoff an engine fails the helicopter keeps climbing, rather than just

Throughout our history, we have been faithful clients

maintaining altitude at the same level. With one H175 in

of Airbus Helicopters. We have had a good working

Tampico and another in Ciudad del Carmen, we can cover

relationship with them and they have helped us to grow.

the entire Gulf of Mexico.

However, there are several helicopter models and brands that could be used for transportation services for the oil

Q: What made Transportes Aéreos Pegaso choose the

industry. Most companies use Agusta, Airbus, Super Puma

H175 over other models?

and Sikorsky aircraft. It usually depends on the mission

A: We were one of the initial companies to order this

they want the helicopter to complete.

model six years ago when it was first announced. Even though this particular helicopter model was not needed

Q: What characteristics does the H175 have that make it

at the time, we knew someday the Mexican market would

suited to the oil industry?

be in need of its performance standard. Today, delivery

A: Our H175 is the first helicopter of this model on the

time for the H175 is 18 months.

entire continent and the fifth in operation in the world. It has top-notch technology that sets it apart from all

We only have one H175, which is used by WesternGeco,

other helicopters, with systems that are unique. It is

but we expect the second unit to be delivered in

reliable with a good range, power and capacity and the

November 2017. Clients are very happy with this aircraft,

price is fair when you consider everything the helicopter

since the broader range allows them to fly to their vessels

has to offer.

without having to move the ships closer to the shore, saving money. Even though the H175 is more expensive

The H175 was designed with a different philosophy. Airbus

than other aircraft in the fleet, the cost per seat does not

Helicopters wanted to create a very special aircraft so

increase much. Taking 16 passengers on the H175 costs

the development phases of components were strict. The

almost the same as taking 12 passengers on the H155.

avionics system it installed has an autopilot and a 4-axis control system. Normally, autopilots work with a three-

Besides performance, the H175 complies with new regulations

axis system. The fourth axis permits the helicopter to

that will be put in place in the coming years and which will

hover using the autopilot. All the maps are connected so

demand higher certification standards than those used by

the flight can be programmed by route or destination and

European Aviation Safety Agency (EASA). They have been

the helicopter will automatically fly there, reach the exact

applied in the North Sea since 2015.

destination and hover over it. Technically, pilots do not have to do much since it can also land automatically if

Q: What competitive advantages does Airbus Helicopters

you have the exact coordinates of the landing strip but in

offer when compared to other helicopters?

A: Deciding which helicopter offers the most competitive

for the oil industry is to buy an existing company or to

advantages depends on the use. From our perspective,

initiate a joint venture.

Airbus works because of its philosophy of offering excellent engineering and work quality with components

Q: How is Transportes Aéreos Pegaso’s planning to

that last longer in terms of flying hours. They are well

maintain or diversify its client portfolio?

made and well designed and the price reflects this.

A: Unfortunately, we do not know what will happen to our business with PEMEX, which is leading us to diversify

In the case of Bell Helicopter, the components are more

and rely more on the private sector. PEMEX used to be

economical but you have to change them every 1,200

responsible for 60 percent of our business operations,

flying-hours. In the case of our helicopters we replace

but now 30 percent of our operations are for the private

components after 3,700 flying-hours. Buyers have to

sector, 40 percent for the Federal Electricity Commission

analyze every type of helicopter in detail, according to the

(CFE) and the remaining 30 percent is with PEMEX. We

mission intended. Costs are almost always comparable

expect to grow our business with private companies

long-term.

rather than with PEMEX. The results of Round 1.4 for deep-water drilling will bring new business but that will

Q: How do you address your maintenance needs with so

not materialize until 2018.

many bases? A: We have bases in many cities, like Dos Bocas and

We are diversifying and will start building a facility in

Matamoros. For heavy maintenance tasks we fly our

Toluca. The company has three Lear Jets and we want

helicopters to Ciudad del Carmen. In Dos Bocas and

to increase our presence in the executive aviation sector.

Villahermosa, we provide light maintenance services, while

Even though it is a market with many competitors we

medium maintenance services are done in Matamoros.

believe there is enough demand to make it a profitable

Regardless of the services offered at each location, all our

business. We plan to have the facility ready by the end

bases have mechanics at all times. Helicopters cannot fly

of 2017 and once it is operational Transportes Aéreos

without correct maintenance, which is at least 1.3 hours of

Pegaso will move its offices there.

maintenance applied per flight hour. We expect this to help us diversify our client portfolio. In Q: In what ways will Mexico’s reforms change the

five years we expect our clients to be 50 or 60 percent

transportation market for oil in the country?

from the private sector, mainly for offshore operations.

A: Helicopter transportation services by foreign companies

The company is planning to maintain its current operations

will not appear in the near future. The governmental

with CFE. We would like them to be around 25 percent of

reforms offered the possibility to extract oil but the

our business, and the remaining percentage will be with

aviation segment is not open to everyone. Coasting is still

PEMEX. Also maintaining our business with TransCanada

not permitted by law, so the only possibility for foreign

is important for us. We are the only Mexican company

companies to enter the helicopter transportation market

that passed all the certifications they asked for.

267

VIEW FROM THE TOP

HEAVY LIFTING DONE RIGHT PAUL HERZBERG CEO of PEMSCO Helicopters

268

Q: How has the Mexican helicopter sector evolved and

building up even more experience. I am becoming more

what challenges remain?

interested in managing the company than flying myself so

A: It used to be difficult to import helicopters into Mexico

PEMSCO is looking for other pilots and maintenance staff

because an aero taxi certification was required. These

to work on the operations side. We even have two expert

are expensive and not particularly useful internationally.

attorneys in aviation in Queretaro, which is quite rare. We

Fortunately, the framework was modified and new

hired them when the Treasury seized a Bell Helicopter in

regulations allow us to operate with permits and now

Queretaro. They spent five years working to return it to

helicopters can enter the country with just an FAA

the US company.

license. Q: Which helicopters does PEMSCO prefer and why? Mexico

rapidly

growing

but

despite

economic

A: PEMSCO mostly uses Hueys, which can pick up

advances, corruption keeps complicating operations.

4,000lb of cement. We also used an S-61A capable of

Many companies choose acceptance and complacency

carrying up to 10,000lb to move air conditioners on the

but PEMSCO Helicopters refuses to take on any under-

new Chrysler buildings in Saltillo. The company also has

the-table activities to secure contracts. We are the

taken on contracts that required a sky crane. This unit

only company in the region that specializes in this kind

picks up 25,000lb. The type of helicopter we use must

of business so there is nothing that would force us to

be suited to each project.

consider partaking in corrupt activities. Q: How does PEMSCO see itself growing and which The company was created seven years ago to build

areas are most attractive?

better operating conditions in Mexico, especially in

A: We are willing to work in all sectors of the industry.

customer service. Mexican regulations impeded me from

We spent a long time contacting potential clients but

owning the company outright so I had to find a partner.

we have seen a vast turnaround and now companies are

Eventually we grew out of Chihuahua and carried out

beginning to call us instead. PEMSCO Helicopters got

several projects all over the country.

off the ground slowly, until companies were aware of our services and comfortable with the idea of working

Q: What are PEMSCO Helicopter’s main capabilities and

with non-Mexican partners. But today, our reputation

how are they developed?

precedes us and is based on working with US standards.

A: PEMSCO specializes in longline specialty work where

Our clients include the National Forestry Commission

a helicopter needs to move like a crane. This can include

(CONAFOR), which we often help to put out forest fires.

erecting poles for electricity lines, putting air conditioners

We also have a returning Columbian client that recently

on rooftops or pouring cement for powerline towers or

called us for a new project and has recommended us

dams. We are now moving drills for mining applications.

directly to other companies.

The company leases helicopters from various companies

The company’s plan is to leave Chihuahua and set up

in the US since each contract requires different types and

in Queretaro so we can collaborate on more projects in

sizes. I have considerable experience as a helicopter pilot

Mexico City and Guadalajara. We are close to celebrating

and all the necessary qualifications, including a US pilot’s

our 10-year anniversary and we expect to keep working

license and an instructor’s certificate. This has allowed

according to our strict quality standards. Our service is

us to secure contracts easily with the public and private

unique. There is hardly anyone in Mexico with the same

sectors. When operations are slow in Mexico, I return to

skills and we want to offer the best possible quality of

the US to dedicate myself to forest fire-fighting efforts,

service to customers.

INSIGHT

SPINNING BUSINESS OPPORTUNITIES Private aviation companies are usually characterized by the exclusivity of their services and Redwings is no exception. It also offers a twist. While both planes and helicopters are an integral part the sector’s offerings, Redwings has found a way to rethink a helicopter's use, uncovering new

“At some point we will fly throughout the country. Mexico has several

business opportunities in the process.

destinations that could

“Part of Redwings’ business is focused on taking advantage

benefit from our helicopter

of the tourism industry in Mexico,” says Bernardo Moreno, CEO at Redwings. With that in mind, Redwings became the first company to develop a tourism product based on using helicopters in Mexico City. The service is called

tours” Bernardo Moreno, CEO at Redwings

Helitour. In December 2015, Helitour de México was awarded with the prestigious Silver Pochteca prize, a

can carry up to six passengers and has a reach of 300

recognition established by Mexico City’s Tourism Ministry

nautical miles flying at 246km/h. The Bell 206-B3 flies at

to encourage the creation of successful tourism projects

a speed of 207km/h and has a reach of 250 nautical miles

with a positive economic, social, environmental or cultural

carrying up to four passengers.

269

impact. The committee that awarded Helitour for touristic innovation consists of the presidents of several chambers

Following Redwings' traditional business model, the

and associations of tourism companies.

helicopters’ interiors are fitted to the client’s requests. “Every aircraft is adapted to meet our clients’ needs and

When Helitour started operating in 2014 it only offered

wishes,” says Moreno. This is Redwings’ distinctive element,

flights in Mexico City. The product’s success led the

making their clients feel like they own the aircraft while

company to offer new destinations. Today, Helitour offers

actually renting it. “Our core business is not transportation

its original flight, a night-tour over the capital, and a

but high-quality service,” continues Moreno.

premium tour that includes the capital and Teotihuacan’s archeological zone. It also has seasonal offerings, such

For companies like Redwings, the aviation industry is

as a tour to Puebla’s 100 Mexican Wines Festival. Its new

inevitably intertwined with local and global economic

offering over Queretaro adds to the company’s alliance

development

with La Redonda Vineyard in the state. “At some point

Conversely,

we will fly throughout the country,” says Moreno. “Mexico

executive and cargo aviation to function, underpinning

has several destinations that could benefit from our

tourism aviation. To ensure efficiency in resource use,

helicopter tours. Los Cabos, Tuxtla or Sierra Gorda have

specific transport solutions must adapt to the country’s

much to offer.”

characteristics.

and a

dependent

healthy

The

economy

appearance

other needs

industries. commercial,

new

economic

centers such as the Queretaro-Leon corridor offers niche Quality and safety come first for every trip. All Helitour and

opportunities for new aviation services, particularly for

Redwings aircraft have IS-BAO and Wyvern certifications,

the use of helicopters. “This is faster than using private jet

ensuring that they comply with international standards.

services. A helicopter can reach Leon in just 30 minutes from Queretaro,” says Moreno.

Helitours is not the only touristic product Redwings has developed. In March 2015 Turibus presented TuriSky, a

Moreno says the touristic aspect does not contradict the

helicopter service operated by Redwings. The trip features

company’s business strategy to offer exclusive services.

iconic sites in Mexico City such as Chapultepec’s Castle,

On the contrary, it complements Redwings’ operations,

the Revolution Monument, Paseo de la Reforma and the

he says. “Our Helitour addition has given us the mass-

World Trade Center, among others.

appeal component our other services lack.”

After 10 years in the market, Redwings has acquired a fleet

Redwings quality offering does not end with customers

of 12 airplanes. But the dalliance into helicopters began

and its helicopter services. It also encompasses the

with the company’s first Bell. Today, their commitment

employees of the private aviation enterprise. “Becoming

to the brand has resulted in a team of four helicopters,

certified as Great Place to Work in Mexico is part of our

featuring the 407 and the 206-B3 models. The Bell 407

future plans,” says the CEO.

INSIGHT

CARVING A HELIPORT NICHE CÉSAR MORENO Director General of ENTEC

As the country’s aerospace sector takes on greater

The normativity for heliports encompasses usage as well.

importance, maintenance and repair firm ENTEC is

The DGAC’s operational authorizations range between

solidifying its place in one segment: heliports.

30 days and 30 years. In Mexico, only 122 of a total 398

“Companies need to adapt to the country’s quickly

are 162 heliports but only 70 of these have the necessary

changing landscape so, in that sense, ENTEC strives

permits to operate.

heliports are authorized by DGAC. In the capital, there

to position itself as a leader in Mexico’s care and 270

maintenance services,” says César Moreno, Director

The company’s expertise working at heights in industrial

General of ENTEC.

environments is put to good use during the construction

Though there are several companies in the country that

safety services ensure the construction is performed

are in the business of building heliports, few offer integral

under the strictest safety measures for workers and

services like ENTEC. Its five business units, aerospace,

pedestrians. The company also offers all the necessary

height access, height services, worksite safety and

the public to ensure the heliport’s functioning after

special projects work in unison. The aerospace division

construction.

stage. ENTEC’s height access business and worksite

is a growing segment for the business. “Aerospace is our company’s most active area. In second place is our

Even though the construction phase is one of the most

height-access equipment and services that focus on

visible parts of the project, aftersales services ensure

exterior maintenance,” Moreno says.

the heliports correct operation once the construction and design phases have ended. ENTEC performs

In Mexico there are a total of 398 heliports of which only 122 have authorization from DGAC

maintenance and updates and can even take charge of everyday technical aspects such as turning on lights and hospitality services for users. Moreno says many new buildings and helipads age quicker than they should because of a lack of upkeep. “At ENTEC, we think that maintenance should be seen as part of a service that end users deserve and not as an expense. Our business revolves around safety and we collaborate with companies that have very high-safety standards,” says the Director General.

ENTEC’s offering includes technical design that considers existing facilities. This phase includes the definition of

ENTEC’s heliport construction techniques include the

construction needs, as well as an aeronautics, operational

use of concrete, steel and aluminum. Though the use

and structural feasibility studies.

of aluminum might seem controversial, the material’s lightness as well as its resistance to corrosion make

The second stage develops research for the desired

it a sound alternative to steel. Heliports made with

helicopter routes, focused on defining operational

aluminum can be constructed in a different location and

characteristics, factoring in the helicopter that is going

transported to their permanent site, which make it a

to be used and the location’s conditions. The research

perfect fit for buildings that are adding helipads post-

follows the technical requirements of DGAC’s National

construction rather than in during planning phase as

Fire Protection Association (NFPA), ICAO and the FAA.

infrastructure companies tend to recommend.

VIEW FROM THE TOP

SAFETY AND FUNCTIONALITY FOR EVERY HELIPORT YOUSEFH PINEDA Director General of Cramex

Q: What is Cramex's role in the construction of heliports?

for helicopter transport and consequently helipads.

A: Cramex builds heliports that fully adhere to Mexican

Monterrey has 25 heliports while Guadalajara and Puebla

safety and functionality standards. Our team is comprised

have between 15 and 20 each. There is a large difference

of aeronautical engineers, pilots, civil engineers and

between heliports in the capital and other cities because

architects. We are not real estate developers so we have

the latter may have many unauthorized or unregistered

created several alliances, as the construction of heliports

heliports. Of all heliports in Mexico, about 60 percent

is extremely complex. Our partners include architects

comply with all regulations. 271

and civil engineers, and we have worked for real estate developers such as Inmobiliaria Brom, ICA, Tradeco and

Q: How does Cramex encourage heliports to be authorized

Prodemex. We also have alliances with designers and

by the DGAC?

lighting companies such as Filotek. Developers often

A: Many have an expired permit because heliport owners

consult us before starting a project in which we are experts

have either been unwilling to renew it or have been unable

and we reach out to them for their construction support.

to comply with the changing regulations, regarding

Cramex has worked on major projects such as Plaza Carso

platform dimensions, firefighting equipment, lighting and

and Torre Bancomer, designing their heliports. Most of our

legal documentation required by the DGAC. Complying

clients request turnkey projects for which we must analyze

with these new regulations represents too large an

the type of aircraft to be used. A helicopter’s size and

investment for heliport owners to renew their permits. If

weight will determine the platform’s dimensions. We offer

heliports are working under a trust that becomes another

clients different heliport configurations and they make the

issue because the DGAC does not regulate this type of

final decision. Besides heliports, we manage aeronautical

operation. While we support and guide existing heliports

training programs and air taxi management services.

in acquiring certifications, they rarely have the resources to invest in improving. Therefore, we recommend real estate

Q: How does Cramex ensure companies comply with

developers build a heliport from the very beginning.

Mexican safety regulations? A: Mexican lawmakers are keen to maintain and improve

Working with the DGAC can be bureaucratic and complex.

security for helicopter passengers and people on the

One of the reasons for this is the organization's lack of

ground. Cramex goes far beyond the minimum safety

personnel. The DGAC has enhanced its installations

regulations imposed by the DGAC, following international

considerably but there is room for improvement, such as

guidelines as established by ICAO. If a heliport has to have

updating technology regulations.

a width of 21m by law, we build it to 23m to provide a larger safety margin. We also install more fire prevention

Q: What are Cramex’ key areas for growth going forward?

systems than those stipulated by authorities to ensure the

A: Our growth was positive through the first half of 2016. We

highest safety standards.

built heliports for Torre Bancomer in Reforma and its Data Center in Atizapan. While we plan to continue expanding

Q: How has the market for heliports grown in recent years?

our heliport division building on this success, we will also

A: The construction of heliports has grown impressively

advance our aeronautical training programs. Cramex is

in major cities, driven by corporate passengers concerned

developing a course for drone pilots with the DGAC’s

with saving time and for safety. This increased the need for

authorization. Drones, in all shapes and sizes, are common

heliports in corporate and apartment buildings. About 150

yet their regulations are underdeveloped so they may pose

heliports are located in Mexico City. Vast new constructions

a danger to airplanes. Cramex will continue to expand its

in Reforma, Santa Fe and the south of the city have led to

air taxi division, which caters to clients such as Coca Cola,

the proliferation of corporate buildings, elevating demand

Telmex, Hospital Angeles, Milenio Diario and Multimedios.

ROUND TABLE

FLYING INTO NEW OPPORTUNITIES From delivering spare parts to amplifying the tourism

from stalling as parts are delivered by road. Enterprises

experience, helicopter companies around the world are

also are becoming more creative with their offerings to

investigating opportunities outside their traditional space.

include broader demographics in their clientelle and secure new market segments.

Amidst dense traffic conditions, the industry that caters to companies that rely on the use of helicopters in large cities

Here, tourism, emergency and rescue services and

is flourishing, particularly to ferry executives to airports

occasional messenger services are among the topics

and private jet installations. Moreover, helicopters are

addressed by companies exploring new market niches for

employed as solutions to companies on tight schedules,

private travel that cannot be fulfilled by the existing small

delivering pieces to prevent manufacturing operations

aircraft offering.

Healthy economies tend to house Just-In-Time production plants that sometimes depend on urgent air deliveries to keep functioning, for which helicopters are increasingly considered a suitable mode of transport. The Mexican tourism industry 272

also depends heavily on aviation. Huatulco provides an example of untapped tourism potential because no flights directly connect with the city. Redwings became the first enterprise to develop a product based on the use of helicopters for tourism. Since then we have developed a product called Helitour that flies in Mexico City and we are in the process of building a heliport in Teotihuacan. The

BERNARDO MORENO CEO at Redwings

country has several destinations that could benefit from helicopter tours, including Los Cabos, Tuxtla or Sierra Gorda.

Grupo Lomex’ services range from emergency transportation to support for the oil and gas industry through ASESA’s services for PEMEX. Our helicopter services simplify clients’ processes, for instance it may be more cost effective to use a helicopter to bring a spare part to a plant than for a manufacturing company to stop production while the team waits for it to arrive by truck. This use of helicopters can save time and make production more efficient. Heliamerica, from Peru, allows Grupo Lomex to handle its helicopters. This group supports companies in a range of industries beyond the popular executive uses of private aviation, branching into

HUMBERTO LOBO DE LA GARZA

mining, oil and gas, energy and electricity sectors with helicopter leasing for their specific operations.

Director General of Grupo Lomex

In the last five years, SENER has obtained expertise in upgrading and updating helicopters. This MRO knowledge was put into practice through a program to extend the operational life of the Spanish Navy’s 45-year-old AB-212 helicopters. The goal of the program was to extend operational life by at least 15 years. We have redesigned and replaced the electrical system in the AB-212s and developed a complete cockpit solution with ultramodern avionics and equipment. SENER now is offering similar modernization solutions for helicopters in other countries, mainly in the Latin

SOLEDAD GARRIDO

America region. Providing aged helicopters with new generation equipment and

Responsible of Aerospace at SENER in México

extending their operational life at a lower cost than acquiring new assets is a good solution for countries dealing with tight budgets. Here in Mexico, our personnel have presented proposals for the Mexican air force’s Bell 212 and UH-60L.

Our company will increasingly focus on leasing helicopters. We want to develop a small helicopter fleet to take advantage of our maintenance capabilities in Mexico. Helicopter leasing is not common in Monterrey but it is popular among individuals who want to visit their houses outside the city. Some individuals turn to helicopters as a safe travel alternative to driving for medium distances. We are also seeing significant interest from the mining and crop-dusting industries. Helicopters are versatile and can be adapted to almost any kind of mission. Moreover, tourism is always a strong area in Mexico and we are considering the possibility of leasing in

EDUARDO ÁLVAREZ

Quintana Roo.

Operations Manager of Avihel

The time helicopters save have made them popular among business travelers, leading to growth in the number of executive aviation companies in Mexico. The areas that are growing the most are Mexico City and the State of Mexico. In Mexico City, the neighborhoods that are seeing the greatest new constructions are Reforma, Santa Fe and the south of the city due to the proliferation of corporate buildings. Saturated zones elevate demand for helicopter transport and consequently helipads especially on corporate buildings. To ensure helipads comply with regulations, companies would greatly benefit from incorporating experts like

YOUSEFH PINEDA Director General of Cramex

Cramex in departments dedicated to aviation and development. This is an area of opportunity for cities and private aviation companies in Mexico.

273

AIRCRAFT SPOTLIGHT

274

AIRBUS H175 Unmissable flying across the skies, the Airbus Helicopter model H175 is a civil craft previously known as the EC175. This 7-ton class helicopter is Airbus’ new medium-sized rotorcraft, with enhanced flight safety and simplified maintenance. Measuring 18.06m X 2.85m and 2.30m high, it can be used for offshore, VIP and public service transport. The aircraft has a time-to-climb record of 6,000m in six minutes and 54 seconds and can climb 3,000m in three minutes and 10 seconds. It has a recommended cruise speed of 150kts and a faster cruise speed of 160kts. The unit’s hover out of ground effect (HOGE) can perform with a maximum 47.5-ton take-off weight at 5,800ft in ISA +20°C conditions and includes heli-deck performance at its maximum take-off weight in the same conditions. This helicopter prides itself on its large window space and low sound and vibration levels. It can carry out Performance Class 1 take-offs and landings at MTOW in ISA +20°C conditions from a 70ft-high platform. The Airbus Helicopter H175 incorporates a Helionix avionics suite and integrated 4-axis. The Human Machine Interface decreases the pilot’s workload and improves flight envelope protection and system redundancy. It has a hands-off one engine failure management mode and a Rig n’ Fly mode for approaching rigs. It also has a TCASII for automatic collision avoidance. In addition, the emergency floatation system is certified at Sea State 6 conditions. In an oil and gas configuration, the aircraft can transport 16 passengers and fly 140 nautical miles, or almost 200 nautical miles with only 12 passengers. From 2016 onward, the Airbus Helicopter H175 has had a maximum takeoff load of 7,800. This version incorporates all safety recommendations of the International Association of Oil and Gas Producers (IOGP). In search and rescue mode, the H175 can last six hours with its standard two-ton capacity fuel tank. The cabin is almost four meters long, boarded by sliding doors on either side. It can perform a HOGE at ISA +20°C up to 5,800ft. It has a high-power margin in One Engine Inoperative (OEI) conditions. This enables the craft to maintain hover height and a climb rate of over 500ft per minute at sea level. The aircraft also comes in the H175 VIP and the H175 Executive versions. The VIP has three styles and can carry six to eight passengers. The Executive can accommodate up to 12 passengers.

275

AIRPORTS & INFRASTRUCTURE

With a total of 1,891 aerodromes in the country, including airports and heliports, it is no surprise the aviation industry is growing. Several investments have been made in past years to ensure the correct functioning and modernization of these facilities, such as with Toluca’s International Airport. Different airport groups such as OMA or GACM have committed a large amount of resources to the construction, modernization and development of new airport structures. The problems with the infrastructure of existing airports have necessitated new projects, in particular Mexico City’s new airport, NAICM, and the expansion of Cancun’s airport. For the economy to fully develop, it needs the appropriate infrastructure to conduct operations.

This chapter focuses on the country’s current and future infrastructure needs. It also features the perspective of different sector players on one of Mexico’s most ambitious projects: NAICM.

277

CHAPTER 12: AIRPORTS & INFRASTRUCTURE 280

ANALYSIS: In the Year 2050…

282

VIEW FROM THE TOP: Héctor Espinosa, AIT

284

VIEW FROM THE TOP: Federico Patiño, GACM

286

MAP: Federal Airport System

290

VIEW FROM THE TOP: Lorenzo Ochoa, OHL Toluca

292

ANALYSIS: High Standards Lead to Award Recognition

293

VIEW FROM THE TOP: Francisco Estrada, Parque Aeroespacial Querétaro

294

VIEW FROM THE TOP: Manuel Romero-Vargas, Manny Aviation Services

295

VIEW FROM THE TOP: Manuel Girault, Universal Aviation Mexico

296

VIEW FROM THE TOP: Virginia Gómez, Prior Aero

298

VIEW FROM THE TOP: Alex Covarrubias, SITA

300

VIEW FROM THE TOP: Manuel Barreiro, Advance Real Estate

301

VIEW FROM THE TOP: Luis Lara, American Industries

302

VIEW FROM THE TOP: Claudia Ávila, AMPIP

303

VIEW FROM THE TOP: Oscar Peralta Navarrete, GMI

304

INSIGHT: Alicia Silva, Revitaliza Consultores

305

INSIGHT: Regulate Drones Reasonably

279

ANALYSIS

IN THE YEAR 2050… Low-cost airlines and an increase in tourism are steadily

flights in Mexico, 76 percent are concentrated in only 10

lifting the number of air operations in the country but as

airports, says DGAC.

more people travel, airports will need to renovate and expand to address demand. To solve the problem, the

Most airports in the country are managed by private

plan is to go big. The construction of NAICM to replace

operators through concessions. Grupo Aeroportuario

the capital city’s international airport is expected to be

del Sureste (ASUR) operates nine: Cancun, Cozumel,

one of the country’s most challenging infrastructure

Huatulco, Merida, Minatitlan, Oaxaca, Tapachula, Veracruz

developments ever.

and Villahermosa. Grupo Aeroportuario del Pacìfico (GAP) operates 12: Aguascalientes, Guadalajara, Hermosillo, La

“Multiple studies have

Paz, Leon, Los Cabos, Los Mochis, Manzanillo, Mexicalli, Morelia, Puerto Vallarta and Tijuana. Grupo Aeroportuario

analyzed the feasibility of

Centro Norte (OMA) operates 13: Acapulco, Chihuahua,

having both airports and

Mazatlan, Monterrey, Raynosa, San Luis Potosi, Tampico,

Ciudad Juarez, Culiacan, Durango, Ixtapa-Zihuatanejo, Torreon and Zacatecas.

concluded that it is beneficial 280

for the city to only have one” Melvin Cintrón, Regional Director of ICAO

ASA, a decentralized organism belonging to the federal government, operates 18: Campeche, Chetumal, Ciudad del Carmen, Ciudad Obregon, Ciudad Victoria, Colima, Guaymas, Loreto, Matamoros, Nogales, Nuevo Laredo, Poza Rica, Puebla, Puerto Escondido, Tamuin, Tehuacan,

The CIA Factbook notes that Mexico has the third largest

Tepic and Uruapan. ASA also is on the boards of Toluca

number of airports in the world, after the US and Brazil.

International

Numbers, though, can be deceiving. The 1,414 airports

Airport (AIQ) and Chiapas International Airport (AIC),

reported by DGAC in 2015 may look impressive on paper

among others.

Airport

(AIT),

Queretaro

International

but not all are operational or available to most aircraft because many are only dirt runways. Only 360 of those

Other airports in this network are operated as private

airports are certified by DGAC and many of those are

entities. GACM administers AICM and is leading the

unused. In fact, the federal network of Mexican airports

construction of the new airport, NAICM. Air traffic has

shows only 76 are officially registered. According to the

enjoyed steady gains over the past six years. Since 2010,

Global Competitiveness Index 2016-2017, Mexico ranks 61

all airport groups have registered increased flows but

out of 138 countries in quality airport infrastructure. Of all

none more than AICM. Last year closed with a best-ever 113.62 million total passengers passing through Mexico’s

PASSENGER GROWTH IN AICMBY PASSENGERS/YR TOP 10 AIRPORTS IN MEXICO

airports and 2016 looks like another record-breaking year.

OTHERS

As of August 2016, almost 84 million travelers had flown

VILLAHERMOSA

to or from a Mexican airport, 10.4 percent more than during those same period in 2015, according to data from

TUXTLA GUTIERREZ HERMOSILLO CULIACÁN MERIDA TIJUANA GUADALAJARA

DGAC. “A significant factor for such encouraging statistics has been the rise of low-cost airlines, which are sound options for travelers, promote competition in the sector and increase the total volume of air travel more generally,” says Melvin Cintrón, Regional Director of International Civil Aviation Organization (ICAO).

31.9% Mexico City

1.9% Culiacan

A flat growth rate among ASA’s airports have led to a

10.1% Monterrey

1.6% Hermosillo CANCUN

push to privatize them. Enrique de la Madrid, the country’s

9.3% Cancun

1.4% Tuxtla Gutierrez

9.1% Guadalajara

MONTERREY 1.4% Villahermosa

7.4% Tijuana

23.9% Others

2.0% Merida Source: DGAC

MEXICO CITY

Minister of Tourism, in September this year expressed support for the injection of private capital into ASA’s airports to improve services and attract tourists. As of October 2016, this project remains under initial review.

PASSENGERS BYAIRPORT AIRPORTGROUP GROUP (millions) PASSENGER BY

40 35 30 25 20 15 10 5 0

2006

2007

AICM

2008

GAP

2009 GAP

Data to August 2016. Source: DGAC

2010

2011 ASUR

ASUR

OMA

2012

2013

ASA

2014

2015

OMA

2016 ASA

Number of Passengers (millions)

THE FUTURE

comparison, “London's Gatwick Airport only has one

The numbers clearly illustrate the country's need for

runway, yet it has more than 405 million passengers. We

NAICM in Mexico City. AICM on its own has seen the

have two but only 38 million passengers, all because of

most passenger traffic growth. In 2015, around 38 million

the size of the aircraft.”

people used the airport, making it the 45th busiest in the world, according to Airports Council International. In the

The issue is being addressed through two different

first eight months of 2016 what were already high-traffic

initiatives. In the short term, airports in Cuernavaca,

levels had already climbed 6.8 percent in comparison to

Puebla, Queretaro and Toluca, all relatively close to Mexico

the same period in 2015.

City, are supporting AICM’s operations. This metropolitan airport system (SMA) aims to reduce AICM’s overcapacity.

For the past 20 years, the capital city's airport has

“AIT can easily act as a third terminal for AICM,” says

faced saturation. Among the many problems that

Miguel Peláez, Director General of DGAC, because the

have resulted are flight delays and rerouting, loss of

airport is only a few kilometers away from Mexico City and

competitiveness for smaller airlines and lower service

for “people living in the western part of the city, getting

quality. There is also a common misconception of

to Toluca is easier and faster than going to Mexico City’s

what causes an airport to become saturated. It is not

airport.” Toluca's airport also has the scope to handle 8

the number of passengers. “AICM has the capacity to

million passengers a year and the necessary infrastructure

serve more than 44 million passengers, but in actuality

for most commercial airplanes.

it is currently handling around 38 million,” says Federico Patiño, Director General of GACM. Patiño explains that

The long-term solution is to replace the current airport

many of AICM’s existing problems come from its high

with a much larger, more efficient model. NAICM will

number of operations and low occupation rates. In

accommodate 52 million passengers after the first stage is completed in 2020. By 2050, it will have the capacity for 120 million passengers, six runways and three terminals,

PASSENGER GROWTH AT AICM (millions) PASSENGER GROWTH IN AICM

representing a MX$180 billion investment.

40 35

The existing airport cannot coexist with the new one

as the distance between both causes air routes to overlap, making them unsafe. “There is a significant risk

when you have two large, complex airports performing

operations close to each other,” says Cintron. “Multiple

studies have analyzed the feasibility of having both

airports and concluded that it is beneficial for the city to only have one.”

Data to August 2016. Source: DGAC

DGAC

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

NAICM, adds Patiño, will become Mexico’s door to the world. “This project will become one of the world’s most intricate infrastructure developments.”

281

VIEW FROM THE TOP

MORE FLIGHTS, DESTINATIONS AMONG KEYS FOR AIT HÉCTOR ESPINOSA Director General of Toluca International Airport (AIT)

Q: What are the main advantages that AIT offers and

flow has been gradually decreasing. Last year we had

how does the airport plan to use them to increase its

around 900,000 passengers but during the vacation

competitiveness?

seasons at Easter and Christmas passenger numbers rose

A: AIT has among the largest volume of private aviation in

considerably. The expectation for 2016 is that passenger

Mexico and Latin America, including commercial, cargo and

traffic will remain steady, near to 1 million passengers.

executive aviation. One of the airport’s greatest advantages

282

is its runway measuring 4.2km, which makes it the largest in

Our greatest challenges are to increase connectivity within

the country. The airport has the capacity for 36 operations

the State of Mexico and to attract the largest possible

per hour and can receive up to 8 million passengers a

number of commercial airlines, as the airport is already

year. It has the necessary infrastructure to host any kind of

strong in private aviation. AIT is consolidated and well

commercial airplane.

positioned. We only need to promote its image. Passenger flow may even increase due to the inclusion of airlines such

The airport also has unique stockholders in OHL, the State

as TAR Aerolíneas, the fourth most important airline in

of Mexico government and the Airports and Auxiliary

AIT after Interjet, Volaris and Aeroméxico. TAR has grown

Services (ASA) representing the federal government.

soundly and we expect to grow alongside it.

This association operates under the name Administradora Toluca

Q: What is AIT doing to attract more airlines to its facilities?

(AMAIT). The collaboration with OHL has been fruitful

A: To attract airlines we have to communicate that

as this consolidated company is committed to the

the airport is a fast, efficient, safe and comfortable

airport’s growth. Within our model, the federal and state

alternative to AICM, which is oversaturated. We are

governments hold 51 percent of the airport while OHL holds

offering incentives via airport tariffs and promotional

the remaining shares.

materials to national and international companies to

Mexiquense

del

Aeropuerto

Internacional

attract them to AIT. Our proximity to Mexico City is an In 2015, we had four international routes. The goal is to

advantage, as we are just 40km away from the capital

bring back more flights and to expand our destinations. We

and 25 minutes away from Santa Fe, a strong economic

recently had a visit from Egypt’s ambassador who manages

center. Due to this location AIT is often the airport of

several interesting projects, including direct passenger and

choice for the international flights of specific events. For

cargo flights to Cairo.

instance, we received US President Barack Obama in 2014 and we will receive the NFL’s Oakland Raiders and

Q: What led to AIT’s loss of passenger traffic and how is

Houston Texans this year.

the airport turning this around? A: AIT has faced many fluctuations over its more than 30

AIT has significant potential in the metropolitan zone of

years of history. The airport enjoyed its strongest period

Toluca and neighboring areas. The State of Mexico has

in 2008 when it reached 4 million passengers, influenced

strong industry and it is close to several states that are

mainly by the birth of low-cost airlines Interjet and Volaris.

home to formidable manufacturing sectors. Furthermore,

The 2008 crisis heavily impacted several economic

many infrastructure projects will improve connectivity

sectors in Europe and the US, effects that eventually

to the state and the airport, including the Toluca to

reached Mexico’s aeronautics sector and led to Mexicana’s

Naucalpan and Toluca to Ixtapan de la Sal highways and

bankruptcy. After the airline closed down it released all

the new section of the highway connecting Toluca with

its landing and takeoff slots in AICM, which the previously

La Marquesa. These projects will increase road safety and

mentioned low-cost airlines took on, leading to a reduction

facilitate access to the airport both from within the state

in AIT’s operations and passengers. From 2008, passenger

and from Mexico City. The Interurban Train linking Santa

Fe with Toluca, to be inaugurated in 2017, will also facilitate passenger access to the airport.

AIT has the largest runway in Mexico with a length of 4.2km

Q: Toluca is Mexico’s strongest city for general aviation. What does this sector represent for the airport’s operations? A: The airport has about 200 daily operations. Of those, 85 percent are for private aviation and the rest are commercial flights. It hosts 45 private airlines. The private aviation sector is a strong driver of the airport’s economy and AIT offers several advantages to this sector. For operations to run efficiently, the AIT depends on the services and support of federal authorities, customs and the Ministry of Sanitation, Safety and Agriculture (SENASICA), among other authorities located inside the airport. AIT

AIT houses FedEx facilities, one of the largest cargo airlines

Toluca

in the world. This company moves 99 percent of cargo in the airport, 94 percent for international destinations, representing US$1.5 billion per year. The company is now

283

developing an expansion project. AIT is planning for the construction of a cargo terminal, which will eventually permit the transportation of 1,300 tons per year and support the development of local industry. The state has an unmatched manufacturing industry. With a share of 13.4 percent, the state is the top manufacturer

Capacity for 36 operations per hour

in Mexico and the second largest contributor to GDP, representing 9.3 percent. It also is well connected with 828.5km of highways. For these reasons, the state is in a perfect location to become a hub for cargo and commercial aviation. Q: What other projects is AIT developing to become an attractive destination for commercial and executive aviation?

Capacity for

8 million passengers a year

A: Alongside the federal government, our goal is to have the airport approved for preclearance operations, which will streamline customs procedures by permitting foreign flights to enter as domestic and to perform all necessary authorizations locally. We are well aware that many of the airport’s flights are from the US and this authorization will increase the airport’s competitiveness for international executive and commercial flights. This preclearance authorization is a medium-term plan as approval usually takes between 12 to 36 months. But depending on the conditions of the airport, approval could take up to 10 years. If successfully introduced, AIT will become one of the first airports in Mexico to implement this procedure. We also have a short-term project to modernize the airport’s facade and to renew the tunnels with modern jetways. These projects will improve AIT’s image and make it more attractive to national and international airlines.

AIT plans the construction of a cargo terminal, which will eventually permit the transportation of 1,300 tons per year

VIEW FROM THE TOP

MEXICO’S DOOR TO THE WORLD FEDERICO PATIÑO Director General of Grupo Aeroportuario de la Cuidad de Mexico (GACM)

Q: What are the expectations for the NAICM?

2014 to help finance the project. Since this, demand has

A: The NAICM is one of the world’s most intricate

increased by 9 percent, showing this market is completely

infrastructure projects and when completed will become

inelastic.

Mexico’s door to the rest of the world. According to the

284

National Infrastructure Plan, NAICM is intended to be an

Q: How will GACM ensure that NAICM follows the

international hub as well as a global logistics platform

established timeline and does not go over budget?

that will spark the country’s economic and social

A: One of the biggest challenges we will face will

development.

be finishing both on time and on budget, which is a challenge for any megaproject. Of all of the megaprojects

This international flagship also will demonstrate the

constructed around the world, only 6 percent are actually

country’s ability to develop immense projects in an

finished on time and on budget but we are optimistic the

efficient and transparent manner and will become an

new airport will be one of them. We have experienced

economic focal point, creating a balance between the

setbacks in some of the project phases but thanks to close

west and east of the city.

collaboration between Parsons International, the technical advisor of GACM and the engineers, we have identified

Q: What are the main projects associated with the

several fast tracks that will allow us to mitigate any future

construction?

delays. By carefully monitoring processes, we will meet all

A: The plan integrates three large projects into one. The

our objectives on schedule.

first project will be the construction of the airport, the second will give the current airport a new life and the third

This project is valued in dollars and the current exchange

project will be creating efficient mobility to and from the

rate benefits the project. Around 30 percent to 40 percent

area. The current airport AICM cannot coexist with the new

of the total cost is vulnerable to exchange rates because

one due to their 10km proximity to one another. As soon

they are construed by machinery, materials and other

as the new airport begins operations, AICM will be forced

commodity imports.

to cease operations. This will create an opportunity to recycle 750Ha of land, equivalent to twice the size of New

Q: What percentage of the airport will contain national

York’s Central Park. The third project involves creating an

content?

efficient transport system that will connect the entire city,

A: GACM developed 21 large project packages, and a

as well as other states, to the NAICM. This mobility plan

number of accompanying smaller packages. We ensured

will include an immense amount of communication lines,

we created tenders in which only national companies could

metros and buses.

participate besides the international tenders in which anybody could participate. In June, we announced these

Q: How is this mega project being financed?

packages and due dates to the market so they could begin

A: According to the World Economic Forum, Mexico

to make arrangements and look for partners. Mexican

occupies 49th place for airport infrastructure and the 55th

companies have developed strong bonds with European,

spot in competitiveness, which is due to the saturation

Asian and Latin American countries, so the Mexican labor

of the AICM. Over the last 40 years, the AICM has grown

force will be carrying out the construction. In some cases,

at an average rate of 5.7 percent, two times the average

a foreign company will take over when no Mexican firm

economic growth of Mexico.

offers the service, such as luggage supplier systems.

The NAICM will cost about US$13 billion dollars and the

The terminal building, the most emblematic part of the

AICM’s airport usage fees (TUA) were raised in January

airport, will be constructed by international and national

partnerships. Around 80 percent of the tenders will include

tied to the development of the surrounding communities

national companies and the remaining will be international.

and citizens, to encourage Mexico’s social development.

The amount of money invested in the terminal building and airstrips represent about 70 percent of the project. In

Q: How will GACM connect the airport with the rest of the

monetary terms, there is more international presence but

city and improve mobility to other states?

not in number of tenders.

A: An urban mobility program is being elaborated alongside the airport’s design, which will integrate three

Q: What impact will this project have on the economic

different modes of transportation. Around 10 percent of

development of the city?

existing airport’s passengers use the subway as well as

A: The project is expected to create more than 70,000

90 percent of its employees. We have not been able to

direct jobs. The current Mexico City airport is responsible

encourage more passengers to use this mode of transport.

for the greatest number of jobs in the metropolitan area. The first stage of the new airport will have three

Based on airports from other countries such as the JFK

runways and manage about 68 million passengers. When

International Airport, we could create an air train to

completed, it will have the capacity to handle more

transport passengers from the Jamaica neighborhood in

than 125 million passengers. The main advantage of the

Mexico City to the airport. In this transportation plan, lines

location is that the neighboring areas require urgent job

4 and 6 of Mexico's Bus Rapid Transit will be extended

generation. GACM is already training the 1,200 people

as well as the green metro line. This plan contains 12

who have started the initial work for the project. These

mobility projects that will extend the reach of existing

people are moving the existing wildlife to conservation

transportation

centers and wildlife reserves.

times to and from the airport. Transparency is a priority

infrastructure

and

optimize

transport

for this project and when it is transferred to another We are working with many governmental entities, such as

administration, the same transparency will have to be

the Ministry of Agrarian, Territorial and Urban Development

maintained until the project is finalized and throughout all

(SEDATU), which supports us in adapting the most

of its years of operation. Combining all of these elements

sustainable techniques for the terrain. We want to create

including working as a team and ensuring transparency

a completely different city by changing the work culture

throughout the entire process we will see the first flight

and habits of its citizens. The masterplan of the airport is

take off from the NAICM on October 2020.

285

FEDERAL AIRPORT SYSTEM

4 8 5 6 286

16 19 9 20 17 22 18

21 24

29 23

3 27

Modernized

New Airports

OPERATORS* North Central Airport Group (OMA) Pacific Airport Group (GAP) Mexico City Airport Group (GACM) Southeastern Airport Group (ASUR) Airports and Auxiliary Services (ASA) Chiapas Airport Group (GAC)

11 287

30 xx 31

38 37

40 41 42

43 33 55

44 53

45 48

51 47 49

NATIONAL AIRPORT SYSTEM

288

AIRPORT NAME

STATE

CITY

OPERATOR

PASSENGER TRAFFIC 2016

Tijuana International Airport

Baja California

Tijuana

GAP

4,090,274

Mexicali International Airport

Baja California

Mexicali

GAP

458,256

Nogales International Airport

Sonora

Nogales

ASA

1,726

Hermosillo International Airport

Sonora

Hermosillo

GAP

1,003,890

Guaymas International Airport

Sonora

Guaymas

ASA

8,564

Ciudad Obregón International Airport

Sonora

Cuidad Obregon

ASA

169,214

Cuidad Juárez International Airport

Chihuahua

Cuidad Juarez

OMA

728,006

Chihuahua International Airport

Chihuahua

OMA

836,357

Torreón International Airport

Coahuila

Torreon

OMA

419,835

Monterrey International Airport

Nuevo Leon

Monterrey

OMA

6,010,989

Nuevo Laredo International Airport

Tamaulipas

Nuevo Laredo

ASA

55,958

Reynosa International Airport

Tamaulipas

Reynosa

OMA

371,819

Matamoros International Airport

Tamaulipas

Matamoros

ASA

68,604

Cuidad Victoria International Airport

Tamaulipas

Cuidad Victoria

ASA

46,506

Tampico International Airport

Tamaulipas

Tampico

OMA

481,780

Loreto International Airport

Baja California Sur

Loreto

ASA

50,064

La Paz International Airport

Baja California Sur

La Paz

GAP

559,601

Los Cabos International Airport

Baja California Sur

Los Cabos

GAP

2,797,275

Los Mochis International Airport

Sinaloa

Los Mochis

GAP

184,848

Culiacán International Airport

Sinaloa

Culiacan

OMA

1,106,676

Mazatlán International Airport

Sinaloa

Mazatlan

OMA

650,328

Durango International Airport

Durango

OMA

283,705

Tepic National Airport

Nayarit

Tepic

ASA

100,949

Zacatecas International Airport

Zacatecas

OMA

227,206

San Luis Potosi International Airport

San Luis Potosi

OMA

326,843

Tamun National Airport

San Luis Potosi

Tamuin

ASA

1,346

Puerto Vallarta International Airport

Jalisco

Puerto Vallarta

GAP

2,797,673

Guadalajara International Airport

Jalisco

Guadalajara

GAP

7,417,206

Aguascalientes International Airport

Aguascalientes

GAP

452,066

Guanajuato International Airport

Guanajuato

Leon

GAP

1,106,181

*Data up to August 2016 Source: DGAC and SCT

AIRPORT NAME

STATE

CITY

OPERATOR

PASSENGER TRAFFIC 2016

Queretaro International Airport

Queretaro

ASA

407,455

Poza Rica National Airport

Veracruz

Poza Rica

ASA

26,560

Veracruz International Airport

Veracruz

ASUR

871,620

Minatitlán Aeropuerto Nacional

Veracruz

Minatitlan

ASUR

160,204

Manzanillo International Airport

Colima

Manzanillo

GAP

121,774

Colima National Airport

Colima

ASA

92,799

Uruapan International Airport

Michoacan

Uruapan

ASA

85,394

Morelia International Airport

Michoacan

Morelia

GAP

354,066

Toluca International Airport

State of Mexico

Toluca

ASA

N/A

Mexico City New International Airport (NAICM)

Mexico City

GACM

N/A

Mexico City International Airport (AICM)

Mexico City

GACM

27,295,955

Cuernavaca International Airport

Morelos

Cuernavaca

ASA

N/A

Puebla International Airport

Puebla

ASA

241,179

Tehuacan Aeropuerto Nacional

Puebla

Tehuacan

ASA

2,393

Ixtapa/Zihuatanejo International Airport

Guerrero

Ixtapa/ Zihuatanejo

OMA

400,662

Acapulco International Airport

Guerrero

Acapulco

OMA

496,171

Puerto Escondido International Airport

Oaxaca

Puerto Escondido

ASA

148,484

Oaxaca International Airport

Oaxaca

ASUR

495,679

Huatulco International Airport

Oaxaca

Huatulco

ASUR

451,589

Tapachula International Airport

Chiapas

Tapachula

ASUR

197,446

Tuxtla Gutierrez International Airport

Chiapas

Tuxtla Gutierrez

ASA

N/A

Palenque International Airport

Chiapas

Palenque

ASA

N/A

Villahermosa International Airport

Tabasco

Villahermosa

ASUR

801,213

Campeche International Airport

Campeche

ASA

116,968

Cuidad del Carmen International Airport

Campeche

Cuidad del Carmen

ASA

331,356

Merida International Airport

Yucatan

Merida

ASUR

1,249,329

Cancun International Airport

Quintana Roo

Cancun

ASUR

14,797,853

Cozumel International Airport

Quintana Roo

Cozumel

ASUR

402,987

Chetumal International Airport

Quintana Roo

Chetumal

ASA

139,282

289

VIEW FROM THE TOP

TOLUCA PLANS A NAICM STRATEGY LORENZO OCHOA Former CEO of OHL Toluca

Q: What is OHL’s involvement with the administration of

analyze and understand each airline’s business model, be

AIT?

it a legacy airline or a low-cost carrier.

A: OHL Mexico’s core experience is in toll road

290

infrastructure but the company saw this project as an

Q: How do the main airlines and private aviation

extremely interesting opportunity due to the saturation

companies contribute to AIT?

of AICM. Within this structure we are not in control of

A: AIT has four main commercial airlines in operation:

the airport’s operations but we are active participants

Interjet,

through daily discussions with the other two stake

In terms of volume, the largest airling is Interjet,

holders, the State of Mexico Government and the

which transported 60 percent of the almost 800,000

Airports and Auxiliary Services (ASA), and the Toluca

passengers that used AIT in 2015. The second is

International Airport State of Mexico Administrator

Aeroméxico, working in the AIT through its Aeroméxico

(AMAIT) administration. This public-private association

Connect division. TAR is in third place operating a unique

has been highly successful even during the airport’s lean

regional airline business model with a 50-passenger

times because each partner is fully aware of the needs

fleet of Embraer's ERJ 145 aircraft. Volaris is also a key

of the other two and all parties work to achieve our

player in Toluca’s commercial offer.

Aeroméxico,

TAR

Aerolíneas

and

Volaris.

common interests. The airport also has a substantial number of private As a private party, OHL complements the administrator’s

aviation operations that moved from the AICM in 1994.

efforts in processes such as financial analysis and the

These operations are overseen by the General Aviation

development of the airport's commercial strategy.

Operator (OAG), which is in charge of the hangers and FBOs for these airlines, while we support them during

Q: How is OHL supporting the development and growth

takeoff, landing and other platform services.

of the airport? A: Toluca’s airport is in direct competition with AICM, a

By number of operations, the Toluca airport is stronger

unique situation as most cities in Mexico have a single

in private aviation. This sector represents about 80,000

airport within proximity. Since AICM is the largest

operations a year or 90 percent of the total volume of

airport in the country, transporting almost 40 million

operations. We foresee even greater executive travel

passengers, Toluca must generate a series of processes

operations because private aviation is expected to grow

to become more attractive to airlines and passengers,

by about 3.5 percent on an annual basis.

such as incentives for airlines based on operating volume and route development.

Q: In which ways will the new airport to be constructed in Mexico City impact AIT's operations?

We have to work closely with airlines to address their

A: The number of passengers using the airport in Toluca

growth strategies. Airlines work with high volumes but

has gone through many variations over time. It grew

low margins, which means that it is only possible for

from a small base of 100,000 commercial passengers in

them to increase profits by using economies of scale and

2005 to over 4 million in 2008. Mexicana’s bankruptcy

increasing operators' efficiency.

dealt a heavy blow to AIT as it freed up close to 30 percent of the highly valuable time slots at AICM. Many

Airlines may prefer AICM due to its high passenger

of the companies that were working in AIT at the time

volume, which puts Toluca at a disadvantage. AIT has had

Mexicana closed moved back to AICM and we returned

to become much more efficient and cost-effective for

to 1 million passengers. Our passenger traffic has

airlines. The first step for our company was to thoroughly

remained around that number ever since.

Airlines’ growth will be tempered at the AICM in the near future, but they will certainly continue to grow in Monterrey, Guadalajara, Tijuana and many other cities, particularly for passengers needing connecting flights. For passengers departing or arriving in Mexico City as their final destination, airports close to AICM such as Toluca, Queretaro, Cuernavaca and Puebla, will start

AIT’s main commercial airlines transported 800,000 passengers in 2015

receiving airlines and passengers who could not enter the capital’s airport. Toluca’s proximity to the capital city and having superior connectivity puts us in a great position to attract these airlines and passengers. Following the construction of NAICM we predict a similar situation to what arose after Mexicana’s bankruptcy. We expect to continue growing steadily until the NAICM is completed, following which we will begin to shrink as operations move back to Mexico City. By that time we

expect to increase the number of national destinations to

expect to have developed a volume of operations that is

medium-sized cities offered from Toluca alongside TAR

large enough to be attractive on its own.

Aerolíneas. We started working with TAR for connections with Guadalajara and expanded our destinations to

We have seen that the west side of Mexico City, particularly

include Tuxtla, Oaxaca, Huatulco, Culiacan and Veracruz.

around Santa Fe, is growing as a business hub and Toluca has become very attractive to this location. AIT is easier

Q: What are the next steps for the airport to consolidate

to access than to cross the entire city to reach either the

its position in the market?

existing or new airport to the east of the city.

A: AMAIT’s concession grant will last until 2055 and we are certain the investment we have made thus far

Q: What competitive advantages does AIT possess to

will yield excellent results. The airport and the city will

compete against AICM and NAICM in the future?

continue to grow, thanks to the Mexico-Toluca highway

A: Since 2006 the AIT has invested over MX$4 billion

expansion that was finished in July 2016. There is also a

in infrastructure, including a passenger terminal of

new highway connecting Naucalpan and Toluca, which

28,000m2 that can serve to up to 7 million passengers

will increase connections with the city from several

annually, a runway that can manage up to 180,000

areas with high demand for air transportation. The

annual operations and a four-level parking lot with 2,000

construction of the Mexico-Toluca train will contribute

spaces. Additionally, we plan to invest in passenger jet

and will be supported by very efficient coach routes

ways and in a new VIP lounge to provide an even better

from the capital city.

experience for our passengers. Our main challenge is to make sure that all the airlines Toluca also has much more competitive Airport Usage

have AIT at the very forefront of their mind. We must

Tariffs (TUAs) than Mexico City. Our TUA is about 50

convince them that Toluca is their best option to grow

percent cheaper than the AICM. This makes us much

in the center of the country. Many airlines are focusing

more cost competitive, especially for low-cost airlines,

on maximizing their time slots in Mexico City by using

which normally have high utilization rates.

larger aircraft for those slots. We must make airlines aware of the possibility of creating a second hub in

At this point our aerial connectivity is somewhat limited.

Toluca to utilize the smaller aircraft they already own

In the past, we had considered it necessary to cover

and operate.

a large number of destinations but we may be unable to follow this strategy, because we recognise that we

Nonetheless, to measure our growth we are much more

must adapt to the changing needs of airlines. Many are

interested in the number of seats than the number of

starting to increase the number of international flights

flights because some airlines may use smaller airplanes

from Guadalajara and Monterrey among others and our

at AIT, especially considering its penetration in the

goal is to increase our flights to those cities.

executive aviation sector. Our market revolves around two and three-hour flights, primarily domestic flights

OHL must make flights more attractive from Toluca,

within Mexico, to the US and to certain destinations in

including those that involve a stop at another hub. We

Central America.

291

ANALYSIS

HIGH STANDARDS LEAD TO AWARD RECOGNITION North Central Airport Group (OMA) is not the biggest in

2016 with an 8 percent passenger growth for the year,

Mexico but its high-quality standards and commitment to

according to Carlos González, Director of Analysis and

infrastructure investment have won it accolades and put it

Market Strategy at Monex.

on a solid footing to grab a bigger share of the country’s growing passenger market.

OMAPASSENGER PASSENGERTRAFFIC TRAFFICBETWEEN BETWEEN2010-2016 OMA 2010-2016 (MILLIONS) (millions)

The Mexican airport operator stands out in the sector,

2.0

having won several awards for its standard of service and quality. Earlier in 2016, its airport in Culiacan was recognized as the best regional airport in Latin America

1.5

and the Caribbean for 2015 in the category of airports with up to 2 million annual passengers, as selected by

1.0

the Airports Council International (ACI). It also is one of five Mexican corporations on the exclusive Dow Jones 292

Sustainability Index for Emerging Markets, a recognition

0.5

awarded based on economic, environmental, social and 0

corporate governance, according to Nasdaq. OMA oversees 13 airports: Monterrey, Acapulco, Mazatlan, Zihuatanejo,

Culiacan,

Chihuahua,

Tampico,

Torreon,

San Luis Potosi, Zacatecas, Ciudad Juarez, Reynosa and Durango. OMA is the third largest airport group

2010

2011

2012

2013

2014

2015

total national

total international

passenger*

2016

TOTAL INTERNATIONAL PASSENGERS *Includes passengers from three types of aviation (commercial, nonregular commercial and general) excludes passengers in transit TOTAL NATIONAL PASSENGERS Source: OMA

in Mexico, following Pacific Airport Group (GAP) and Southwest Airport Group (ASUR), which reported 18.52

This year started more slowly compared to 2015. During

million and 16.94 million, respectively, during that same

the first half of 2016 passenger traffic for OMA grew 9.2

period. Trailing behind is Airports and Auxiliary services

percent compared to 2015’s first half. Revenue rose 15.5

with 3 million. All four are enjoying sustainable growth in

percent during that same period the year before.

passengers and revenue. To stay competitive, OMA is investing through the Master Development Program (Programa Maestro de Desarrollo) for 2016-2019, an infrastructure investment and tariff program that must be approved by the government for each airport every five years. The program will inject a total of MX$4.44 billion (US$261 million) across its 13 airports. Monterrey will receive the largest slice of the pie, about a third of the budget, or MX$1.26 billon (US$74 million).

Budget OMA MX$4.44 billion 2016-2019 GAP MX$5.48 billion 2015-2019 ASUR MX$7.03 billion 2014-2018

The group stated in its 2015 annual report that Monterrey International Airport is OMA’s leading airport. With a total 8.46 million passengers in 2015, the airport also is the fourth largest in Mexico, after Mexico City, Cancun and Guadalajara. Other

leading

airport

groups

also

have

declared

investment plans for the coming years. For example, Between 2010 and 2016, OMA’s number of national

GAP boosted its 2015-2019 budget 60 percent from

passengers grew about 68 percent while international

its previous plan to a total of MX$5.48 billion (US$322

passengers increased 26 percent. Together, passenger

million), according to an official company statement.

traffic grew an estimated 62 percent in this same six-

ASUR has increased its budget 40 percent with a 2014-

year period. The airport group is expected to finish

2018 MX$7.03 billion (US$413 million) plan.

VIEW FROM THE TOP

SUPPORTING QUERETARO FROM THE GROUND UP FRANCISCO ESTRADA Director General of Parque Aeroespacial Querétaro

Q: What made Parque Aeroespacial Querétaro attractive

would provide better leasing prices for the aerospace park’s

to companies in the industry?

users. Second, the company had acquired a comprehensive

A: The park was created to support the arrival of Bombardier,

knowledge of the needs of the aerospace industry by

whose goal was the eventual creation of an aerospace

visiting several international locations, including those

cluster to which the company could transfer several labor-

belonging to Bombardier, Safran and Airbus. Finally, an

intensive operations to make its manufacturing more cost-

alliance with GE Capital’s real estate division and another

effective. It chose Queretaro as the best option because of

with GE Capital Aviation Services (GECAS) allowed Vesta

the creation of UNAQ, accessibility to the landing strip at

to understand the needs of this industry.

293

Queretaro’s Intercontinental Airport (AIQ) and sufficient land inside the airport for the construction of an industrial

Q: What are the park’s main advantages and what

park to support the industry. This would also permit the

challenges is it facing?

generation of a local supply chain for the OEM. The park

A: The park has steadily grown since 2007 due to

was well received by many other aerospace companies

because it portrayed a comprehensive vision for the

professionals, competitive labor costs in the state and

industry, allowing many suppliers to engage in synergies.

the benefits of producing in pesos and selling in euros

combination

excellent

infrastructure,

qualified

or dollars. Other advantages include the proximity to Our first task was to understand the supply chain to

Queretaro’s International Airport (AIQ) and the leasing

develop a product that was fully adapted to Bombardier’s

processes that lower land use costs. Electricity is also

needs as well as Queretaro’s unique geographical and

subsidized by the state government, reducing costs to

climatological conditions. All our processes were handled

about US$100 per kVA. All of these measures have made

with complete transparency so our clients knew how every

the park extremely attractive to investors.

cent of their money was spent, which helped us gain their trust. They also were able to supervise the process to

The park covers about 150,000m2, but it could still

ensure the infrastructure suited their needs.

incorporate 250,000-300,000m2 of industrial buildings. Of the available space, 60-70 percent is reserved for

Q: How did the park overcome the unique circumstances

Bombardier but the current infrastructure perfectly

of developing inside an airport?

meets the needs of the industry. The only potential

A: For the park’s construction, the state needed a real

problem is saturation because the park’s business model

estate developer with extensive experience in the sector.

has been so successful it is now close to capacity. At

In 2007, Vesta successfully tendered for the construction

the time we believed that a 90Ha project was overly

of the aerospace park against 22 national and international

ambitious yet nine years later we realize that it should

developers. The basis for this tender followed an innovative

have been two or three times larger. We are researching

regulation. Because the park would be built inside the

solutions, including expanding the park or creating an

airport, the companies could not own the land so it

alternative location to complement it.

became necessary to generate new plans to guarantee the developers a return on investment. We had to develop

Parque Aeroespacial Querétaro has proved to be a

an economic model that showed clients the benefits of

successful model, creating a platform for the development

belonging to the park despite not being landowners. We

of the aerospace industry. We are grateful as our clients

proved that long-term it was more efficient for them to

have behaved as much more than just leasers, together

lease because they could invest in their own processes

we have become an integrated society through process

instead of acquiring land. Vesta was chosen for three

sharing, mutual interests and goals, which has led to the

different reasons. First, it offered competitive rates which

development of the ideal infrastructure for this industry.

VIEW FROM THE TOP

EVOLVE TO SATISFY AN EVER-CHANGING INDUSTRY MANUEL ROMERO-VARGAS Director General of Manny Aviation Services

294

Q: What is Manny Aviation Services’ client base and why

Q: What aircraft does the company work with and how

did the company choose to locate in Toluca?

does it attract new clients?

A: In 1997, my father broke away from Universal Weather

A: We can work with any type of aircraft for a variety

and Aviation to start his own company, Manny Aviation

of services, be it private flights, charter operators,

Services, which is now dedicated to providing ground-

or diplomatic flights. Manny Aviation Services is the

handling services to foreign private aviation companies.

preferred

Manny Aviation Services began with only three employees

flights to Mexico. We also have managed flights from

but today we have 45. About 95 percent of our clients are

operators in other countries, including Russia, India,

from the US. We chose Toluca as our base because it is

Europe, Kuwait and South America. We reach new

clearly the biggest hub for private aviation in Mexico and

customers through international events and magazines

one of the most important centers in Latin America.

that target operators, such as Professional Pilot. We

service

provider

for

some

government

also rely on word of mouth because satisfied clients Q: How has Manny Aviation Services evolved to adapt to

often recommend us.

economic changes in recent years? A: Manny Aviation Services is always evolving. About

Q: As a Business Aviation Service Provider, how would

20 years ago, we understood the company had to be

you describe your relationship with DGAC?

proactive rather than reactive because operators are

A: DGAC has been streamlining its administrative

significantly more demanding. The sector also is growing.

procedures but there is still a lot of work to do. The

We saw an increase in operations in 2016. The company

authority must acknowledge the importance of all areas

has identified demand for 24/7 services, for which we

of aviation in Mexico, including general aviation.

had to hire more personnel and make more efficient use of our technology. For this, we designed and developed

The government also has to invest in training and

the Handling Trip Sheet system, to reduce our response

compensate its inspectors and administrators appropriately

time and make management more efficient, and we are

to reduce corruption in airports, a problem that affects

developing a Safety Management System, a manual for

the entire sector. Mexican airport administrators are often

operational safety. Having such a system in place gives

unaware of current regulations and even ask for unnecessary

us an advantage and facilitates our work with operators.

paperwork. Manny Aviation Services and many other

Manny Aviation also is in the process of being certified by

service providers have been working with Miguel Peláez,

the International Standard for Business Aircraft Handling

DGAC’s new Director, to address this problem.

(IS-BAH) and we hope to complete this process by the beginning of 2017. No other operator in Mexico has this

Q: What other services has Manny Aviation Services

certification.

generated for the aviation industry? A: We run a catering business called Manny’s Catering,

Manny Aviation Services will turn 20 years old in 2017

a 13-year-old company created by my father and myself.

and we plan to celebrate by continuing our hard work.

Catering for aviation companies is much more complex

Our goal for next year is to be the first Mexican operator

than for other industries. There are strict norms for

to hold the IS-BAH certification. This certificate is only

temperatures, handling, raw materials, plating and it

the first step because after two years, a second, much

requires very delicate handling. Few companies provide

more comprehensive audit of all processes will be

this type of service and this opened doors to several

required by the International Business Aviation Council

prominent companies. Operators expect a high level of

(IBAC). Another important goal for Manny Aviation is to

product quality as well as presentation and we provide

become a full service FBO in the future.

both highly trained staff and the freshest ingredients.

VIEW FROM THE TOP

STRESS-FREE SUPPORT MANUEL GIRAULT General Manager at Universal Aviation Mexico

Q: How is Universal Weather and Aviation adapting its

are subject to as standard. We offer aircraft storage, airport

business model to Mexico?

lounge services and transportation to their final destination.

A: Universal Weather and Aviation works with large European, Asian and American companies, facilitating

Q: What factors influence Universal Weather and

the flight plans of executive aviation companies. It offers

Aviation’s growth in Mexico?

services ranging from scheduling, weather forecast,

A: We have grown about 7 or 8 percent internationally

fuel provision, organizing the aircraft’s reception at its

every year in the last decade. But the last two years have

destination, landing permits, customs and immigrations

seen this growth plateau due to slower global markets.

processes, crew transportation and catering. In Mexico, we

Our growth is dependent on Mexico’s economy. When the

have operated under an extremely successful joint venture

country prospers more people want to visit. The low price

with Avemex since 2002. Universal Aviation Mexico tends

of turbosine has helped keep our clients’ operational costs

to the needs of the global brand’s clients in Mexico. Our

down, increasing the attractiveness of flying in general.

headquarters are in Toluca but we have operations in all international airports in Mexico, including Los Cabos,

Executive aviation represents an important proportion

Puerto Vallarta, Cancun, Monterrey, Mexico City, Cozumel

of AIT's business. While these operations have dropped

and Tapachula, Chiapas.

in general, Universal Aviation Mexico has weathered the decrease. Our team has developed a strong relationship

Q: How does Universal Aviation Mexico support private

with the airport’s authorities over 20 years and we have

aviation clients traveling to and from Mexico?

renewed our contract for another 13 years. For this reason,

A: Permits for private aviation and chartered flights vary

we have happily invested approximately US$1.8 million in

and are difficult to obtain without support. As soon as we

infrastructure, such as the renovation of the passenger

are notified that a flight is arriving, we ready the immigration

lounge. Our company also has acquired more hangars

and customs administration. Our agents are bilingual, as

over the years and we now have four. We can receive up

90 percent of our clients are foreign, and can organize

to 60 aircrafts at a time, many of which are stored in our

hotels, activities in Mexico and transport to and from the

facilities or undergoing maintenance.

destination for the client and the cabin crew. We have alliances with hotels and golf courses to offer discounts to

Q: To what extent do you expect NAICM to affect your

air travelers. Our goal is to make our clients’ journeys as

future operations?

stress-free and enjoyable as possible on arrival in Mexico.

A: Though it is not official, the possibility of a corporate hangar has been touched upon by the NAICM. We think

When a flight leaves Mexico, we do the same in reverse. We

this should be a given for the new airport, as it opens

collect and transport the crew and often the passengers

opportunities to attend to clients traveling to Europe.

to the aircraft, manage leaving permits and handle the

This would catalyze expansion for companies like ours.

catering for their trip. This allows executive aviation users

Nonetheless, we are very happy operating in Toluca and we

to avoid queuing at airports and any problem that might

have not suffered as expected after moving from Mexico

arise because of delays. Between 80 and 85 percent of our

City. We are focusing on this emerging aerospace hub

clients are recommended by our headquarters in Houston,

and we plan to construct a new hangar at AIT. Though we

and the rest are direct returning clients.

have personnel at all the airports, we are evaluating which other airport would justify installing FBO infrastructure.

Universal Aviation Mexico has another line of business that

We primarily want to continue increasing the quality of our

offers services to domestic customers, helping them to

support, to distinguish our company as the market leaders

expedite many of the security checks that international flyers

in customer service.

295

VIEW FROM THE TOP

DEVELOPING, IMPLEMENTING SAFE AIR-TRAFFIC CONDITIONS VIRGINIA GÓMEZ Director General of Prior Aero

296

Q: Which specific market needs shaped Prior Aero’s

Q: How does Prior Aero’s windfarm division complement

value proposition?

its regulation services for private aviation companies?

A: Prior Aero was launched to take advantage of my 28

A: Our wind farms are directed at the vibrant sector of

years of experience in air traffic control. The company

renewable energy. They benefit the executive aviation

is the first aeronautics consultancy firm created to

sector by maintaining safe air-traffic conditions. We

strengthen the sector and offers support in many

ensure that wind and photovoltaic farms do not infringe

areas, including air navigation, safety, efficient flight

on an aerodrome’s obstacle limitation surfaces, both in

route planning, fuel efficiency, aeronautical studies and

terms of the height of the turbines and reflections from

accident investigations. We ensure our employees can

solar panels. This allows us to protect airways and secure

problem solve in highly complex situations, generating

healthy development in both industries.

solutions within the frame of safety. Our target is to have a 100 percent success rate and so far we have triumphed

Prior Aero’s clients are among the main actors in the

in every case.

aviation industry, including the Mexican air force, the School of Mexican Aviation Pilots (Colegio de

Prior Aero has differentiated itself through aeronautics

Pilotos Aviadores de Mexico), executive airlines and

studies that also contribute to the energy industry. We

independent clients. Whereas in the renewable energy

help with the licensing processes that civil aviation

industry, our top clients are Enel Green Power from Italy,

authorities require to authorize construction work in

Invenergy from the US, SYNERGION, which is a company

the vicinity of aerodromes. Obstacle limitation surfaces

with roots in Mexico and the Czech Republic, and

normally extend beyond an aerodrome’s boundaries and

GEMEX, a Mexican-Spanish venture. Our most requested

we ensure all parties respect inherent procedures.

services are air space studies, shielding studies, safety

management

systems,

stabilized

approaches

and

training courses in aeronautics language. Q: What exclusive benefits do your clients enjoy through

Prior Aero aims to have a 100 percent success rate and has triumphed in every case to date

their association with Prior Aero? A: The majority of our customers are foreign companies

international operators. However, it remains important

that require a very specialized service. As companies

to grow within the country, for example, rediscovering

enter the Mexican industry, they search for a support

destinations that other carriers have neglected.

network that can advise them on local operations and managing the Mexican legal system. These entities may

The aerospace industry needs efficient flight plans and

require technical support that does not differ greatly

to properly balance passenger and cargo transportation

from the needs of our national clients. The paperwork

to save on fuel. This will lead to more competitive prices.

can be complicated for new incoming companies that

Aircrafts must also become more economical to justify

have no experience in the industry, which can result in

reaching new, less popular, destinations. Furthermore,

a loss of time and money. Ultimately, both Mexican and

aircraft with greater passenger capacity would reduce

international companies look for quality services that will

saturation of airports and air traffic controls, especially

protect their large investments.

for airports with complicated slot allocations.

While uniting consulting services with technical, judicial

Q: What are your forecasts for Prior Aero in the Mexican

and governmental expertise, we rely on our three decades

aerospace market?

of collaboration with institutions in each of these areas to

A: Two important alliances are in the pipeline for Prior Aero

offer the best service possible to clients. Our operations

that will increase our international presence and shift our

are centered on a very strict method of deep analysis of

growth toward Latin America. We forecast our operations

local and international norms, especially those of ICAO.

will rise by at least 30 percent. This will be achieved partly thanks to new services that we are integrating into our

Q: What must national airlines do to achieve international

business model. These services touch on environmental

standards?

impact studies and administrating drone licenses for

A: All companies in Mexico push to improve and maintain

filming, patrolling and recreational purposes.

the internal quality of services to reach international standards. The most common challenge faced by our clients

Our growth has been encouragingly consistent through

is the BASA between Mexico and the US, which amplifies

our expansion into Latin America. We hope to extend our

open competition. There are significant opportunities for

foreign and local investments to contract a larger number

those who can create alliances to compete with the largest

of employees to support this growth.

297

VIEW FROM THE TOP

TECHNOLOGY PLAYS STRATEGIC ROLE IN AIRPORTS ALEX COVARRUBIAS Vice President Latin America & Caribbean of SITA

298

Q: How do different regions compare when adopting

a particular country. NAICM is in a unique position to

new technologies and their implementation?

become an important international hub. Its underlying

A: SITA’s mission is to serve the air transport industry. In

design principles are oriented toward introducing

that context, several years ago we created an initiative

flexibility to support new processes. In addition, the plan

called Intelligent Airport, focused on three main pillars.

to build an “Aerotropolis” concept around NAICM will

One is mobility and the way it is impacting how airlines

produce an important economic engine, with convention

and airports support passengers, baggage and cargo

centers, hotels and other developments that will create

processing. The second is self-service to streamline

a multimodal platform to ensure the airport is promoted

passenger

as a destination not only for passengers but for the

collaboration among the various stakeholders involved

general public. Cargo is another important element to

in the airport ecosystem, enabling airports and airlines to

consider. This gives a perspective on how processes can

automate regular operations and to manage disruptions

trigger economic development for a country.

and

baggage

processing.

The

third

effectively by performing predictive analysis. Q: In what ways can SITA help to streamline passenger Now we are implementing this vision and seeing its

processing?

impact firsthand. In Europe, for example, adoption

A: One of our solutions is the incorporation of biometrics

of new technology has been historically more rapid,

into self-service and the creation of a single passenger

especially for introducing efficiencies and mitigating

token to simplify the flow of passengers at every step

labor costs. In Latin America and the Caribbean,

of the journey, called SmartPath. By introducing these

the adoption curve is different, as the objective is

technologies, queue times and end-to-end processing can

to rationalize the introduction of new technology

be reduced substantially. We are confident that NAICM

according to the particular context of each individual

will include these technologies as part of its design.

airport. Given passenger growth in Latin America during

Our role has been to work with the airlines operating

the last decade there have been unique opportunities

in Mexico, as well as the supporting organizations like

to modernize the airport infrastructure associated with

the Airports Council International (ACI) and CANAERO

new terminal expansions. Mexico is an example of the

and the associated entities involved in the design and

pressures and opportunities created by industry growth.

construction process, to ensure best practices are incorporated early enough so that the airport opens in

SITA has been working with major airlines in the country

2020 as a “future-proof” airport.

for many years, introducing new technologies as they are released. The new Terminal 4 in Cancun is being built

Q: How is SITA ensuring that sensitive information is

with a vision of being the “terminal of the future” with

protected from hackers and malware?

a complete set of state of the art technologies. Mexico

A: Our owners, the Air Transport Industry, have given

has become an early adopter of new technology, and

SITA a mandate to develop innovative solutions that

the design of the new airport for the capital, NAICM,

address community needs. These needs directly relate

promises to be a cornerstone of this vision, with its goal

to physical and cybersecurity.

to be the most technically advanced airport in the region. In regards to physical security and secure operations, we Q: How does the aviation industry influence economic

have leveraged our technology, capabilities, experience

development?

and our understanding of the air transport ecosystem at the

A: There is a direct link between growth in the air transport

airport together with our customers and industry partners

industry and enhancing economic development in

to provide an Airport Control Center (AOCC) solution.

This solution integrates airport operational processes with

the key success factors to delivering airport construction

technology, across multiple stakeholders, to safely improve

projects on time and on budget.

airport and airline performance, reduce costs and delays and improve the passenger experience.

Q: What specific systems will you put in place in the NAICM to ensure it is more efficient than AICM?

Regarding cybersecurity, we have taken a leadership

A: When examining business processes, there still are

role in the industry to create a working group called

significant areas of improvement to be introduced into the

the Aviation Cybersecurity Group. The group is made

new airport. Common use infrastructure is key to ensuring

up of the leading players in the air transport industry.

an efficient use of resources benefiting both airports and

We also participate in different working groups with

airlines by introducing efficiencies and reducing costs.

organizations such as IATA and ACI to make sure

Improvements must also be made in terms of passenger

we introduce the appropriate standards to cover

flow and baggage processing. In terms of ongoing

cybersecurity in the industry.

operations, effectively managing airport resources and the airport capacity to react real-time to disruptions is

Q: What innovative technologies are you introducing

imperative. The introduction of Business Intelligence,

to airports?

Collaborative Decision Making (ACDM), an effective

A: We operate in over 1,000 airports around the world.

and integrated Airport Management System (AODB/

We have several success stories that demonstrate why we

AMS), and a centralized, secure and integrated Airport

are industry leaders in Latin America and in particular in

Operational Control Center (AOCC) are imperative.

Mexico for the last several decades. It is critical that airports recognize the strategic role of technology in airport

It is extremely important that GACM chooses the right

development and their associated airport master plans.

technology partner to lead the way on this journey, not just during the design and implementation of the new

As the industry evolves, the need for integration is

airport but also during the ongoing operations including

paramount. The way of consuming technology at

its continuous improvement.

an airport is changing substantially. Technology has become a strategic component of an airport master

Q: What kind of partnerships need to be created for the

plan because it generates operational efficiencies

project to be successful?

that are directly related to the airport’s bottom line,

A: There are different layers of partnerships. When

optimizing assets and reducing the need for investment.

examining the key success factors of a project of this

Airports also are better understanding how technology

magnitude, collaboration is extremely important. I was

can be used to generate revenues, using common

pleased to see the new airport has taken that message

infrastructure to generate efficiencies, and increasingly

to heart and has been working closely with national and

commercializing the airport environment. Providing

international airlines and other relevant stakeholders to

more personalization for customers allows airlines to

ensure all input and requirements have been taken into

capitalize on their investment by creating the right

consideration. In addition, effective communication with

marketing platforms. When adding to this the idea of the

the relevant government organizations is important,

“Aerotropolis,” airports can then serve this ecosystem

given that changes in public policy are required to

and create revenue from it, reducing aeronautical fees

streamline the passenger and baggage processes.

and becoming more competitive. Mexico was one of the first countries in the region to In terms of “greenfield” airports, like the one in Mexico

privatize airport concessions and operators like ASUR,

City, we have participated in a great number of projects

GAP and OMA have been very successful. NAICM

globally, delivering new terminals and new airports

must decide to what extent it wants to involve private

managed under our Master Systems Integration (MSI)

partnerships to leverage expertise in some areas. In

methodology, which consisted of the core airport

regards to technology, SITA is working to be the partner

management system combined with a variety of other

of choice to GACM. Our sole objective is to harness

passenger and baggage solutions. Our Airport MSI

the power of technology to simplify air travel and to

solution incorporates a full range of airport technology

provide benefits to all the stakeholders involved in this

and the program management capability to deliver an

process along the way. We are passionate about the

end-to-end integrated solution. Through Airport MSI,

challenges and opportunities of new airport design

SITA brings together all the technology suppliers into

and the underlying impact of the introduction of new

a single program of works that integrates into, and

technology in the industry. The success of NAICM is

informs, the airport’s master building plan. This is one of

extremely important to SITA.

299

VIEW FROM THE TOP

IDENTIFYING CLIENT NEEDS BEFORE THEY DO MANUEL BARREIRO Partner at Advance Real Estate

What

are

Advance

Real

Estate’s

competitive

Aerospace clients have very specific requirements, such as

advantages and how does it support its clients?

similar specifications to those of their plants in Europe or

A: Advance Real Estate is an industrial development firm

the US, so they generally prefer our build-to-suit options.

based in Queretaro, which offers two main products.

300

Firstly, we offer industrial parks and buildings primarily

Q: What hurdles is the company helping its clients to

for aerospace, automotive and logistics companies.

overcome?

Our second area covers business parks, which are

A: The most problematic area is a lack of infrastructure,

essentially smaller scale industrial parks designed to

especially in terms of power supply. Limited electricity

improve the quality and working environment of smaller

infrastructure, high overheads and an unclear regulatory

Mexican companies. SMEs represent about 70 percent

structure for the free power market create barriers to entry

of manufacturing in Mexico, yet are often ignored by

to the Mexican industry. The Energy Reform has promised to

larger industry players. These parks have led some large

improve this situation but a degree of uncertainty remains as

automotive companies to certify SMEs in our business

to how this will evolve. As well as investing in the development

units so they can become their suppliers.

of the entire electric infrastructure in our parks, we support local educational institutions and also offer training programs

We mostly operate in the center of the country, in a triangle

through alliances with technical universities. Advance Real

between Puebla, Guadalajara and Monterrey that covers

Estate also manages a social program to support education

Mexico City, the State of Mexico, Queretaro, Guanajuato,

in local communities, through which college graduates

Irapuato, Leon, Aguascalientes and San Luis Potosi.

enroll in a teaching program to provide better education

Our main competitive advantage is that we are local

for secondary and high-school students in rural areas. This

developers with 15 years of experience in the area and are

encourages companies to remain in our parks where they

therefore fully aware of the sector’s operations, such that

can attract the professionals they will need.

we sometimes know our clients’ needs long before they do. We have both the funds and the capacity to develop

Q: Where is Advance Real Estate focusing its development

industrial infrastructure, which differentiates us from other

of new parks?

developers. Our association with Equity International has

A: This year we are focusing on starting operations in three

allowed us to secure capital and our clients feel confident

parks in Queretaro, another in Guadalajara, one in Irapuato

working with such a strong, transparent institution.

and we are consolidating our park in Puerto Interior next to the International Bajio Airport and our new park, Celaya

Q: How are you targeting growing demand in the sector?

III. Our new industrial park next to the airport in Queretaro

A: Our parks can adapt to meet demand, such that while

started

automotive clients dominate our clientele, aerospace is

incorporate up to 150,000m of industrial buildings, mostly

catching up. Part of our strategy to target this sector is

for the aerospace and logistics industries. .

operations

mid-2016

and

will

eventually

to develop aerospace parks next to airports, exemplified by our parks in Queretaro, Guanajuato and Guadalajara,

Finding land with the necessary services and permits is

neighboring their respective airports.

difficult and even more so at good prices. However, our list of international clients and cutting-edge operational parks

The aerospace sector has grown exponentially over the

has helped us to persuade land sellers and to convince

past 10 years, especially in Queretaro. Today, our clients

local authorities that these long-term investments boost

are much more capable of identifying their own needs and

the local economy and generate employment. Advance

instructing us on how to address them based on location,

Real Estate is growing extremely fast and in the next five

budget and the local economic and regulatory climate.

years, our goal is to own 750,000m2 of gross leasable land.

VIEW FROM THE TOP

MRO EYED AS LAUNCHPAD TO GLOBAL MARKET LUIS LARA Chairman of the Board & CEO at American Industries

Q: What led American Industries to the aerospace

MRO we are collaborating with many different companies

industry and the state of Chihuahua?

including Oliver Wyman, Boeing and L-3 Crestview.

A: Our aerospace operations in Chihuahua began sheltering General Dynamics, a harness manufacturing company that

would later become Aerotec. Shortly after its incorporation

influenced the Mexican aerospace industry?

What

exterior

factors

have

most

significantly

to the state, the company decided to outsource its cable

A: During the ‘80s, the automotive industry catalyzed

manufacturing, which we bought and managed after

the development of local manufacturing industries in the

a complete analysis of the complexities of the project.

north and central Mexico, which led to the diversification

At the time, we manufactured harnesses for many big

of the country into aerospace. However, the industries are

players, including General Electric and General Motors.

very distinct. Automotive companies must operate with 85

Some companies may consider shared manufacturing a

percent use of personnel effective hours to be competitive

luxury but competitiveness can be enhanced using labor

while the aerospace industry can manage at 40 percent, as

specialization to lower operational costs.

the latter operates longer time frames. Nonetheless, it may be beneficial to increase this percentage to 50 percent.

Afterward, we began similar projects with various OEMs. We worked with Bombardier’s civil aviation division

Many global aerospace companies have seen a reduction

until demand for airplanes dropped. Subsequently, we

in their productivity due to their adherence to old outdated

approached Airbus, which opened a global tender for a

practices. For example, 20 to 25 years ago, Boeing

project with long-term growth. These negotiations also

dominated 90 percent of the global commercial airplane

led us to collaborate with Safran, because a condition

market but today possesses only 45 percent. Even after this

of the tender was that manufacturing be performed

loss, Boeing is only beginning to change its strategies. Now

in Mexico. Safran’s operations in the country have been

that we have established a relationship with the OEM, we

greatly successful, growing from a staff of 500 to 4,000

have suggested they move the manufacturing of old models,

to date, with the highest operations by volume of all its

which represents 60 percent of their manufacturing hours,

plants in the world.

to low-cost areas such as Mexico to obtain 40 percent cost savings. While top management is willing to move, the

Q: What are the company’s plans within Chihuahua’s

company has run into reluctance to change. Such a move

aerospace industry?

would allow it to reduce its overall costs by 15 percent and

A: Our plans include the construction of a world-class MRO

greatly increase its competitiveness.

that would strengthen the cluster by providing services to international airlines. To perform C and D maintenance,

Mexico is an ideal location for businesses interested in

component disassembly is necessary to diagnose the

reducing costs through outsourcing while maintaining

condition of parts and with what level of urgency they must

quality standards. To do so they need to train or acquire

be replaced. If a replacement is necessary, the new part

qualified personnel locally and American Industries

has to be acquired in less than 48 hours for the plane to

supports

be operational in less than three weeks. All local companies

processes. The Mexican government could introduce

involved in this process must be certified to manufacture the

incentives for these companies and facilitate local

necessary parts or have them easily accessible in storage.

business

Managing such a large structure, chain of suppliers and a

We supported Hawker Beechcraft through a similar

range of capabilities is much more complicated than opening

process, leading us to develop a close relationship

a new manufacturing plant. However, having an MRO will

with the company, which is still appreciative of support

give us similar capabilities to an assembly plant. To build this

received during this difficult time.

companies

expansions

through

into

these

the

administrative

aerospace

industry.

301

VIEW FROM THE TOP

BANDING TOGETHER TO FACE CONSTRUCTION HURDLES CLAUDIA AVILA Executive Director of the Mexican Association of Industrial Parks (AMPIP)

Q: Why are industrial parks an important element for

pushes industrial parks to adapt to those specific needs

increasing the appetite of foreign investors?

and create more advanced structures.

A: Mexico must use industrial parks as a tool to attract foreign

302

direct

investment

into

Mexican

industries.

Q: How can quality standards for industrial parks help

According to experts, the element companies consider

bolster the growth of the sector?

the most when selecting a market to enter is its size and

A: Industrial developers have united through AMPIP to create

Mexico has a clear competitive advantage. Not only does

a standard that clearly defines what an industrial park is and

Mexico have an extensive list of free trade agreements and

what it consists of. In most countries, an industrial park is also

a geographical position that enables it to easily trade with

equivalent to a free trade zone, yet in Mexico the majority

NAFTA countries, it has a growing, talented workforce

of the industrial spaces do not have any tax incentives or

of young engineers that can support industries such as

customs facilitators. They are considered to be just another

automotive and aerospace.

real estate project. A committee was created in 1999, that established a standard for industrial parks, including the

The success of an industrial park is measured through

usage and acquisition of the land, regulation compliance,

its occupancy rates and since the country has become a

feasibility of utilities, internal administration and by-laws.

part of the regional production chains of these industries, these rates have remained high. These industries require

Q: How can industrial park developers meet the needs of

spaces that facilitate their Just-In-Time and Just-In-

the country’s 4.2 million SMEs?

Sequence processes, keep their suppliers close by to save

A: The majority of the private companies located in Mexico

on inventory costs and incorporate increased accuracy in

are SMEs and the industrial parks that form part of AMPIP

terms of timing delivery of the products to the end user.

cater to the needs of medium and large companies.

Most people picture the aerospace industry in Queretaro,

For a developer to create an industrial park, it needs an

when in reality it began in the northern region of Mexico,

immense amount of initial investment to acquire land,

in Baja California and Chihuahua. The industry was already

gather permits, urbanize the area and construct a Class A

installed and meeting the demands of the US market.

building. This process can go on for more than two years, in which developers do not have an income and at the

Q: Which sectors will see an increasing demand for

same time still pay taxes, which is why many developers

industrial spaces in the upcoming years?

are unwilling to construct for SMEs.

A: The Mexican manufacturing industry has grown steadily during the last two years. A vast majority of

Industrial parks have an intricate financial structure, in

foreign companies are expecting to export to the US by

which the participation of investors has been crucial to

using Mexico as a logistics platform. There is a strong

the growth of the sector but they require reliable tenants

correlation between the Mexican production market and

that can guarantee the payment of the lease for many

the market demand in the US, which has led to a small

years, and small companies are not always able to give

but tenacious increase in the demand for industrial

investors this guarantee. This may be the largest factor

space. The main drivers for the development of industrial

that steers developers away from creating parks for SMEs.

spaces are of course the automotive and aerospace

The National Entrepreneur Institution (INADEM) has

suppliers. Distribution and logistics centers require far

always shown interest in developing programs to foster

more sophisticated buildings and services, such as taller

the development of spaces for SMEs but the support the

roofs, access to more trade routes and security systems,

government has offered may not been enough. Maybe

especially with the e-commerce trend swaying the market.

a program of guarantees would help to encourage the

E-commerce demands higher process efficiency, which

development of industrial parks designed for SMEs.

VIEW FROM THE TOP

PRECAST UNITS REVOLUTIONIZE HANGARS OSCAR PERALTA NAVARRETE President of Grupo GMI

Q: What are Grupo GMI’s main products for aviation?

Q: What are the main advantages of these hangars over

A: Grupo GMI has created two divisions for the industry.

the competition?

The first, ATS, handles the construction of hangars for

A: The design process usually takes between three and

lease in Queretaro. The demand for these hangars has

four months because the hangars have to be planned for

been extremely high as aircraft owners request safe and

projected airplane acquisitions over the next 10 years. The

comfortable storage systems. Our second aviation division

hangars are designed alongside international advisers with

is the construction of maintenance hangars, which are

many years of experience in the industry to optimize the

much more advanced in terms of technology and have

capabilities of every hangar. We also can adapt designs from

all the necessary capabilities to provide MRO services,

parent companies and implement them in Mexico. Once

including special electric and fire systems that can identify

the project is conceived and designed its implementation

the exact location of a fire to extinguish it in seconds.

takes only six months, half the time our competition takes. Another advantage is that our panels are finished at the

Airplane hangars require several specific services for

manufacturing plant and only need assembling at the final

aircraft storage and maintenance, such as fire systems

destination. There is no need for specialized labor at the final

and either automatic hangar doors or light, easy to open

destination, foundations are much lighter and the hangars

manual hangar doors. Manual doors are common in Mexico

require no maintenance for 10 years, not even painting.

and if they get stuck, they require heavy equipment to open and close them. Our manual doors, on the other

Our hangars are unique in that they can be disassembled

hand, can be opened one-handed. GMI’s hangars do not

and moved wherever the company needs them, allowing

require welding at any point, permitting the construction

for 70 percent of the structure to be recycled. This is an

of precast units in very short times, and allowing easy

advantage as most MROs construct hangars on leased

transportation to their final destination.

terrain, which is granted to them for a specific time period, after which they may have to move to a different location.

Q: What innovative projects is Grupo GMI developing for the aviation industry?

Q: What are your projections both for Grupo GMI and the

A: We recently finished two projects in Monterrey, one for

aerospace industry in the next few years?

Beechcraft and another for Aerolíneas Ejecutivas, and we

plan to develop a third hangar with the latter company.

environment. However, if we continue on this same

We are also developing projects in Cancun, Colombia and

path I am certain we will see enormous growth. In the

Panama. In El Salvador we constructed a maintenance

next five years, I hope to see Grupo GMI as leaders in

hangar for Aeroman, one of the largest MROs in Latin

the construction of hangars in all of Latin America. The

America that services all of Volaris’ fleet. We used our

aviation industry is very well connected, such that thanks

experience in the construction of this hangar to win a

to our work with TechOps and Aeroméxico we were

tender with Avianca for the construction of a maintenance

selected to implement a new project in the Philippines.

center in Medellin, Colombia, which was opened this year.

We manufacture 65 percent of all hangars in our plant in

The hangar was constructed in only one and a half years

Queretaro and the quality of our products speaks for itself.

This

highly

dependent

the

sociopolitical

and is the widest open hangar space in Latin America when measuring its ground coverage without structural

Aviation is one of the fastest growing business areas

support columns. All of the materials for this hangar were

worldwide and the number of existing aircraft is expected

manufactured in Mexico and transported to Medellin in

to double in the next 12 years. Maintenance centers also

containers. Avianca was extremely satisfied with this

will have to double, especially since low oil prices are

hangar so now we are developing a second one for it.

allowing airlines and private parties to renew their fleets.

303

INSIGHT

AIRPORTS COMMIT TO SUSTAINABILITY ALICIA SILVA Founder and Director General of Revitaliza Consultores

demonstrating

Institutions also are realizing that trying to modify or lower

a commitment to the future. NAICM and the new

international standards has a negative impact on Mexico’s

terminal at Cancun International Airport (AIC) will sport

development, according to Silva. “Overcoming the public’s

green credentials through their hard work to acquire

ignorance regarding the overall picture of sustainability

certifications such as LEED.

and its benefits is a challenge.”

International certifications can help advance sustainability

Many companies believe that sustainability can inflate

because they promote the creation of inclusive and well-

their construction budget up to 30 percent but Revitaliza

planned structures such as airports, says Alicia Silva,

Consultores tries to show these businesses that it does

Founder and Director General of Revitaliza Consultores, a

not necessarily have to be this way. “In our experience

consultancy specializing in LEED certification and energy

sustainability may initially cost 5 to 6 percent more but

efficiency in buildings. It is involved with the construction

it brings an abundance of added value to construction

of Terminal 4 at Cancun’s airport, as well as facilities

projects,” Silva says. “The additional investment can be

for Avianca in Medellin, Colombia and the upcoming

recovered in less than five years.” It is easier to persuade

aerospace

companies to invest in sustainability when the numbers

The

304

airport

industry

laboratory

Mexico

Chihuahua

Autonomous

University (UACh).

are explained in terms of economic benefits.

“Trying to become certified makes companies go into

In the airport sector, Mexico has several advantages,

every detail of a project from the beginning and reduces

including its central location as connectivity is of tremendous

the number of changes during the construction process,”

importance to this industry. “Moreover, the stability of the

says Silva. “Mistakes during the construction of an

country and its commitment to aviation means that Mexico

airport generate the biggest costs in infrastructure while

has become one of the most important destinations for

sustainable construction also requires an integrated and

air travel from the US and Canada,” says Silva. Traffic from

preventative design.”

the US to Mexico City accounted for over 7.012 million passengers in 2015, according to the US National Travel &

It also encourages all participants to come together at

Tourism Office, up 10.3 percent from the year before.

the start, providing the potential to avoid future problems such as community protests or blockades.

Silva sees the airport industry as a leader that is setting an example in the sustainability realm. “NAICM is the

Among the challenges firms like Revitaliza Consultores

most important infrastructure project of the upcoming

face is the permissive culture prevalent in Mexico.

decade. We competed against national and international

Silva cites the example of lead-based paint. Mexican

companies from Germany and the US to be part of the

companies still use the product because regulations

project.”

that prohibit it are taken too lightly, she says. This paint was banned in Europe in 1954 and in 1974 in the US. The

According to Obras magazine, NAICM is expected to

product is also banned in Mexico but the regulations

be the most sustainable airport in the world under its

are not strongly enforced. “People do not understand

platinum LEED certification. Revitaliza Consultores works

that we need to get rid of heavy metals that damage

to assure that the engineering of the project maintains high

our health and which can cause cancer,” says Silva.

standards, that the staff is well trained and understands

“Many manufacturers will reconsider the materials they

how to install equipment and manage the operating

use after seeing why sustainability and safety are such

process. “These projects are complex and holding them to

important global trends.”

a high standard makes them easier to manage.”

INSIGHT

REGULATE DRONES REASONABLY Look up on any given day and flying across the sky might

take-off and land horizontally. They fly faster and for longer

be an unmanned aircraft, flitting here and there. Drones are

distances. While neither is more useful than the other, their

an increasingly ubiquitous technology for both business

application differs greatly, Zepeda says. “A company that

and pleasure. While their utility is recognized and attracting

wants to closely oversee a certain structure at a short

investment, companies and enthusiasts alike are discovering

distance should opt for a rotary wing drone while a long

there is fine line between commercial and personal use and

distance mission such as a topographical survey would

potential for UAVs to compromise security and privacy.

benefit the most from a fixed-wing drone.”

Airports are a singular point of focus due to the potential

Delair-Tech particularly specializes in fixed-wing drones.

damage a drone could cause if it were to fly into an airplane’s

“From a technical point of view, missions that require fixed-

turbine. To avoid cases of drones falling from the sky,

wing drones are the most difficult,” Zepeda says. “They

flying into dangerous zones or crashing into infrastructure,

require BVLOS capabilities [flying beyond the pilot’s line of

players on all sides advocate the introduction of legislation.

sight], robust avionics, long-range communications systems and resistance to harsh weather conditions. Being able to

“If the government approaches the regulation of drones

perform this type of mission is precisely our expertise.”

the wrong way, they could either block the growth of the industry or encourage it to go wild,” says Sebastián Zepeda,

Drones are valuable management tools for the planning,

President of Delair-Tech Mexico. “At the moment, there is little

execution and follow-up of such projects because they

regulation not only in Mexico but all over the world.” Finding

can

the middle ground between strict legislation and flexibility is

reliable information. “It can give decision-makers both

crucial. A total ban could push people to fly drones illegally

perspective of the current project status overall, regardless

and lenient regulations could put security in jeopardy.

of its geographical spread, as well as detailed data on

rapidly

provide

quantitative,

cost-efficient

and

the blocking points to which they need to zoom in,” says Internationally, the US fell behind in drone development

Zepeda. Drones allow these projects to retrieve a clear

because it pushed too hard early on and blocked the

image of terrain and structures.

technology as it struggled to formulate appropriate legislation. Zepeda says Europe and Asia were left to grab

The most versatile sensing technology the company

the reins of leadership. Those regions are crafting new rules,

uses is photogrammetry, in which it mounts a high-

which some companies are already using as a guideline.

definition camera on the drone to capture geo-referenced, overlapping pictures of the area of interest. Images and

Amazon, for one, is launching Prime Air, a delivery system

information captured by drones can be used to create

that uses small drones to get packages to customers in

photographic 2-D scaled maps or 3-D models that are

under 30 minutes. The company declares on its website

scaled and geo-referenced. “We are the technological

that it supports, “the pragmatic, flexible, risk-based

leaders of the civil drone industry,” says Zepeda. “We

approach to drone regulation that has been pursued by

can safely navigate the longest distances, fly in the most

European authorities, in particular the European Aviation

challenging environments and have the most sophisticated

Safety Agency (EASA).” Similarly, Zepeda recommends

and precise remote sensing devises.”

the Mexican government look at international best practices to figure out the most efficient way to regulate

Delair-Tech developed the first drone to be certified by

the market and learn from the mistakes of other countries.

a national civil aviation authority to operate beyond the

“Proper regulation will foster the growth of the market

pilot’s line of sight. “We also have the first and only fixed-

and ensure the safe integration of drones into Mexican air-

wing civil drone that is capable of carrying high-frequency

space,” says Zepeda.

LiDAR sensors.” The company focuses on big mining companies, railroad operators, oil and gas operators, the

THE RIGHT DRONE

Ministry of Communication and Transportation (SCT),

There are two main types of drones in the industry, fixed-

PEMEX, the Federal Electricity Commission (CFE) and the

wing and rotary-wing. “Rotary-wing drones are a small

National Water Commission (CONAGUA).

and popular type that take off and land vertically,” Zepeda says. “They can manage stationary flight that allows them

Appropriate regulations and user guidelines are needed to

to hover extremely close to objects.” On the other hand,

draw limits and avoid potential setbacks as the technology

fixed-wing drones are similar to airplanes because they

becomes commonplace.

305

MRO & AFTERMARKET

An aircraft’s life cycle could not be maintained without MROs and aftermarket services. The critical functioning of an aircraft requires vigilant and strict maintenance operations. DGAC is one of the world’s most exacting aviation regulators and that in itself creates business opportunities for MROs, which help sure standards are maintained. OEMs also are in the country as commercial airlines expand their fleets and more private aircraft take to the skies. The implementation of BASA will heighten aviation competition in Mexico, which inevitably will further drive demand for these services. The rising need for certifications and FAA approvals is increasing the competition between Mexican and US MROs, creating a binational industry.

The main topics discussed in this chapter are the business opportunities that MRO owners have found, their market outlook and how cross-border competition is affecting their business operations.

307

CHAPTER 13: MRO & AFTERMARKET 310

ANALYSIS: Pop The Hood

312

VIEW FROM THE TOP: Rick Uber, TechOps

314

VIEW FROM THE TOP: Marcos Rosales, Mexicana MRO Services

315

INSIGHT: A Pro Aerospace Initiative

316

VIEW FROM THE TOP: Julio Álvarez, Qet Tech Aerospace

318

VIEW FROM THE TOP: Roberto Marcos, Monterrey Jet Center

319

VIEW FROM THE TOP: Rodolfo Rodríguez, Duncan Aviation

Chris Gress, Duncan Aviation

321

VIEW FROM THE TOP: Juan José Simón, SAE

322

MRO SPOTLIGHT: Mexicana MRO

324

VIEW FROM THE TOP: Vladimir Hernández, HTMC

325

VIEW FROM THE TOP: Ruth Gutiérrez, ASENSA

Carlos Díez, ASENSA

309

ANALYSIS

POP THE HOOD Just like a car mechanic, an MRO is essential to the function

airline’s operating costs, according to IATA. Globally, the

and life cycle of an aircraft. It provides all the services

air transport MRO market for civil aircraft was valued at

necessary to ensure a craft’s air-worthiness, reliability

US$63.4 billion in 2015, according to ICF International,

and safety in accordance with authorized specifications.

and employs 350,000 people worldwide, according to

Commercial airlines can provide MRO services to their

Oliver Wyman. For 2016, Oliver Wyman estimates the

own aircraft but it is also common for them to outsource

market will be worth US$68 billion and will continue

that work.

growing at a 4 percent annual rate to represent US$100 billion by 2026.

Aircraft maintenance can be classified as unscheduled,

310

which is not planned but called on when a component

Most of these services are clustered in North America,

fails, or scheduled. This latter maintenance can itself

Asia Pacific and Europe but as the aviation industry

be divided by the type of tests it requires and how

keeps growing in other regions, new service providers will

often they are necessary. Transit maintenance is the

gradually enter the market, especially in emerging areas.

most common and involves a superficial inspection of

Latin America is lagging behind with only 6 percent of

an aircraft after each stop to search for easily detected

the industry in 2015, valued at US$3.6 billion but that is

damage and deterioration. Next are type A checks, which

expected to almost double by 2025 to US$6.3 billion,

are completed every two months or 400 to 600 flight

according to an IFC International forecast.

hours and involve a more comprehensive observation and often service or replacement of damaged or corroded

In Latin America, MRO growth is driven by narrow-body

components. Type B revisions are performed every six

aircraft, such as the Airbus A320, which represents more

to eight months and necessitate a more detailed revision

than half of the aircraft in the region. Next is the wide

than the A check. Type C checks are carried out every

body, the Boeing 777 for instance, with a fourth of the

20 to 24 months or 4,000 flight hours and involve a

market, followed by turboprops and regional jets.

comprehensive revision of most of an aircraft’s individual parts. Finally, D maintenance is performed about every six

Demand for MRO services focuses on engines followed by

years or 25,000 flight hours. This last revision is the most

components, line, airframe and modifications, according to

comprehensive and includes the A, B and C revisions plus

IFC International. MRO demand by component is expected

a complete structural check. It may take over 20 days

to retain these proportions for the next nine years.

during which the aircraft cannot be used. The sector will continue to grow globally as Boeing The most common services requested from an MRO

projects a need for 38,050 new aircraft by 2034, of which

are for engines, representing 40 percent of demand,

3,020 will be destined for Latin America. According to the

followed by components, line, airframe and modifications,

aerospace giant, this will translate into a fleet of 43,560

according to ICF International in 2015.

aircraft globally. Of the expected new aircraft, 21,960 will be bought in direct response to growth and 16,090 will

The market for MRO services can be attractive as these

replace old airplanes. The remaining 5,510 will consist of

operations usually represent from 12 to 15 percent of an

existing aircraft retained by airlines.

GLOBAL MRO DEMAND BY REGION

GLOBAL MRO MRO DEMAND DEMAND BY BY SEGMENT SEGMENT GLOBAL

29% North America 27% Asia Pacific

40% Engines

26% Europe

22% Components

8% Middle East

17% Line

6% Latin America

14% Airframe

4% Africa

7% Modifications

Source: ICF International 2015

Africa

Middle East

Asia Pacific

Line

Engines

Latin America

Europe

North America

Components

Modifications

Airframe

In Mexico, DGAC serves as the regulatory authority but

to service the entire North America region,” says Luis Lara,

MRO service providers often receive aircraft from the US,

Chairman of the Board and CEO at American Industries.

leading them to acquire certifications as MROs from the FAA. The Mexican market for MRO services has been mostly

Mexico has a growing aviation industry and most local

overlooked and the country has only three large MRO

airlines are increasing their fleets. Volaris, for instance, has

centers: Mexicana MRO, TechOps and Qet Tech Aerospace

ordered 30 Airbus A320neo and 44 A320, VivaAerobus

and a few smaller workshops.

40 A320neo and Interjet 40 A320neo and 10 A321neo. Aeroméxico has an order in for 60 Boeing 777 MAX.

Inaugurated in 2014 by Aeroméxico and Delta Air Lines and

These growing fleets will only increase the need for MRO

representing a US$55 million investment for both airlines,

services, making it an attractive market for investors in

TechOps’ Queretaro facilities are the largest in Latin America.

the coming years.

The center “specializes in the Boeing 737 and 717, Embraer ERJ-145, E-170 and E-190 and the McDonnell Douglas MD80 and MD-90,” says Rick Uber, General Manager Base Maintenance of TechOps. The center is working only with

LATIN AMERICA COMMERCIAL FLEET BY LATIN AMERICA COMMERCIAL FLEET AIRCRAFT TYPE BY AIRCRAFT TYPE

Boeing and Embraer but is open to further collaborations. Located next to AICM, Mexicana MRO was created to look after Mexicana’s fleet and worked independently after the airline’s bankruptcy. The center is certified by DGAC,

51% Narrowbody

FAA, the European Aviation Safety Agency (EASA), the US

25% Widebody

Department of Transportation (DoT) and the Civil Aeronautic

16% Turboprop

Institute of Cuba (IACC). Mexicana MRO specializes in line

8% Regional Jet

maintenance. “In the area of major maintenance, Mexicana MRO does not have any competition at AICM,” says Marcos Rosales, Director General and CEO of Mexicana MRO Services. “Some major airlines have their own maintenance hangars but we are the primary service providers for all other airplanes that come to the airport.”

Source: ICF International 2015

REGIONAL JET

WIDEBODY

LATIN AMERICA MRO DEMAND BY TURBOPROP NARROWBODY LATIN AMERICA MRO PREDICTED DEMAND SEGMENT IN 2015 BY SEGMENT FOR 2025 Source: ICF International 2015

Qet Tech Aerospace operates with the vision of becoming the “go to” destination for commercial aircraft. The center is located in Sonora, a location chosen due to its advantages for MRO service providers. “Obregon is close to the US border and has an adequate climate for airplane

36% Engines

maintenance,” says Julio Alvarez, Director General of Qet

25% Components

Tech Aerospace. “Furthermore, if we need a spare part it is

20% Line 13% Airframe

easier to get it directly from Arizona.” The center specializes

6% Modifications

in commercial aircraft but has been shifting its focus toward small regional airlines. “Through years of experience, we have noticed that Mexico lacks infrastructure for small airplanes. Traditionally, the local aviation industry has been dominated by MROs for big commercial airlines, neglecting to service smaller airplanes,” Alvarez says.

Source: ICF International 2015

MODIFICATIONS

LINE

ENGINES

LATIN AMERICA MRO PREDICTED DEMAND BY

AIRFRAME LATIN AMERICA MROCOMPONENTS DEMAND SEGMENT FOR 2025 BY SEGMENT IN 2015 Source: ICF International 2015

Others are seeing the potential the MRO service market has to offer. American Industries, a shelter and real estate company, is planning the construction of an MRO in

40% Engines

Chihuahua that would strengthen the local cluster and gain

24% Components

support from it to provide services to international airlines.

17% Line

This center is in the planning stage and being operated in

12% Airframe

collaboration with Oliver Wyman, Boeing and L-3 Crestview.

7% Modifications

“Mexico can act as a platform for the global aerospace industry through this MRO, which we plan to make available

Source: ICF International 2015

MODIFICATIONS

COMPONENTS

AIRFRAME

ENGINES

311

VIEW FROM THE TOP

AIRPLANE ‘HOSPITAL’ ANCHORS FOCUS ON SAFETY AND QUALITY RICK UBER General Manager Base Maintenance of TechOps

312

Q: How do TechOps’ facilities in Queretaro compare

TechOps also is investing in technology. For instance, we

to those in the US and what are the branch’s greatest

have joined forces with EmpowerMX, which manufactures

advantages?

software that provides instant access to comprehensive

A: Our facilities can compete with all others thanks to

information of all current processes. It also permits us to

our great employees, most of whom possess a four-year

track airplanes and the labor hours invested in each unit.

degree and are fully qualified to work in the aerospace

Before implementing the software, our Queretaro facility

industry. Queretaro has greatly benefited from its young

was using an accounting program that was not designed

and intelligent workforce and TechOps has enjoyed the

for aircraft management and therefore was significantly

advantage of having committed employees who are

harder to use. While other airlines and MROs use this

constantly on the lookout for ways to improve themselves

software, including Delta Airlines, we are the largest MRO

and their work.

using it and Queretaro is the first TechOps facility to implement it. This system has improved our processes and

TechOps specializes in the Boeing 737 and 717, Embraer ERJ-145, E-170 and E-190, and the McDonnell Douglas MD-80 and MD-90

will put us in an excellent standing to reach the top market position, as it provides much more information than the competition can. Q: What are TechOps expansion plans for the short term? A: This year we have scheduled a 10 to 12 percent increase in processes. We have had six lines with Delta Airlines for a couple of months but next year we will operate with them

Our employees usually have five years of experience and

for almost the whole year. We plan to continue growing 10

being young means they are adaptable to the newest

percent per year having acquired the AS 9100 certification.

technologies. Some of our employees are trained at UNAQ,

So far, it is not within our goals to open new hangars.

with which we have a partnership to develop human capital.

We are making the most of our existing infrastructure

This university has state of the art facilities and technologies

by taking advantage of the quality and safety policies

to train professionals in the aviation and aerospace industry.

we implemented in 2015. This will allow us to store a

To date, of our approximately 1,600 employees, about 400

larger number of our airplanes in the existing hangars. At

are from Guadalajara and many more from Mexico City, San

the beginning of 2016, we only had three planes and we

Antonio, Texas, and El Salvador. We are steadily increasing

now have six in the same space. Storing aircraft takes a

our human capital. In 2015 we added 130 employees and we

considerable amount of space and organization thus we are

plan to contract 130 more this year.

redesigning our practices to increase capacity. We service 50 to 60 airplanes a year.

What

partnerships

has

TechOps

developed

complement its services?

We work with Delta Airlines and Aeroméxico but we

A: One of my first actions directing TechOps was to create

are obtaining certifications for others such GOL Airlines

a series of local partnerships. At that time, we had to send

from Brazil, which operates several Boeing 737. We

a large number of products back and forth to the US for

also are evaluating other regional airlines, such as TAR

different processes and treatments. This is not convenient

Aerolíneas. Approval processes are time consuming

for many internal reasons and is not beneficial for the

because facilities have to be inspected so we are starting

local economy either. For that reason, we developed

with small local airlines before incorporating larger ones.

partnerships for heat treatments and plating, among many

We are capable of servicing any airline in America but

other processes.

our Queretaro hangar specializes in the Boeing 737 and

717, Embraer ERJ-145, E-170 and E-190 and the McDonell

discarded carpet out of the country. While laws like that

Douglas MD-80 and MD-90. We plan to expand our

are needed to protect local industry, it is also necessary to

aptitudes to Boeing 757 and CRJ-700 and 900, for

develop alternatives to facilitate operations for companies

which we need to incorporate tooling and training. We

in the state. Customs also can pose a problem because

are not operating with Airbus because our workforce

the regulations change frequently. Due to the international

is much more specialized in Boeing and Embraer. As

nature of the aviation industry, customs must be as

our employees are experts in Boeing products, it is

supportive and clear as possible. The local government has

easier and faster to adapt to other Boeing aircraft than

been especially helpful but we need to continue working

to switch to a different brand. It is more important to

to improve processes.

stabilize our operations and grow with our existing skills. The market for the Boeing 737 and the McDonell Douglas

Q: What does Mexico need to do to become an international

MD-80 and MD-90 is also strong but if these aircraft are

player in the industry?

replaced in the next five to 10 years by Airbus, we will

A: Mexico needs to promote its industry more because

follow the market.

the world is still unaware of what the country has to offer. The public perspective of the country’s skillset and

Q: Which would you identify as the greatest hurdles to

available resources leaves our clients astounded when

doing business in Mexico?

they visit for the first time. Mexico’s specialties have been

A: I cannot praise our local employees enough, who are of

overshadowed by an image of insecurity.

diverse ages and are 18 percent female, while in the US the female staff only represents about 5 percent. Employing

TechOps came to Queretaro in part thanks to the effort

diverse work groups is beneficial for us as it generates a

of the local government to attract new companies. The

broader range of ideas and faster, better solutions to any

state provides numerous advantages and allowed us

problem. Our greatest advantage is our people and we

to implement new initiatives. For instance, our plant is

have a great relationship with the labor union because we

powered 30 percent by solar energy, which has allowed us

work together toward the same goals.

to keep this cost constant while our growth has doubled. We also capture and recycle rainwater to wash our

On the other hand, we face difficulties involving the textile

airplanes and we reuse it seven times before discarding it.

law, which complicates fabric imports and exports. If we

TechOps works hard to ensure we do not contribute to the

replace the carpet for an airplane we have to send the

deterioration of the local environment.

313

VIEW FROM THE TOP

FROM SURVIVAL TO STABILITY, THEN GROWTH MARCOS ROSALES Director General and CEO of Mexicana MRO Services

Q: How did Mexicana MRO overcome Mexicana de

entities, as well as in Europe and in South Africa. We are

Aviación's bankruptcy?

negotiating several contracts to increase our involvement

A: Mexicana MRO was created in 1987 to provide

with airlines to expand our 6.5 production lines to 8.5

maintenance services to Mexicana’s fleet. It became

during 2016.

an independent company in 2007. While Mexicana

314

MRO worked mainly with the airline’s fleet, it gradually

Q: What is your current position in Mexico and what is

started to incorporate new clients. Throughout 2010, the

your strategy to reach new clients?

workshop ran at minimum capacity and the MRO suffered

A: Mexicana MRO is the largest MRO in Mexico and is in the

many economic and operational difficulties. That year, the

Top 5 for Latin America. We also possess the largest number

airline filed for bankruptcy and underwent a bailout that

of certifications in this area, allowing us to provide services

ultimately failed. By August 2010, Mexicana had stopped

to 16 different countries. The three main certifications we

operating as an airline but our external clients gave our

hold are from the DGAC in Mexico, the FAA and the EASA.

workshop the opportunity to continue running our MRO operations. In 2014, highly unfavorable economic, financial

Mexicana MRO’s competitive advantage is the reputation

and operational conditions pushed us to rapidly identify

we have acquired over the years, consolidating our

cost-saving areas. Although client retention was not very

technical

high in 2014, this started to change by 2015 and we closed

response time. Our turnaround time is very competitive

the year with 95 percent client retention.

because clients compare our prices to MROs based in the

capacity,

skills,

certifications

and

quick

US that focus on materials and components, while we Q: What new services is Mexicana MRO planning to

focus on the sale of technical hours and labor. Another

introduce to its offering?

competitive advantage is having two platforms, giving

A: We are maintenance service providers for airplanes,

us the flexibility to handle a large number of planes at

mostly performed at our overhaul workshop. Our service

once and to provide overnight and line maintenance at

portfolio includes maintenance, repair and back shop

short notice. While some major airlines have their own

component repair services directed mainly at Airbus’

hangars we are the primary service providers for all other

A320, A318, A319, A321 and A330 and Boeing’s 727,

airplanes that arrive at AICM.

737, 757 and 767. Over the years, we have developed capabilities to service the Fokker 100 as well and are now

Q: How will NAICM impact Mexicana MRO and how is the

working to incorporate other fleets. In September 2016,

company preparing for it?

we inaugurated the second Airbus Virtual Training Room

A: We will move operations to the new airport as soon as

for A320 in Latin America, which will also provide training

possible. Our goal is to increase Mexicana MRO’s assets in

for the A320neo and the A330. Afterward, we will start a

AICM as much as possible before putting it up for sale as a

similar project for the Boeing 787, a state of the art aircraft

business unit. The strategic growth plan developed for the

built with composite materials.

period up to 2018 will be presented to the new buyers of the business unit after which we will open facilities in NAICM.

The growth of the aviation industry in Latin America has reinforced our own. Locally, we have cultivated

For Mexicana MRO, 2014 was a survival test, 2015 a year

partnerships with VivaAerobus, Volaris, Aeroméxico and

of stability and 2016 is the year for reinforcement and

the Federal Police, which are now our main clients in

growth. Mexicana MRO is a completely separate entity

Mexico. Our largest market outside of Mexico is South

from Mexicana airlines, so while the airline’s bankruptcy

America, representing 40 percent of our clients. We also

affected us considerably, we are working to solve these

have clients in North America, many of which are leasing

problems and expand our client portfolio.

INSIGHT

A PRO AEROSPACE INITIATIVE The aerospace sector is becoming a catalyst for the Mexican

increase the country’s participation in the industry and

economy, boosted by the Pro-Aéreo 2012-2020 program.

contribute to attaining Pro-Aéreo’s goals. OEMs’ growing

According to ProMéxico data, more than 300 companies

need for lighter, cost-efficient and eco-friendly materials will

employing over 45,000 people, provide services or

increase demand for composites such as carbon or glass

manufacture products for the aerospace industry here.

fiber. Global demand for composite materials is expected to increase 7 percent annually until 2019. Manufacturing

Through ProMéxico, the federal government has established

of open rotor and geared Turbofan engines also offers

its main objective: “To develop of a high added value,

business openings. Open rotor engines will reduce fuel

national aerospace ecosystem that can be competitively

consumption by almost 26 percent compared to traditional

integrated into international aerospace and defense

engines. Geared turbofan engines reduce noise pollution

industries.” Pro-Aéreo has four objectives. The first and

by almost 50 percent compared to other engines, also

most notable is to place Mexico within the top 10 countries

improving fuel efficiency and reducing emissions.

that sell products for the aerospace industry. The program’s second objective is more precise, to export US$12 billion

The third niche discerned by Clean Water is a long-term

dollars of aerospace products, almost US$6 billion dollars

opportunity rather than a target for the 2020 program: the

more than in 2015. By 2020, employment provided by the

development of alternative fuels to reduce oil dependency.

aerospace industry is expected to more than double to

Even though the use of biofuels will be widespread at some

110,000 direct jobs in the industry. Pro-Aéreo expects that

point, investment and R&D are needed to reach popular use.

at least 30 percent of the total number of jobs will be in engineering areas, rather than manufacturing. The fourth

Should

Pro-Aéreo

meet

its

expectations,

2021

objective is for components in aerospace manufacturing to

aerospace exports would register 14 percent annual

be at least 50 percent Mexican.

growth, increasing the sector’s contribution to GDP by 0.68 percent. In the worst-case scenario, exports would

According to the Clean Water Consultancy, there are still

only increase 9 percent and contribution to the country’s

opportunities that Mexican companies could seize to

GDP would increase 0.18 percent.

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VIEW FROM THE TOP

EXPANSION ON THE HORIZON JULIO ÁLVAREZ Director General of Qet Tech Aerospace

Q: What strategies helped Qet Tech Aerospace become

infrastructure for small airplanes. Traditionally, the local

one of the most important MROs in the country?

aviation industry has been dominated by the MROs of big

A: Satisfied customers are the company’s priority. If

commercial airlines at the expense of smaller carriers. In

customers leave satisfied they are more likely to return and

Qet Tech, we noticed this was a niche market we could fill

recommend our MRO services. If they do not come back,

so we began working with TAR. Learning to understand

then the service we provided did not meet their expectations

their needs helped us grow together over the past years.

or our prices were not competitive. Pushing to offer quality

316

service with competitive prices and keeping customers

Big airlines are increasing their market presence by covering

satisfied with our offering embodies our growth strategy.

routes to neglected small cities with medium-sized planes. Qet Tech can cover the necessities of this type of aircraft but

Our workforce has grown threefold from when we originally

in the long-term, our goal is to provide services for bigger

started. At its two sites in Queretaro and Obregon, 230

airplanes such as Boeing or Airbus. In the city of Obregon,

people work for Qet Tech Aerospace. The company does not

our hangar measures 5,500m2, which can fit five or six

have financial liabilities nor union problems and our financial

planes at the same time. We have been developing all the

structure is solid. The combination of these characteristics

service stations that are needed to provide full maintenance

has allowed us to maintain a healthy growth rate.

operations to any type of aircraft. The company also is investing in overnight stations for airplanes.

Q: What is the main focus of Qet Tech’s business? A: Commercial aviation tops the list. Lately, we have

Q: Which services does the Mexican aviation market most

been focusing on small regional airlines. Mexico lacks

require at the moment?

A: Several operators take their airplanes to MROs in the US.

demand for our services is certain even beyond Sonora

We need to convince them that Mexican companies have

and Queretaro.

the capabilities to provide excellent services. Qet Tech not only wants to convince Mexican operators to keep their

Q: What are the company’s plans and expectations for

aircraft in the country but also to attract US aircraft.

growth? A: Eight years ago when Qet Tech started, our main

We already have the required DGAC certifications and the

challenge

was

complying

with

all

governmental

company is filing for all the stipulated FAA certifications

requirements to offer a legal MRO service. When we

to service US airplanes. If we obtain these certifications

secured major contracts, we started offering small services

then we can capture a bigger market share. Starting with

such as nondestructive tests, borescopes and services for

national airlines, we will convince them by providing quality

DGAC audits.

services, delivering on time and offering competitive costs. We gradually began increasing our capacities until we Q: Why did Qet Tech select Sonora for its base of

achieved our current status. Today, Obregon is our main

operations?

repair center and our Queretaro base allows us to support

A: The state of Sonora believed in our project from the

12 service stations throughout the country. To grow beyond

beginning and the cluster offered us advantages that no

this, we are focusing on the regional market until we can

other aerospace cluster offered. Ciudad Obregon was

also provide services for Boeing and Airbus aircrafts. We

particularly promising. The city is close to the US border

also will open a hangar in Queretaro to cater to clients in

and has an adequate climate for airplane maintenance.

the Bajio region. Our future plans include branching into

Furthermore, if we need a spare part it is easier to get

the aircraft recycling industry.

it directly from Arizona. Parts enter Mexico via Nogales within the same day of order and exporting goods is

Q: What projections for the coming years do you perceive

equally punctual.

in the local industry? A: Mexico offers important growth opportunities and

However, we want Qet Tech to expand to other parts of the

the current exchange rate of the Mexican peso to the US

country. Tijuana and Guadalajara are particularly attractive

dollar has not impacted our volume operations, in fact it

for us. Guadalajara is about to become the biggest hub for

has benefited us. Qet Tech is growing hand in hand with

one of our clients so we need to position a service station

its clients. We have 50 percent projected growth with

in Jalisco. A similar possibility is on the horizon in Tijuana,

TAR airplanes and expect to grow 30 percent in our cargo

where one of our clients’ biggest hubs is located. Volaris

business. In maintenance services for enterprises such as

has important hubs in both cities, which means that

Volaris we are expecting to grow more than 100 percent.

317

VIEW FROM THE TOP

TIME TO BUILD A MEXICAN AIRPLANE ROBERTO MARCOS Vice President of Monterrey Jet Center

318

Q: How is Monterrey Jet Center capitalizing on its

Q: What areas does the Mexican aerospace industry need

strengths to overcome the main challenges it faces?

to tackle to consolidate the local industry?

A: Dollar prices are impacting the entire aviation sector.

A: It is necessary for the local industry to begin building fully

The industry operates in dollars which makes costs higher

Mexican airplanes using local engineers, parts and labor. To

for Mexican clients. Furthermore, all aircraft parts have to

do so, it is only necessary to invest as the country already has

be imported and their prices have risen. Because prices

a large number of qualified and experienced professionals.

are higher, the investment for maintenance is greater than

While many universities in Mexico are graduating a large

what clients contemplated at the beginning of the year.

number of engineers, sadly the industry is not consolidated

While this situation may represent a problem for others,

enough to absorb them and several leave the country. To

Monterrey Jet Center’s more than 38 years of experience is

consolidate Mexican industry, the private sector needs

helping us to stay at the forefront of the aviation sector in

economic support from the government because initial

Monterrey. Even with the problems impacting the aviation

investment in aerospace is extremely high. The government

sector, we have grown enormously thanks to our safety

needs to increase its support of local companies.

and quality practices. For the past 10 years our growth has tripled for many reasons. FAA certification is one reason

Q: What are the main trends impacting the Mexican

that, alongside good service and competitive prices,

aviation market?

attracted many clients from the US, which now represents

A: The aviation industry has grown exponentially over

up to 50 percent of our portfolio.

the past 15 years. Local commercial airlines have renewed their aircraft giving Mexico one of the youngest fleets

We only have offices in Monterrey but we receive clients

in the world. Furthermore, executive aviation has grown

from all over Mexico. Between 30 and 40 percent of

enormously due to policies brought about after 9/11. The

our customers are from Toluca. We have clients from

resulting increase in security brought longer waits at

Chihuahua, Veracruz, Merida and Oaxaca, all of which

airports, pushing many toward the faster private aviation

were acquired through recommendations.

sector. Executive airlines are increasingly incorporating modern aircraft, becoming much more attractive for

Q: In which aircraft does Monterrey Jet Center specialize

potential users. Globalization also has helped this sector

in and how have your services adapted?

as it increases the need to travel long distances.

A: We specialize in maintaining and repairing Hawker aircraft, which represents 80 percent of our services.

Q: What other initiatives is Monterrey Jet Center

The market in Monterrey for this aircraft is smaller than

implementing to support the growth of the private

in Toluca but it is still relevant. We have an alliance with

aviation industry?

Embraer, of which we are an authorized service center.

A: We have collaborated with UANL to develop its

We secured this relationship because we used to perform

aerospace program, which is necessary to supply human

maintenance and on-call services for Delta Airlines,

capital to aerospace companies entering Monterrey. Not

Continental Airlines, United Airlines and American Eagle

long ago, companies interested in Monterrey faced the

in 29 Mexican airports, giving us considerable experience

problem of acquiring human capital and eventually left for

with this aircraft. We represent several US suppliers,

other states that could provide these professionals. The

including two large engine overhaul workshops and

state now has to invest in attracting a larger number of

Garmin, and we are working with ProJets, a US aircraft

aerospace companies, from manufacturing enterprises

retailer. We have also increased the scope of our services

to MROs. Monterrey could capitalize on its considerable

to include paint and interiors services to be a one-stop

advantage of now possessing a larger number of skilled

MRO workshop.

workers than anywhere else in Mexico.

VIEW FROM THE TOP

FAMILY OWNED MRO EXPANDS REACH

Rodolfo Rodríguez Regional Manager of Mexico at Duncan Aviation

Chris Gress Component Solutions Sales Manager at Duncan Aviation

Q: What characteristics did Duncan Aviation identify that

appropriate. Having tooling here in Mexico will be a litmus

made Mexico an attractive destination?

test for the company, which could lead us to establish a

RR: Duncan Aviation has been family owned for three

bigger presence in the country.

generations and is celebrating its 60 anniversary this year. th

Robert Duncan, the former company president and now

Q: How are you reaching out to private aviation companies

Chairman Emeritus, travels to Mexico regularly. The Duncan

to increase your client base?

family realized that as well as being an attractive vacation

RR: Of the more than 300 companies based in Mexico, we

destination, Mexico has plenty of business potential so the

have contacted more than half of that list of companies.

company decided to expand its reach by opening an office

Of those 150 companies, approximately 50 percent

here. Duncan Aviation has 27 facilities in the US and offices

have already requested quotes. However, as this list of

in Amsterdam, New Zealand, Mexico and Brazil, with the

companies is growing rapidly in Toluca, we have to work

last two taking care of our Latin American business. Our

very hard to keep up to date with all the new entrants.

main Mexican clients are based in Monterrey and Toluca but

This must happen alongside our philosophy of retaining

we have identified that the Guadalajara and the Yucatan

our existing customer base.

region have potential for our services. Q: What specific needs can your services cater to that CG: The senior team identified potential in Mexico because

your competitors cannot yet offer?

many aircraft for which we have repair capabilities and

CG: Duncan Aviation has very specific knowledge of

stock parts are operating in Mexico. Our years of experience

the aircraft and avionics used in Mexico. Our technical

in these models made it very practical to enter the local

representatives, some of whom have been working with

aerospace market. Furthermore, several of the Learjet and

us for 25 or even 35 years, understand these aircraft and

Hawker aircraft that have been purchased secondhand

work closely with the manufacturers. They can often

from the US are now operating in Mexico. Such a large and

fix squawks that no one else has been able to resolve.

expanding secondhand fleet merits attention from MRO

Moreover, the same level of quality and experience exists

companies such as Duncan Aviation.

in our avionics workshop and our accessories workshop so we offer both services and long-lasting relationships. Our

Q: How does the company plan to continue expanding in

testing equipment can also detect potential issues in units

the Mexican aerospace industry?

that have not received maintenance in decades, allowing

RR: Our technicians and mechanics travel to our customers

us to find and fix the units before any problems occur.

to service aircraft and quickly have them in optimum condition. However, an opportunity exists to speed up

RR: With some older aircraft, our technical data and

our service by having the equipment that our technicians

previous experiences in servicing them are very handy.

need on hand when they arrive with our Mexican clients.

We have strong relationships with the major engine

Therefore, to supplement our office, we will station some

manufacturers, such as General Electric, Honeywell, Pratt

tooling and parts in Mexico for maintenance operations. This

& Whitney and Rolls-Royce. Honeywell has approved

will allow us to respond more quickly because transporting

Duncan Aviation to perform major periodic inspections at

tools between countries can delay our response to requests.

our workshop. Pratt & Whitney also has a workshop within our facilities, and has certified our company to carry out

CG: Our tip to tail services include engine services,

certain operations on their engines. We recognize that

airframe services, paint, interior and repair maintenance

being responsive is crucial in this market and as we gain

either by shipping new parts directly to our customer’s

more experience in the country, we will evaluate adding

hangars or sending pieces to the US for repair when

another facility in Mexico.

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VIEW FROM THE TOP

CLOCKWORK OPERATIONS FOR A DYNAMIC INDUSTRY JUAN JOSÉ SIMÓN Director General of Servicios Aéreos Estrella (SAE)

Q: What differentiates SAE from other companies

A: Planes are bought either by our clients or by our

operating in Toluca International Airport (AIT)?

investors. Once the plane has been acquired, we

A: SAE has a 25-year history of providing services for

administer the aircraft. The company has no input in the

the private aviation industry. We began our operations

decision to acquire a new plane and the operator chooses

as the first FBO at AIT then decided that to offer a more

the model of the aircraft they buy. Our investors are

comprehensive service we had to begin maintenance

working on buying a HondaJet, which we expect to arrive

operations. Through our MRO, we complement our FBO

in the second quarter of 2017.

services and hangars for aircraft storage. Our air taxi services began with only one aircraft and we now have 14

Most aircraft we manage in Mexico are worth about US$6

units. SAE also offers aircraft administration services linked

million to US$7 million. The bigger the airplane, the more

to the air taxi operations. We manage our clients’ aircraft

expensive it becomes to operate and maintain. Our most

on request and add them to our air taxi catalog.

requested planes transport eight passengers.

SAE has the biggest FBO at the airport, with the greatest

Q: What are your growth expectations for the rest of 2016

number of hangars and ramps. During the past five years,

and the near future?

we managed around 15,000 operations per year on

A: We do not wish to expand our operations. The FBO

average, making the FBO the core of our business.

service offering in Toluca has surpassed existing demand. In the last five years, four new FBOs entered the state,

We occupy a strategic position in the airport next to

absorbing an important share of demand. This makes

governmental offices, which makes it easier for our

us more cautious regarding growth expectations. SAE is

international passengers to go through customs. The

focusing on improving its current facilities, having made

company is performing a gradual renovation of our

an important investment in a 4,000m2 platform, and re-

facilities, balancing our investments. By upgrading our

locating its offices inside the airport. Once the FBO and

current facilities, we will increase our infrastructure and

MRO renovation is finalized, a new hangar for our newest

then work on the update of the passenger facilities.

platform will be built.

Q: In which ways is the local aeronautics industry

During the past five years, the company managed on average approximately 15,000 operations per year

changing at AIT? A: We have seen the aeronautics industry grow and we believe that the supply of FBO services exceeds demand. We have collaboration agreements with other FBOs but we do not wish to establish facilities elsewhere. The aviation industry is dynamic and therefore is constantly changing. The company has considered joining efforts

Next year we will focus entirely on our clients. The

with FBOs in the US but their business model is different

FBO update will be inaugurated in 2017, with several

from that used in Mexico. Unlike the US, we do not

meeting rooms designed to provide more comfort. We

receive revenues from the sale of jet fuel. Nonetheless,

want to consolidate our client base and create customer

we are open to alliances and co-investment projects

loyalty. Therefore, we need to meet them to understand

with other FBOs.

and suggest how we can help them. The company is renovating its work culture, to be more effective and to

Q: How do you balance the acquisition of new airplanes

let our clients know that at SAE, our operations run like

with the cost management you are performing?

clockwork.

321

MRO SPOTLIGHT

322

MEXICANA MRO With an emphasis on aircraft care rather than maintenance, Mexicana MRO offers essential services that follow the “One Stop Shop” concept, providing all the required services in one place. Its 8593m2 main hangar can hold up to six narrow body aircraft or four narrow body and one wide body aircraft, allowing for simultaneous maintenance operations. The MRO also has a 1,568m2 illuminated platform with a 40-position capacity, equipped with external electrical installations and a jet blast deflector. The comprehensive line of services offered by Mexicana MRO is divided into three categories: line maintenance, major maintenance and paint shop. Mexicana MRO’s paint shop can perform full aircraft pre-paint configurations, polishing, finishing and detailing the exterior, interior painting and logo and design. The paint shop is environmentally friendly, with a downdraft air system that controls temperature and humidity. The operational flexibility that characterizes Mexicana MRO is evident in its ability to offer maintenance services to any aircraft. It provides services to four aircraft OEMs: Airbus, Bombardier, Boeing and Fokker. In addition to the usual MRO services, for the Fokker 100, A320, B727, B737, B757 and B767, the company has workshops for repairs as well as testing components, including avionics, seats and interiors, sheet metal, wheel and brakes, and aircraft weight and balance analysis, among others. Human talent is a key to Mexicana MRO’s functions, which is why the company hires qualified personnel with an average of 15 years of experience. All staff receive frequent technical training to offer services that exceed industry standards. Mexicana MRO also has the highest aeronautic and ecologic certifications in the industry. It has been accredited by the US Department of Transportation, the FAA, the European Aviation Safety Agency (EASA), the Mexican, Chile, Ecuador and Bolivia’s DGACs, the Cuban Institute for Civil Aeronautics (IACC), and Argentina’s and Brazil’s National Administrations of Civil Aviation (ANAC). Throughout the years, Mexicana MRO has proven to be one of the most comprehensive, flexible and marketoriented MROs in the country, offering services to every major aircraft.

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VIEW FROM THE TOP

WHEELING INTO NICHE MARKET VLADIMIR HERNÁNDEZ Director General of HTMC

Q: What is HTMC’s core operation and how is the company

instance, uses Michelin tires that last 35 to 45 percent longer

pursuing growth?

than average wheels, such as Goodyear, but with daily

A: HTMC specializes in special inspections and the assembly

pressurization they could last up to two months. Tire brands

and disassembly of wheels, brakes and batteries. We offer a

are in charge of sales, we handle assembly and subassembly.

high-quality internationally competitive service. HTMC was

324

created to address an overlooked market area. We noticed

We also repair wheels. This process is held to strict

there were opportunities for brakes and wheels of which

quality standards to ensure they are as safe as new ones.

there are not many workshops in Mexico. There are only two

Sometimes wheels are changed ahead of time but it is

maintenance centers in this market niche. Large airlines have

possible to continue using them after a comprehensive

their own maintenance so they are not our target market.

inspection and certification. Through careful planning, we

We see potential growth with airlines such as VivaAerobus,

can offer up to 30 percent lower prices for maintenance

which used to outsource these services to the US.

services. We focus on nondestructive testing (NDT) and assembly and disassembly. Our priority is to be the first

Many MROs focus on one type of airline but our niche is

workshop in Mexico to be FAA certified for NDT.

necessary for all airlines and it is possible to combine our services and even to transfer some practices from one sector

Q: AIT is strong in private aviation. What does the city

to another. For instance, we apply the quality strategies

need to consolidate this sector?

for service and maintenance for the small aircraft used

A: It is necessary for the authorities to grant more space,

by executive aviation to the larger commercial airplanes.

because the area is nearing saturation, and to simplify

While commercial airlines require our services every three

paperwork and processes. Sadly, several executive airlines

months, executive airlines require them every six. But the

are changing their license plates to a US registration

longer period between servicing means executive airlines

because this process, while more restrictive, is much faster.

require more comprehensive maintenance.

To prevent this situation, it is necessary for local authorities to streamline their processes. Another challenge local

Q: Who are HTMC’s main clients and which areas present

MROs face is the costs of importing parts, and it would

the most potential?

be beneficial for authorities to ease trade. Mexico is

A: We have a broad client portfolio both in Toluca and Mexico

very competitive due to its high-quality efficient and

City, with clients including executive airlines like Flymex

inexpensive labor but there are still several areas to tackle.

and Eolo to commercial airlines such as VivaAerobus, TAR Aerolíneas and Magnicharters. We even work with cargo

Q: Besides Toluca, what other locations in Mexico are

airlines such as MCS. To provide these services we work with

attractive to HTMC?

MROs such as Qet Tech Aerospace and Magnicharters. At

A: We are working exclusively in Toluca but we plan to

this point we are not interested in foreign airlines because

expand to Cancun because the city receives a large

they have strict processes that are determined by their main

number of foreign flights but it does not yet have a local

offices. We see a much higher potential in Mexican airlines.

maintenance center. The city is also a strategic point to enter the southeast region of Mexico and to eventually

Q: How essential is this area for the life of an airplane and

expand to Central America. We also are analyzing other

how are you planning to capitalize on it?

cities, such as Obregon. These expansions would be

A: The importance of wheels is often overlooked but they

implemented alongside a partner. For Obregon it would

are essential to the airplane and require significant care and

be Qet Tech Aerospace. We are certified by DGAC and

attention. The life of a wheel is determined by its materials

we plan to obtain FAA certification shortly, which will

and varies greatly by type of airplane and use. The A320, for

facilitate the creation of our own MRO.

VIEW FROM THE TOP

FAA RECOGNITION LIKELY A BOON

Ruth Gutiérrez General Manager of ASENSA

Carlos Díez Director General of ASENSA

Q: How is Monterrey consolidating as the country’s center

depend on any airport operator group and therefore we

of private aviation and what role is ASENSA playing?

do not have to pay the 15 to 20 percent fee on total

RG: The city’s competitiveness and ready access to

billing that MROs in other airports pay. This fee, paid to

airplane parts is its primary characteristic and attracts

the host airport, contributes to an increase in aviation

people from all over Mexico. From our side, the

prices and hurts the industry. To counteract this cost

company’s accessible prices are complemented by our

many airlines try to make up for the expenses generated

quality maintenance services. The Del Norte International

by airports and the government by reducing their

Airport (ADN) also offers its customers accessibility

maintenance budget.

and quality customer service. ADN is a private airport so it operates independently from OMA or ASA. ADN

RG: The existing regulations in Mexico have also led to

is becoming one of the most important airports for

people buying fewer airplanes with Mexican registration.

executive aviation following a substantial growth in the

This is due to maintenance tending to be more expensive.

number of hangars since 2008.

In the US, certain inspections are recommended while in Mexico, they are mandatory and the DGAC can apply

Q: What role is competition playing in shaping ASENSA’s

fines if regulations are not observed. For instance, plane

outlook?

manufacturers in the US recommend owners change

CD: Competition has meant that companies must stand out

the engine every 12 years, whereas this is obligatory in

with quality service and personalized attention. ASENSA

Mexico. The aviation rules we abide by are very general

is one of the few avionics workshops in the country and

and primarily designed for large commercial airlines,

an authorized maintenance and distribution center for

making aviation expensive for small airplanes, something

Garmin, Genesys and Aspen Avionics among others.

we have discussed with the Mexican Aircraft Owners and Pilots Federation (FEMPPA).

RG:

Our

main

business

airplane

maintenance,

especially MRO services for private and executive

Q: What are ASENSA’s expectations for its operations

airplanes. Training our employees is crucial for this area

in Mexico?

because despite managing a small number of airplanes

RG: We have many clients based in the center of the country.

we are one of the few enterprises that work by the book.

Flying to Monterrey for maintenance can be expensive so

We are strict because we know the risks of an imperfect

they tend to do so only for their annual servicing. Adding

plane in the air. We recently acquired the FAA Repair

locations will definitely be part of our expansion plan.

Station certification, for which we changed our manuals and procedures to adapt to FAA standards. This

CD: We have planned an expansion in the long term to

certification will allow us to offer maintenance services

meet Mexico’s need for quality workshops and to focus

to American airplanes.

on our MRO becoming one of the best in Mexico, building on ASENSA’s existing national recognition. We also hope

Q: What are the main challenges that private aviation is

to end the year with the FAA certification to fly and

facing at the moment?

provide maintenance to American planes, which will be

CD: One major challenge is the expensive dollar. When

an excellent opportunity. An advertising campaign to

the dollar rises clients fly less and any modification or

be launched in cities in the south of the US will attract

plans they had to replace aircraft parts are delayed.

new customers because our services match the quality

Unfortunately, private aviation in Mexico is still more

of services in the US. Our goal is to show Mexican pilots

expensive than in the US. Another difficulty that private

that Monterrey can offer even better services than those

aviation faces is the regulatory system. ADN does not

they receive in the US.

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MEXICO’S AEROSPACE FUTURE

Though the aerospace industry has been in Mexico for over four decades, it is just beginning to take off. There are states that have already developed strong industries while others are in the nascent stage. Unlike clusters in other industries or countries, Mexican aerospace clusters work together toward one common goal: boosting the aerospace industry in Mexico. Regardless of the clusters’ efforts, the challenge ahead for Mexico is to cultivate effective R&D operations rather than just manufacturing. The development and complete assembly of a Mexican aircraft is still in the works and there are several institutions in the country working toward that end. The consolidation of a national industry has to rest on three axes: the government and its financial institutions, academia and private companies.

This final chapter looks ahead to what the future of the aerospace industry in Mexico could hold. With interviews from representatives of financial institutions, educational centers, the military and technology companies, the chapter examines what actions must be taken to make Mexico a world-class aerospace country.

327

CHAPTER 14: MEXICO’S AEROSPACE FUTURE 330

VIEW FROM THE TOP: Benito Gritzewsky, FEMIA

332

VIEW FROM THE TOP: Federico de la Hoz, Bancomext

334

VIEW FROM THE TOP: César Fragozo, ProMéxico

336

INSIGHT: Juan Manuel Kuri, Siemens PLM Software

337

VIEW FROM THE TOP: Alejandro Preinfalk, Siemens

338

VIEW FROM THE TOP: Jorge Gutiérrez, UNAQ

340

VIEW FROM THE TOP: Angélica Raya, IPN

342

ROUND TABLE: Cluster Competition Versus Collaboration

344

AIRCRAFT SPOTLIGHT: HA-420 HondaJet

346

VIEW FROM THE TOP: José Sierra, EMTEFA

348

ROUND TABLE: Defense Emerges from Under the Radar

329

VIEW FROM THE TOP

BIG EXPECTATIONS, BIG PLANS BENITO GRITZEWSKY Former President of FEMIA

Q: In what ways has FEMIA contributed to growth in the

We work closely with the federal government through

aerospace sector?

ProMéxico, the National Productivity Committee (CNP)

A: FEMIA is actively demonstrating how competitive

and the Minister of the Economy to invite and attract

the aerospace industry is in Mexico. Four years ago, an

investment, building on the success we have seen in the

independent firm investigated events up to 20 years

past 12 years. We will continue to achieve solid success in

prior to 2012 and concluded that Mexico was the world’s

the aerospace industry by taking advantage of Mexico’s

number one destination for aerospace manufacturing

advanced manufacturing capabilities.

investment. We would have liked to share this information

330

more widely but we are even more proud that the country

Q: Which specialties do you perceive in each aero cluster

now is blossoming in engineering and design activities.

and how are you uniting the different regions? A: FEMIA’s focus is national. Our goal is to create a world

Mexico is not a low-cost country. OEMs are identifying us

class manufacturing hub that includes collaboration

as a “best cost” country. Flattering characteristics cited are

between different states. Each cluster has its own strength

productivity, learning capacity and the disposition of our

and all are enjoying tremendous double-digit growth. Our

human capital. Our enviable location in the NAFTA region

average growth in the past 12 years has been 16 percent

also positions us next to the most important market on the

per year thanks to the country’s competitiveness and

globe and allows local industry to operate in US dollars.

collaboration among the clusters.

We focus on the needs of our members while promoting

While it is natural to compete and be proud of each

foreign direct investment in Mexico and sharing the

region’s successes, achievements and resources, we

success stories of companies from our sector. Foreign

decided to integrate an internal promotion commission

members have stated that their Mexican projects have

within FEMIA. This team is made up of members from

grown much faster than estimated, spurring faster-

across the country who are presenting a united and

than-expected investment to take advantage of such a

coordinated front. Our focus is on finding common

competitive and productive environment.

ground to operate as one team. Mexico is more likely to expand its population’s capabilities and attract

Global OEMs are forecasting around 38,000 commercial aircraft to be built by 2032, representing US$5.6 trillion

investment through collaboration than competition. Q: What main areas should the aero clusters address to consolidate? A: The clusters always need regular communication between the presidents and cluster participants to take advantage of their specialties. Some clusters are member

Q: To what extent has Pro-Aéreo’s success led FEMIA to

financed and others are government funded, which

update its expectations for the industry?

causes each cluster to act differently. FEMIA’s goal is to

A: We are on track with Pro-Aéreo’s targets but we

support clusters in whichever way they choose to operate

still have important areas of opportunity on which

and we have seen them opening up to connecting with

to focus to surpass expectations, including special

other clusters as well as with foreign companies. There

processes, coatings, heat treatments, a qualified labor

is no one single recipe for success, although we have

force and supplying special alloys. We look forward to

identified that the maturity and integration of a cluster

the integration of local suppliers to comply with rapidly

contributes to its accomplishments. The clusters that are

increasing demand.

most integrated in terms of number of companies are the

ones that can attract big projects. When an important

of that treaty, more opportunities will open up. Having

aerospace company builds a manufacturing site, that

access to the technology that is being used to make

company’s suppliers follow it to the cluster or it develops

defense components will strengthen our aerospace

local suppliers. It also is important for a cluster to create

manufacturing as a whole and provide the possibility of

strong links between the industry and local academia.

increasing our production for exports.

An important percentage of the most popular jet engine

Our defense activities are moving forward, though

in history is being built in Queretaro. The new LEAP

not as swiftly as those of civil or commercial aviation.

engine is making a statement in the industry with over

The country’s manufacturing activities for space and

11,000 units already sold before its production is even

satellites also are discrete but there are potential projects

normalized. Having thousands of planes using engines

for astronautics in Mexico. Several companies have

heavily manufactured in Mexico makes us very proud.

approached industry players and we hope to make more information public about the growth of that segment in

Q: In what way do you expect emerging hubs, such as

the near future.

Jalisco and Tamaulipas, to complement the industry? A: As a country, we have ample experience and expertise

Q: What are FEMIA’s main short-term plans for the

in advanced manufacturing. Emerging aerospace hubs

promotion of the industry?

are being built on existing infrastructure and capabilities,

A: FEMIA has a busy agenda for 2016, with presence

with companies that have been operating in Mexico for

at eight international events in critical locations for the

years. This makes it much easier to obtain certifications

global industry. We are anticipating the next edition of

that are quality-control oriented and explains why

Mexico’s Aerospace Fair (FAMEX) in 2017 because it is

aerospace companies are flourishing in several states in

a global platform for our sector. Mexico has shown its

Mexico. Oaxaca, Guanajuato, Yucatan and Zacatecas are

productivity, efficiency and competitiveness in such a

destinations for qualified advanced manufacturing. Some

way that international companies believe that having

companies are even taking advantage of the privacy of

operations in our clusters is a way to gain additional

these locations as well as their proximity to the US to

competitive advantages.

build classified sections in their facilities. These hubs are likely to remain small unless an OEM establishes facilities

Q: What are your projections for Mexico’s participation

nearby or their educational institutions focus heavily on

in the global market?

aerospace training in those particular areas.

Global

OEMs

are

forecasting

around

38,000

commercial aircraft will be built by 2032, representing Q: Does FEMIA believe Mexico has the ability to expand

US$5.6 trillion in aircraft production. In light of this

its military aircraft production?

opportunity, FEMIA has high expectations of the

A: In the last few years, Mexico has signed international

ProAéreo program up to 2020 but our job is to identify

treaties, one of which is critical to the defense and

the gaps in the market that may impede our participation

military sector because of its export controls focus, the

in the production of those units. Our goal is to reach

Wassenaar Arrangement. Now that we are members

US$12 billion in exports by the end of 2020.

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VIEW FROM THE TOP

DEVELOPMENT BANK WORKS FOR CONSOLIDATION FEDERICO DE LA HOZ Subdirector of Promotion of the Aerospace Sector at Bancomext

Q: Where does Mexico stand in the global aerospace

A: Mexico possesses a number of competitive advantages.

industry and what is its growth potential?

Its foundation is the presence of a strong national

A: The global aerospace and aviation industries are

automotive industry, which is well established and

valued at over US$1.64 trillion. Of this total, aviation

supports the aerospace industry’s development. While

including airlines and airports represents US$860 billion.

these two industries differ in volumes and standards, they

Suppliers and OEMs represent US$680 billion and MROs

share processes, plant layouts, problem-solving skills and

represent roughly US$100 billion. The Mexico aerospace

sustainability practices.

industry only exported US$6.4 billion in 2014 [US$6.69

332

billion in 2015 with expectations for US$7.5 billion for

Mexico’s admirable machine overhauling processes and

2016, according to FEMIA] but has excellent potential to

the workforce’s skill in fixing, improving and modernizing

increase manufacturing, since it offers advantageous costs

old machinery is often overlooked as a competitive

over countries with comparable characteristics. Several

advantage. Highly qualified professionals trained locally

foreign companies operating in Mexico, generally from

can renovate or upgrade these machines at reduced

North America and Europe, already are taking advantage

prices, a valuable skill because aerospace companies often

of this. For instance, GE Aerospace is employing

keep old equipment for long periods of time because of its

Mexican engineers to design turbines and engine parts

high value. The renovation of their is equipment a fantastic

in Queretaro and Zodiac is designing water supply and

opportunity for both the country and these companies

drainage systems in Chihuahua. In some ways, aerospace

that do not want to waste salvable machines. The

manufacturing can be considered an artisanal skill because

aerospace industry also is stable as companies undergo

it operates low volumes but requires highly specialized

fewer mergers than many other sectors and operate under

individuals to achieve the high-quality standards required.

long-term supply contracts. This is beneficial both for

Composites, for instance, are a new high-tech trend that

suppliers and for banks. They can be confident that cash

requires specialized manual labor.

flow will be stable for several years.

The aerospace industry has guaranteed demand for the next

Q: How does Bancomext support the aerospace sector?

10 years because at the current global production capacity

A: Because global aerospace companies operating in

it will take this long to fill the backlog of commercial jet

Mexico are usually financed through their main offices, it

purchase orders held by OEMs. An expected increase in air

has not been easy for a Mexican bank to offer services

passenger numbers worldwide also is fueling this demand.

to these entities. However, Mexico needs to attract more

The global industry is scrambling to increase its production

business from these companies and from new entrants

capacity and to speed up aircraft delivery times.

to the country’s aerospace sector because we can play an important role in financing these projects and their

Many companies are turning to Mexico to expand their

suppliers. Most of these multinational companies are facing

operations but their growth is limited by the domestic

gaps in the market when expanding their manufacturing

availability of key products and processes required in the

operations to Mexico because the existing supply

supply chain. The country still needs to nurture more Tier 1,

cannot always cater to their very specific requirements.

2 and 3 companies. If Mexico can consolidate its aerospace

The aerospace sector is highly regulated and requires

sector, it will operate as an important participant in the

participating companies to hold many certifications,

global aerospace supply chain.

such that new processes and parts manufactured in the country often have to be re-certified. This is an expensive

Q: What principal advantages would allow national

and most importantly, a time-consuming process. For

industry to compete in the global market?

that reason, OEMs and Tier 1s prefer to bring their existing

suppliers with them to new locations. In Mexico this

A: The bank is actively financing the Mexican aviation

includes companies from North America and Europe.

industry and works with all major Mexican aviation airlines and some regional ones. This industry is growing fast as

Manufacturing here is less expensive for the aerospace

the number of air passengers is increasing at a rate close

industry, representing US$84.3 of any product that costs

to 5 percent per annum, translating into opportunities for

US$100 in the US, according to the KPMG Economic

fleet expansion as well as renovation when appropriate.

Intelligence Unit. This was calculated with data from

We also are exploring financing private aviation airlines on

before the electricity price reduction of 2015, which

a case by case basis.

would further lower overheads. MRO service providers have high potential in Mexico but Q: How can Bancomext contribute to the consolidation of

to date most MROs operating locally only manage basic

the sector in Mexico?

operations. The country has the capacity to develop more

A: Our conviction that the sector has plenty of growth

complex MRO services because the primary component

potential has led us to develop strategies to support it.

of any maintenance company is its highly qualified team

Bancomext is designing specific solutions to provide

and in Mexico, this skilled labor is considerably less

financing to foreign aerospace companies entering the

expensive than in the US, our nearest competitor. Delta

domestic market. We also are working in collaboration

TechOps exemplifies the supply of well-established

with real estate developers to offer financing for these

MROs in Mexico, providing services for Delta Airlines and

companies. In September 2015, Airbus opened its first

AeroMéxico but with the potential to expand its services

plant in Alabama, which we believe will benefit the Mexican

to a broader array of airline fleets.

industry as cost comparisons may lead direct suppliers to this plant to open offices in Mexico rather than in the US.

Q: What are the main changes Bancomext hopes to see in the aerospace industry?

Bancomext manages two different support plans. One

A: Bancomext has found it difficult to participate in

is targeted at companies with financial requirements of

transactions with OEMs and Tier 1s but we also are

over US$3 million, which operate directly under a sectorial

exploring structures involving Export Credit Agencies

focus, and the second is aimed at companies looking for

(ECAs) from their countries of origin as a way to propose

financial support under US$3 million, which we operate

competitive financial structures. The Mexican aerospace

through financial intermediaries. We collaborate with

industry is only 16 years old so it still has a lot of room for

around 51 intermediary financial institutions to finance

growth. Fortunately, aerospace companies’ plans are by

such a large number of companies.

nature long-term and Mexico is certainly well positioned to play a vital role in these developments. It is crucial for

Q: Which special initiatives is Bancomext managing to

the country to develop solutions for the next 15-20 years

boost domestic aviation?

to generate stable industry growth for all those involved.

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VIEW FROM THE TOP

PROMOTING MEXICO AT HOME AND ABROAD CÉSAR FRAGOZO Chief of the Aerospace Unit at ProMéxico

Q: What opportunities does aerospace bring and how is

trade policies and thus had to invest more heavily in

ProMéxico supporting its development?

the development of an entire internal supply chain for

A: The aerospace sector generates great possibilities for

the construction of Embraer. As part of NAFTA, Mexico

Mexico and the country can use its strong experience

entered the global supply chain, allowing it to become a

in the automotive industry to capitalize on these new

top aerospace parts supplier for the US but there is still

opportunities. The local aerospace industry has benefited

room for growth.

from the existing infrastructure and human capital. Q: How feasible is it to increase exports to other

334

ProMéxico is working closely with the Ministry of

locations apart from the US?

Economy to implement the Pro-Aéreo program through

A: This issue is not exclusive for the aerospace sector. It

three ventures. The first is to bring anchor companies

will be beneficial for the country to diversify its exports

to Mexico, namely OEMs and Tier 1 businesses that

in every economic area. According to global trends, the

will interest aerospace suppliers. The second venture

US will continue to grow its aerospace industry as the

aims to attract suppliers that can cater to companies

country has the largest fleet in the world and a large

already operating in Mexico and the third is to establish

number of aircraft will have to be replaced.

MROs. These efforts are undertaken both locally and internationally.

Asia is increasingly becoming a major player as aircraft demand in the region will only keep rising. For that

Globally,

ProMéxico

promotes

Mexico’s

different

reason, it would be convenient for Mexico to capitalize

industries to investors and within our borders we help

on its aerospace industry. The country must create more

strengthen companies already established here, such as

alliances with companies all over the world, especially

UTC, Honeywell, Safran and Bombardier.

with Asia. We are already working with Asian investors such as Singapore Technologies, which is interested in

Mexico has over 330 aerospace entities, 72 percent are dedicated to manufacturing

developing MROs in Mexico. Q: How aware is the foreign community of Mexico’s aerospace capabilities and how is ProMéxico promoting them? A: Being present at aerospace events has helped enormously

promote

Mexico’s

aerospace

competencies at a global level. Our objective is to make all industries in the world aware of Mexico’s capabilities.

Q: What allowed Mexico to enter the aerospace global

These events also are helping state governments reach

value chain and differentiate itself from other countries

multinational companies to propose collaborations. We

in Latin America?

are planning to attend several aerospace events, Mexican

A: NAFTA and other trade agreements helped Mexico

and otherwise, in 2017 including Mexican Aerospace Fair

position

(FAMEX), Aviation Week MRO Latin America and the

itself

commercial

powerhouse

significantly opening borders and simplifying commerce.

International Paris Air Show.

This made the country an attractive destination for parts manufacturing. But the ease with which these

There is an increasing awareness of Mexico’s capabilities

can be exported limits any interest in completing the

in foreign countries. For instance, recently we had

supply chain. Brazil, on the other hand, has limited

a conversation with a foreign representative who

showed interest in opening an MRO in Mexico, noting

markets. Mexico is becoming the first destination for

that is where the company best workers come from.

foreign manufacturers in Latin America.

The biggest challenge for operating an MRO is hiring qualified professionals and Mexico can train enough of

Q: How important is the aerospace industry for Mexico

them to service the industry properly.

in comparison to other economic sectors? A:. The aerospace industry grew fivefold between 2005

Mexico may still have an undeserved negative image

and 2014. While it is not as large as the automotive sector,

but foreign companies are well aware of the country’s

it has significant potential for growth due to the number

potential, capabilities and positive business environment.

of aircraft that will be needed in the coming years.

The country is at its highest competitive point. For the

Mexico is well on its way to cover Pro-Aéreo’s goals, as

aerospace industry, this translated to exports of US$6.6

the country has over 330 aerospace companies, of which

billion dollars in 2015.

72 percent are dedicated to manufacturing, 10 percent to maintenance services and the rest to other services.

We are the safest country for investment in Latin

It also has significant potential to develop other areas of

America and the country increasingly is attracting

expertise, such as MROs, thanks to its closeness to the

potential investors. In light of Brazil’s political instability,

US. Mexico has room for several more MROs as existing

many investors are turning to Mexico as the base for

workshops are either saturated or belong to an airline

NAFTA and an entry point for many other potential

and only provide maintenance to that fleet.

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INSIGHT

GET SMART: THE 4.0 REVOLUTION JUAN MANUEL KURI Vice President and Country Manager Mesoamerica of Siemens PLM Software

It sounds simple: incorporate new digital platforms into

could greatly benefit from this latest trend because the

manufacturing processes and improve efficiency. Sometimes

industry is somewhat similar to its automotive cousin.

it is the simple things that have the greatest effect. Those closest to manufacturing say a revolution is unfolding and it

Kuri says that as leaders in automated solutions, Siemens

is called Industry 4.0.

has much to offer all manufacturing sectors. The company’s Manufacturing Execution Systems (MES) gathers large

336

The latest trend in factories and plants incorporates

quantities of information from the production floor and

automated processes and “smart” systems connected via

presents it in a Big Data solution, permitting an easier and

the Internet. Through constant, automated monitoring,

more efficient virtualization of the entire manufacturing

companies receive large amounts of real-time data, giving

process. “Siemens is the leading company offering these

them the potential to obtain comprehensive knowledge of

solutions and the standard provider in 65 percent of the

processes, real-time requirements and consumer needs. PwC

industry,” says Kuri.

says Industry 4.0 encompasses four main characteristics. The first is vertical networks of production systems, logistics,

The technology allows an OEM to keep in touch with all

production, marketing and services through smart systems.

suppliers, regardless of their position in the supply chain

The second is horizontal integration through the creation

or their location. Communication through all steps of

of global value-creation networks. Through-engineering

the manufacturing process eliminates production delays

across the value chain is the third characteristic followed by

by allowing all members to synchronize their processes.

acceleration through exponential technologies.

Furthermore, automation can greatly benefit SMEs, an area Siemens has both recognized and targeted. “Siemens has

Automation, one of the pillars of Industry 4.0, is permeating

recognized the importance of the SME segment in Mexico

many manufacturing systems. “Initially, only design processes

and we have adapted our solutions to the needs of this

were virtual but migrating all that knowledge to the

particular sector,” Kuri says.

production level will result in intelligent manufacturing sites,” says Juan Manuel Kuri, Vice President and Country Manager

There are still challenges to overcome. “The biggest area of

Mesoamerica of Siemens Industry Software. Virtualization

opportunity we detect in Mexico is telecomms infrastructure

and predictability are now the bases for all engineering and

and Internet bandwidth, which is still insufficient to support

manufacturing operations, he says. This trend is growing in

major Internet of Things developments,” says Kuri. The

Mexico, mainly driven by the booming automotive industry.

available infrastructure in the country has limited the services developers can bring to their clients. Even so, Siemens sees

Previously, companies preferred to hire more people instead

potential in the country. “Mexico has amazing opportunities

of investing in automation solutions that could benefit

in the manufacturing sector. New investments are continuing

the company in the long-term. Nevertheless, technology

throughout the supply chain and several reforms are

adoption has improved in the country and younger

boosting the growth of the country,” says Kuri.

generations have made this process even easier. “Between 2000 and 2010, many Mexican companies realized the only

Industry 4.0 will continue to penetrate manufacturing at

way to compete with their Asian counterparts was to either

a global level. Kuri says Siemens PLM is concentrating

lower the base salary or invest in automation,” says Kuri.

on developing better solutions with a strategy based on digitalization, data collection and the Internet of Things.

While Industry 4.0 was brought to Mexico by the automotive

The company will work with Mexican businesses to help

sector, it can be used — and in other countries it is used —

them “understand how they can take advantage of those

by many more industries. The growing aerospace sector

circumstances and make the right investment in technology.”

VIEW FROM THE TOP

GUIDING MEXICO'S JUMP INTO INDUSTRY 4.0 ALEJANDRO PREINFALK Country Division Lead of Digital Factory & Process Industries and Drives at Siemens

Q: What role has Siemens played in the development of

design process has allowed us to better analyze how the

the Mexican manufacturing industry?

product could be manufactured efficiently. The evidence

A: Siemens has over 6,000 employees, nine manufacturing

of how much we believe in our product is that we use it in

sites in Monterrey, Guadalajara, Queretaro and Ciudad Juarez

our main automation factory in Amberg, Germany, which

primarily and has played a major role in Mexico by helping

allows us to produce 1 million PLCs a month and more than

the country with technology in different sectors like industry,

1,000 different versions of each PLC. Every product that

infrastructure, healthcare and power generation. We have

we manufacture is autonomous enough to tell the machine

worked successfully with private and public companies.

what needs to be done, allowing us to reach a quality standard of 99.99 percent perfection, while also offering

Siemens plays on a global stage, just as Mexico does

great flexibility to companies that run on tight deadlines.

thanks to the many free trade agreements it holds. Our company manages centers around the world in which

Q: What would you highlight as the company’s primary

we design solutions to analyze data and create tailored

success during its involvement in Industry 4.0?

offerings for companies. We juggle our technological,

A: We serve all the major players in the industry but not

human capital and engineering platforms to bring the best

only OEMs. Tier 1 and Tier 2 companies offer the greatest

value to our customers and to ensure that all data is used

opportunity for us to add value because integrating these

optimally with what we call “smart data.”

players’ concepts into the same database makes the whole chain much more reliable. This is the main concept

Q: What are the main services that Siemens offers?

of Industry 4.0, upgrading from the automated islands of

A: From power generation and distribution solutions to

Industry 3.0 which lacked this network interconnection.

automation, we can design future-proof manufacturing suited to many industries. For example, we can help

Q: What projects are you developing and how will these

industrial

impact the mobility sector?

customers

measure

gas

and

steam

consumption within their plants. We make sure that

A: For future innovations, Siemens is betting on software

energy is used as intelligently as possible during the

and digitalization, including smart data and life-cycle

manufacturing process. All industries are looking to save

management. In the mobility segment, sensors in vehicles

resources while covering demand. Technology and data

can analyze data within the unit to schedule the most

can make huge changes when they are put together.

efficient and appropriate maintenance for the vehicle. For example, the high-speed train linking Madrid and

Our advanced automation simulators can show even the

Barcelona offers a full ticket refund to passengers if the

system’s programmable logic controllers (PLC), down

train is delayed by more than 15 minutes and this has only

to the welding cells and the robotics and the conveyor

happened once in 10 years thanks to intelligent big data

movements. This allows us to give an extremely realistic

analytics. Siemens’ key driver is using digitalization to

representation of how a line could be improved.

optimize technological advances to be more competitive.

Q: How can Siemens differentiate itself from other

The three trends we focus on as a company are digitalization,

network system providers?

automation and electrification. Mexico is an exciting market

A: Our main differentiator is the digitalization concept

in which to participate, especially following the Energy

we apply. We begin at the first stage of CAD simulators,

Reform, and it is the manufacturing hub for the Americas.

ensuring the development of a concept’s strengths and

Moreover, we believe that Siemens is the right partner to

characteristics from the start. Beginning the process much

improve the industry’s structure. Mexico can jump into new

earlier than any other vendor and being present in the

technology and into Industry 4.0 without a doubt.

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VIEW FROM THE TOP

EDUCATION UNDERPINS DEVELOPMENT JORGE GUTIÉRREZ University Rector of UNAQ

Q: How has the university contributed to the consolidation

property to meet the required conditions of aerospace

of the aerospace industry in Queretaro?

manufacturers, complemented by access to the airport’s

A: UNAQ was established as part of the government’s

runway. Queretaro’s industry is not as exhaustive as

commitment

company

Baja California or Sonora but it has strategic companies

Bombardier Aerospace to establish operations in the state.

encourage

the

Canadian

that make more pieces with added value, which was the

The government assumed two levels of commitment,

university’s goal.

to establish an intensive training program for the first

338

technicians who make electrical harnesses and aero

Regarding the country’s exports, 37 percent is produced

structures and to create an institution that could guide the

in Queretaro, with only 18 percent of the workforce. Our

entire industrial sector’s development. UNAQ was built to

goal is to be a national and international reference for the

create the educational conditions that would capture the

impact that our production and top-class facilities have on

attention of important aerospace companies.

our graduates. The credibility we generate for our country has led us to develop university courses, technical training

The value proposal also involved establishing an intensive

and research expertise and even to develop technology.

training program. I was entrusted with the responsibility of

The state has managed to attract other important

forming an instructive project that would attract Bombardier.

companies such as Airbus.

We began analyzing the evolution of other aerospace manufacturing clusters. Studies of several cities, Wichita and

Q: What direct support do you offer to aerospace

Seattle in the US, Toulouse in France and Montreal, Canada

companies investing in Mexico?

indicated the defining characteristics of successful clusters,

A: The intention of our educational programs is to offer quality

which contributed to UNAQ’s development. We designed

that helps attract investment. Any aerospace business that is

and built a faux-factory, which is part of the university, to

new to the state passes through UNAQ because we support

attend the formative needs of the students.

the rapid establishment of manufacturing or maintenance activities. TechOps, among many manufacturing companies

We work alongside the Mexican air force to develop better

based in Queretaro, has benefited from this helping hand.

technicians. As a result, UNAQ can educate technicians,

We support a company through the whole process, from

professionals, engineers, researchers and lead all aerospace

location to training programs, until they are fully productive.

activities. This is a feature that no other state in Mexico can

This reassures companies they will be competitive and see

boast. For this reason, the university actively participates in

a return on their investment within a specific period of time.

diverse forums and we have a permanent seat at the Mexican Aerospace Federation. We also educate researchers and

UNAQ is a public entity that offers several options for

develop new technology as well. The university welcomes

technical studies. Our offer of more than 150 courses for

other aerospace companies that want to join us in these

aerospace manufacturing and maintenance guarantees

projects so that our efforts reach far beyond Queretaro.

talented human capital in the state. The university degrees available are vocational, for advanced technicians in

Q: What competitive advantages have made Queretaro

aeronautical maintenancem aerospace mechanics and

stand out as an aerospace hub?

design. Both programs are officially recognized by FEMIA.

A: When Bombardier came to the country, the state devised an attractive value proposal for the OEM. Proximity to

Q: Which skillsets have you identified to be the most

Mexico City topped the state’s list of benefits. Besides an

relevant to companies in the industry?

educational institute, the Mexican government created an

A: Every company has specific requirements but the most

industrial hub inside the Queretaro International Airport

basic skills are technical abilities. Fluency in English is

339

necessary to understand manuals and to contact foreign

We enabled and developed the Mexican-French campus

suppliers. Upper managers are more likely to need these

for aeronautical studies. This project was formalized by

language skills, along with leadership training. All our

former Presidents Calderón and Sarkozy and ratified

graduates must master teamwork and the ability to work

by President Hollande and President Peña Nieto. This

with people from all over the world.

binational project covers aerospace training and has the recognition of the French Ministry of Education, the Mexican

To become competitive globally, graduates need technical

Ministry of Education (SEP), the Government of Queretaro,

skills in engineering. This led us to establish our Master’s

Safran, Airbus, DGAC and EASA. The project is unique in

degree

ecosystem,

Latin America. This institution has the characteristics and

including an international airport and satellite industrial

capacities of an EASA PART 147 laboratory to develop high-

parks, demanded a specialized university to train staff for

level maintenance expertise. Thanks to the agreements

incoming companies. The National Center for Aeronautics

signed by Calderón and Sarkozy, Mexico and France manage

Technology caters to testing needs, certification processes,

more than 110 deals not only in the aerospace sector but

design requests and engineering, among others. This has

also between tourism and biotechnological companies.

program.

Queretaro’s

interesting

made the aero cluster one of the most competitive in the country and helped Queretaro attract almost 50 percent of

Q: What are the university’s plans for the aero cluster?

all foreign investment in recent years.

A: To consolidate our work in research, applied investigation skills will demand special capacities inside our institution.

Q: How are you promoting the university to become a

We must work on this offering of technology solutions to

global reference?

attract companies that bring added value to Mexico and

A: UNAQ has been working to become a reference for 10

to produce entrepreneurs. Next, UNAQ wants to develop

years, since we made our first institutional development

partnerships with institutions in the UK, US and Canada,

plan. By the year 2020, we see the university as an

countries that could accelerate the development of our

international reference. To meet this goal, we have

sector. We will continue talks with the Ministry of Economy

developed relations with French, Spanish, Canadian and

and the Ministry of Education, requesting more resources or

US institutions in every academic, engineering and MSc

funds to be assigned only to aeronautical projects. Working

program we manage. We also have diplomatic relations

alongside the IPN or UNAM, educational institutions must

with Quebec in Canada and some US states, as well as

shift their views from regional to national to consolidate the

private and public institutions in France.

work we have carried out in the last decade.

VIEW FROM THE TOP

INCUBATING AEROSPACE TALENT ANGÉLICA RAYA Director of the Interdisciplinary Professional Unit of Engineering, Campus Guanajuato (UPIIG) at IPN

Q: How does IPN identify and address the specific needs

From a logistics standpoint, Guanajuato could begin to lead

of the local industry?

the race over Queretaro. However, maintaining the current

A: Through state-led commissions, including the State

communication channels and developing a proficient

Commission for Higher Education Planning (COEPES), IPN

workforce is fundamental to attracting comparable foreign

has gained understanding of the industry’s requirements.

investment.

The institute also is part of the Subcommittee on

340

Workforce Training, through which we are informed of the

Q: How is IPN supporting the economic development of

market’s labor demands and react accordingly, molding

the region?

our curriculum to provide students with the ideal skillset.

A: IPN supports the government by showcasing its

However, our response time is not as efficient as it could

facilities and academic programs to the general public

be for such fast-paced industries. Restructuring study

and prospective investors. Quality human capital is

programs takes up to four years, while they are revised

essential and a lack of employees can push companies to

every five years. In response, IPN changed its approach to

other locations. Due to the government of Guanajuato’s

focus on teaching practices and methods imparted by its

concerns,

teacher council. In the summer of 2016, IPN will implement a

established a Labor Subcommittee, which analyzes wages

20:80 scheme, wherein 20 percent of a professor’s training

and tracks job openings. By assessing the positions with

will be in-house and the remaining will be conducted in

the highest offerings, it pinpoints the professional skills

other enterprises with real-life industry problems, as well

required to fill them. As a result, the state’s government

as with the National Training Institute. This will allow

established the Borderless Training program, granting

professors to design their individual courses distinctively,

working scholarships to students looking for professional

rather than wait for the curriculum to change. We will

experience. Students with specific skillsets are summoned

continue to reinforce the talent pool in Guanajuato, as that

by local businessmen for further evaluation and those

human talent is responsible for the state’s development.

who are selected can either work in a Mexican plant or

the

Ministry

Economic

Development

relocate to the company’s country of origin for an entire Q: What academic areas have been most popular for the

semester. In addition, IPN is implementing an academic

aerospace industry?

mobility program, which allows students to travel around

A: Our aerospace specialization programs have not gone

the world and experience the latest technological

through major changes. They still focus on design and

advancements first hand.

construction for the most part. Most changes occur once students enter the professional market. They can either

Q: What are the main areas students need to develop for

opt to further expand their professional preparation with

their professional development in the current economic

a Master’s degree or with on-the-job training. IPN holds

environment?

regular meetings with former students to pinpoint areas

A: Although the industry demands advanced technical

of opportunity for our courses. In addition, IPN’s Technical

skills, soft-skills are equally important in students’

Unit for Development and Business Competitiveness

professional development. As defined by the Research

(UPDCE) increases its students’ overall understanding and

Center for Civil Associations Development (CIDAC) in

professional development. In 2016, students will showcase

its National Survey of Professional Skills, these include

about 20 projects to UPDCE, all of which could later be

leadership, conflict management, team work, empathy

developed into fully operational companies.

and communication skills, among others. By soliciting the opinion of Mexico’s business community, CIDAC came to

Guanajuato’s

aerospace

industry

can

reach

similar

investment levels to those seen in the automotive industry.

the realization that these characteristics were lacking in the profiles of Mexican students.

Nowadays, securing a job is not enough. To retain it, a professional must adapt to the company’s philosophy in extremely dynamic circumstances. IPN is developing its students with the professional flexibility and technical knowledge the industry demands. The school’s model encourages autonomous learning, one of its most challenging goals since 2003. Q: To what extent did IPN adapt its academic

IPN will implement the 20:80 schemes, wherein professors are trained 20 percent in-house, and the remaining 80 percent is conducted in enterprises with real life industry problems

curriculum to the requirements of companies in Guanajuato Inland Port? A: We concentrated on programs that are offered nationwide by IPN. The institute imported our Ticoman campus’ academic program

for

aerospace.

Our

Professional

Interdisciplinary Biotechnology (UPIBI) unit served as a foundation for our biotechnology and

pharmaceutical

aerospace

students

study are

plans.

known

for

IPN’s their

entrepreneurial talent and constantly entering different contests, such as the SAE Aero Design. Given our students’ success, we have received a number of donations to expand our aerospace capabilities. Consequently, IPN is negotiating with the government of Guanajuato to establish its own in-house hangar. Q: What areas of opportunity will allow IPN to grow and support local industry? A: Since 2008 a total of 262 aerospace graduates have walked our halls and close to

percent

successfully

obtained

diploma, which is not necessarily the ideal percentage and we hope to improve this success rate. Of IPN Guanajuato Inland Port’s 1,949 enrollments, 402 are engaged in the aerospace industry, which is 20.6 percent of our total student population. Of our total population, 594 students, or 30.4 percent, are involved in automotive industry studies. Biotechnology

and

industrial

engineering

courses account for 438 and 336 students, respectively. Increasing the number of female students in aerospace studies is crucial. They only represent 5 percent of students enrolled. Creating online programs is of the essence for

students

who

wish

study

while

working. These courses must cover written and oral communication skills, as well as our classroom courses across all specializations and in multiple languages, to develop the best human capital for the state.

341

ROUND TABLE

CLUSTER COMPETITION VERSUS COLLABORATION While collaboration is not a foreign concept in Mexican

to compete on an international level. The target has

industry, the aerospace sector is beginning to witness

changed from becoming the biggest and best state in

the coming together of nontraditional partners to

aerospace, to becoming the best country in aerospace

support the sector’s growth, such as alliances within aero

participation.

clusters and the heavy involvement of governmental ministries in the budding industry.

The country’s competitive advantages are evident but as a fledgling industry competing with more mature

Although companies tend to collect in groups to

aerospace locations, the government and private entities

facilitate logistics or to enjoy preferential quality of life

have recognized the need to join forces to compete as a

in certain locations, Mexico’s aero clusters recognize the

nation. Here, aerospace leaders compare the tendencies

need to collaborate with clusters all over the country

toward collaboration and healthy competition.

In our vision, Mexican states should not compete with each other. Rather than competing, it should be a matter of complementing each other’s capabilities. Our objective is to encourage states to find their niche. We have a very close relationship with all the existing clusters in different states such as Chihuahua, Nuevo Leon,

342

Queretaro and Sonora, working together toward the development of the aerospace industry in Mexico. We worked with the emerging Guanajuato Aerocluster to refocus the the state’s leather industry expertise toward manufacturing parts

TOMAS SIBAJA Executive President of Aerospace Cluster Baja California

and components for airplane interiors. We have also worked closely with Zacatecas, providing advice regarding assertive aerospace promotion. We also are Guadalajara’s ally in their quest to find a niche in electronics and avionics.

Every cluster has its own individual strengths and if all the aerospace entities in Mexico band together, we can promote the growth of the country as a whole. All the foreign investment that aerospace clusters can capture is beneficial for Mexico. Cooperation from all states also is necessary to form a large, single cluster that unites the country to compete with clusters in other countries. Collaboration would grant greater access to new technologies and processes, training programs and

MARCO DEL PRETE Secretary of Sustainable Development (SEDESU)

plans to attract companies. The state is more interested in cooperation and healthy competition because what is good for every other state is good for Queretaro.

INDEX, the Exportation Manufacturing and Maquila Industry in Mexico, works closely with FEMIA to support national synergies between the clusters located in Chihuahua, Baja California, Nuevo Leon, Mexicali and Queretaro. We launched a plan in 2016 to remove regionalization and promote the unity of the aerospace clusters. Key influencers include the Ministry of Education, the Ministry of the Economy, FEMIA and strategic directors in private aerospace

JOSÉ LUIS RODRÍGUEZ Director of Operations at Fokker in Mexico

companies. While FEMIA can promote cluster collaboration, it needs a catalyst to reach this objective, creating the need for INDEX’s 24 offices across Mexico.

Sadly, I have perceived a lack of integration within the different clusters as there seems to be competition for the top spot. According to FEMIA, it is necessary for all clusters to concentrate on the consolidation of the supply chain to compete with other countries that have a complete supply chain established near each OEM. So far, OEMs established in Mexico acquire most raw materials, components and services from abroad.

CARLOS RAMÍREZ President of Monterrey Aerocluster

We have the capacity to generate R&D when strong companies come to the state. Our goal is to attract more business from the center of Mexico but to do so, we are competing with the emerging clusters in Toluca and Queretaro.

Some experts are discussing the advantages of making Mexico one large cluster, instead of having several clusters in different states. We are beginning a collaborative project with Chihuahua in which we will merge our strengths to balance our deficiencies. For instance, Chihuahua does not have the laboratories and services that we have in Nuevo Leon but Chihuahua has more 100-percent aerospace companies in its cluster. Coahuila, which is very close to Nuevo Leon, does not have an aerospace cluster but its few aerospace companies are already incorporated into ours.

PAULINE MEDORI Former Director General of Monterrey Aerocluster

It is fundamental for the clusters to collaborate to achieve further development and healthy competition among the clusters.

343

AIRCRAFT SPOTLIGHT

344

HA-420 HONDAJET Honda, known for its cars and motorcycles, has had its eye on the sky for a while. More than four decades after envisioning the creation of a jet and almost 10 years since it was first released for sale, the Japanese company delivered the first HA-420 HondaJet in December 2015. Featuring state of the art technologies, the HA-420 is a revolutionary light jet equipped with several innovations, including Honda’s patented over-the-wing engine mount (OTWEM). The engine’s location increases fuselage space that can be used to expand the cabin or for external cargo areas. It also reduces cabin noise for a more pleasant journey. Another innovative feature is the aircraft’s natural laminar flow (NLF) wing and nose. The aerodynamic NLF design helps reduce drag, making the jet faster and more efficient. To achieve this NLF characteristic, the HondaJet has integral, machined panels that reduce the number of parts required for the wing’s assembly. By employing the NLF method on the aircraft’s nose, the fuselage drag can be reduced by up to 10 percent when compared to a turbulent-flow nose. The jet’s lightweight structure is achieved through an advanced composite fuselage structure, formed through a combination of honeycomb-sandwich and stiffenedpanel structures. This reduces the aircraft’s weight and manufacturing complexity. HondaJet’s combination of over-the-wing engine mount and natural laminar flow innovations allows the aircraft to achieve a maximum cruise speed of 420KTAS at 30,000ft. Its takeoff distance is less than 4,000ft and it has a climbing rate of 3,990ft per minute. The plane’s spacious cockpit was developed in partnership with Garmin, the most customized and automated avionics cabin in its category, with enhanced visibility from three 14-inch landscape displays and touch-screen controllers. At 12.99m long, the plane in its typical configuration can accommodate one crewmember and five passengers. The alternative seating configuration offers space for one crew member and six passengers. The aircraft’s nose compartment has a baggage capacity of 0.25m3 while the aft baggage compartment has a 1.61m3 capacity. HondaJet’s performance is in line with Honda’s Blue Skies for Our Children commitment. In addition to a reduction in fuel use, the aircraft also cuts noise emissions. Forty years ago Honda looked up and saw possibility. The HondaJet delivers on that vision.

345

VIEW FROM THE TOP

AIR FORCE BACKBONE SUPPORTS THE FUTURE AIR FORCE COLONEL JOSÉ SIERRA Director of Military School for the Air Force’s Specialized Troops (EMTEFA)

346

Q: What is EMTEFA’s role in air force operations and the

Q: How has EMTEFA’s educational model evolved to

education system?

incorporate new technologies?

A: The school is the backbone of the air force. It trains

A: The military education system has undergone a

the workforce for all aircraft, including specialists in

transition toward 10 core competencies. This was a slow but

weaponry, aviation electronics, aviation maintenance

comprehensive process implemented with the full support

and aircraft equipment suppliers. The school’s graduates

of Minister of Defense General Salvador Cienfuegos, aimed

comply with all security and maintenance requirements

at elevating graduates’ expertise. A revamp of the system

for the operation of an aircraft. Our goal is to provide

and investments in technology and infrastructure were

military training based on discipline and strong morals

necessary to support our students’ growth. These included

because our ultimate objective is to generate well-

an auditorium renovation, equipment upgrades and the

rounded individuals who can support Mexico’s growth.

acquisition of a virtual shooting simulator. Communication

Military education in Mexico centers on three axes;

technology is changing educational models in both the

military, academic and ethical. We offer an integral

civil and the military sectors.

education by tackling all three areas. The current administration’s six-year plan includes We receive students from several units of the army,

the acquisition of a wind tunnel and a test bank with

air force and navy and even have exchange programs

a miniturbine for our aircraft maintenance workshop.

with Ecuador. All our graduates obtain the rank of

Our Master Plan 2016 assigned a large amount of

deputy sergeant, after which they are integrated into

resources to acquire the necessary training tools and

operational units where they take charge of an aircraft

equipment for our students. These new acquisitions

for a year, following which they should have gained

were received in August 2016 and we are developing

enough experience to become sergeants.

budget procurements for 2017. Equipment acquisition is

a continuous process and in 2018 we will also invest in a storage warehouse. Q: What collaborations does the school manage with Mexican universities? A: There have been pushes to educate and train professors,

Mexico is investing strongly in aircraft for military operations and acquiring 150 different aircraft

for which we have several partnerships with Mexican universities, including Valle de Mexico University (UVM),

and operate them. Our students also learn about GE

UNAM and UNAQ. This latter center is the best aeronautics

turbines and several types of helicopters including Black

university in Mexico and possibly in Latin America. We

Hawk and Bell.

have a close relationship with this university, which has trained several of our professors and their specialists have

Q: What is the school’s perception of the aerospace

visited us on occasion to address issues at our workshops.

industry’s potential?

Our collaborations with these universities offer students

A: Thanks to efforts by the Minister of Defense, the country

a comprehensive education. Our goal is to make these

is acquiring 150 different aircraft for military operations.

technologies and information available to all students and

The aerospace industry has strong potential in the country,

teachers, taking full advantage of the newest technologies.

which is reflected in the investment from many global companies, including OEMs such as Airbus, as well as the

Q: What are the main advantages of military training over

government. Eventually all aerospace manufacturers will

civil training for the aviation sector?

open offices in Mexico.

A: Military training schools have a significantly larger volume of aircraft and machinery than other schools.

The sector is strong in many areas of the country, mostly

This allows our students to gain first-hand knowledge to

in the five clusters but also in smaller concentrations in

support and man aircraft on their own under any conditions.

other states including Zacatecas and Puebla. Mexico has

It is common for private companies to want to “steal”

a significant position as an aerospace manufacturer and it

our graduates, as personnel with these qualifications are

will eventually reach the top 10 in the world. The country

extremely valuable. Some former students have found

is setting high goals and eventually it may be possible to

prestigious positions in maintenance departments at

construct a fully Mexican airplane. This growth will only be

national and international airlines.

accomplished with strong support from the government but collaborations between the public and private sector

We have one Lockheed C-130 Hercules and three

will be beneficial to both. On the other hand, it also will

Beechcraft Bonanzas among several others. While these

be necessary for the private sector to invest more in

aircraft are not brand new, they are functional and every

technology in Mexico because many foreign companies

year our students take them apart, put them back together

only produce simple parts in the country.

347

ROUND TABLE

DEFENSE EMERGES FROM UNDER THE RADAR In spite of military and defense currently representing

military products. New players are stepping onto the

a small piece of Mexican manufacturing operations,

field, suggesting innovative aircraft solutions and the

existing industry sets the foundation for potential

education system continues to train military capabilities,

developments in the near future.

including MRO skills.

The sector already has proved its prowess in obtaining

Here, industry leaders evaluate what is holding the

certifications and working to high aerospace standards.

country back from becoming as much a defense

Companies such as Daher and L-3 Crestview already

aerospace manufacturing center as commercial producer

have facilities in Mexico, though not targeted at

and who is most contributing to changing this trend.

The defense sector has very few operations in Mexico but it could represent an interesting business opportunity in the future. This is in direct contrast to worldwide trends. The defense segment represents roughly half of the aerospace industry in other manufacturing and purchasing countries. In Mexico, we have not yet taken on the sector because we still are in the process of developing the necessary expertise and certifications to operate to

348

LUIS LIZCANO Director General of FEMIA

the highest standards throughout the manufacturing chain. These are slightly stricter than those for commercial aviation.

Mexico is privileged to have a modern military fleet thanks to the administration’s commitment to the sector. This administration has acquired many new aircraft, including transport and training aircraft such as CASA C-295, Boeing 737-800, T-6 Texan II and Grob 120TP. It has also invested in helicopters including UH-60 Blackhawks, Bell 407 and Bell 412. Other aircraft and helicopters that have been upgraded include the MI-17 and the C-130 Hercules. Before acquiring new aircraft we must analyze the potential uses, from moving large numbers of individuals to

BRIG. GEN. RODOLFO RODRIGUEZ President of FAMEX

performing rescue operations or reconnaissance. SEDENA has complete confidence in the industry and supported us when we had just 10 months to organize the first FAMEX last year. Through FAMEX, SEDENA will support the Mexican aerospace sector, which will in turn support Mexico’s economic development.

The defense sector was the first to start operations in Baja California in the aerospace sector in 1966. It was directed at supporting defense projects in the US and involved projects of national security that necessarily had a low profile. All defense companies have contracts with the US Department of Defense through a Manufacturing License Agreement granted by the US State Department. Baja California became attractive for this particular industry segment because

TOMAS SIBAJA Executive President of Aerospace Cluster Baja California

the seventh biggest military defense fleet in the world is located in San Diego. US entrepreneurs began introducing low-risk investment and low-complexity manufacturing processes until gradually realizing that the Mexican industry could manage more complex projects in our sector.

The Pegasus was designed to be affordable for governments and the defense sector to acquire. A standard fighter might cost US$12 million but our goal is to commercialize the Pegasus at about US$2.5 million. There are plenty of countries in Latin America and worldwide that could use a more reasonably priced aircraft for surveillance. The Pegasus has vertical visibility of 300° and horizontal visibility of 240°. It could easily be armed with weaponry to broaden its usage.

RAÚL FERNÁNDEZ President of Oaxaca Aerospace

Current fighter plane designs have not changed drastically in several decades but our plane will be faster and safer than the majority of aircraft in this segment and it could be used to perform missions that are assigned to fighter airplanes by the armed forces. Our product could reach several market niches but until we expand production, our main target would be the defense sector.

349

INDEX A-C 140

AAMEC

Arnprior Aerospace

63, 96

Administradora Mexiquense del Aeropuerto Internacional

Artex

117

de Toluca

ASA

21, 250, 280, 281, 282, 286, 288, 289, 290, 325

ADN

282

115, 116, 117, 121, 124, 233, 246, 261, 325

ASENSA

233, 325

300

Asertec

115, 119

ASESA

260, 261, 272

ASPA

ASUR

21, 280, 281, 286, 289, 292, 299

Advance Real Estate 9, 114-115, 125

AEISA

22-23, 141, 178, 184, 187

AEM

10, 49, 60, 61, 130, 134-135, 140, 179, 181

Aernnova

Aeroconsulteck

152

234, 248-249

Aeroélica

115, 244, 245, 303

Aerolíneas Ejecutivas Aerolitoral

235, 238, 250, 295

Avemex

Aero Maintenance Group

167

Avianca

40, 204-205, 303, 304

Avianet

115, 116, 232

Avihel

121, 125, 273

AVNTK

178

Aeroman

303

AWAS

167

Aeromar

192, 201

Axon'

141

Azor

115

Aeroméxico

29, 37, 38, 39, 45, 47, 60, 114, 119, 134, 147,

192, 200, 201, 204, 210, 215, 282, 290, 303, 311, 312, 314

Bae Systems

Aeroméxico Cargo 218-219

Bancomer

214, 271

Bancomext

10, 178, 194, 332-333

Aeronamic Aircraft Subsystems 135, 139

Aeroprocess TTT

9, 30, 69

Aerospace Alliance

Aerospace Cluster Baja California Aerospace Logistics Group Aerotec

162

68, 342, 348

120

301

BAP Aerospace

B/E Aerospace

159, 161

Bell Helicopter

9, 54, 61, 88, 93, 121, 135, 179, 253, 256,

257, 260, 265, 267, 268 BlueOrigins

40, 201, 224

AeroUnion

BMW

179

Bodycote

Aerovitro

117, 119, 124, 243

Boeing

AICM

244, 256, 257, 261

11, 16, 17, 21, 41, 183, 192, 193, 200, 201, 206, 224,

111

Aerovics

AgustaWestland

10, 164, 172

1, 8, 12, 14, 15, 17, 25, 36, 37, 38-39, 41, 42, 43, 44,

45, 47, 50, 51, 57, 60, 69, 77, 78, 79, 80, 88, 91, 92, 93, 94, 95, 110, 112, 118, 130, 134, 137, 142, 147, 148, 152, 160, 165, 167,

225, 233, 244, 280, 281, 282, 284, 289, 290, 291, 299, 311,

168, 169, 170, 183, 191, 200, 201, 204, 205, 207, 208, 209,

314

212, 217, 218, 219, 224, 301, 310, 311, 312, 313, 314, 316, 317,

AIQ

147, 210, 280, 293

Air Berlin

323, 348

213

Airbus Group

Bombardier Aerospace 40, 141

Airbus Helicopters

Bosch

10, 12, 121, 132, 138, 152, 179, 185, 243,

253, 256, 257, 258-259, 266

159

British Airways Bull

202

Air France-KLM

206-207

Cabifly

229, 237

Air New Zealand

213

CAEP

Airport Estate Services AIT

247

21, 183, 232, 233, 239, 244, 280, 281, 282-283, 289,

CANAERO

11, 16-17, 29, 200, 298

Carlisle

159, 169

290, 291, 295, 321, 324

CASSOS

Alstom

CAV Aerospace

ALTA

60 183

C&D Zodiac

Altaser Aerospace AMAIT Amazon

American Eagle

29, 106, 202, 209 318

American Industries

58, 88, 301, 311

America West Airlines Amphenol

159

302

213

CENALTEC

305

American Airlines

AMPIP

CECATI

282, 290, 291

36, 44, 152, 185, 338

30, 56, 63, 86, 89, 96

CENAPRED

CENAPROT

144

CENTA

130, 132, 133, 134, 142, 143, 152

Cessna

12, 33, 37, 49, 52-53, 54, 55, 63, 73, 92, 93, 96,

170, 235 CFE

188, 267, 305

Challenger

44, 117, 241, 243, 244, 245

INDEX C-H 9, 88

Chihuahua Aerospace Cluster

Encore Interiors

Chihuahua Technological University (UTCh) Chromalloy

56, 96

9, 159, 179

Enel Green Power

296

270

ENTEC

CIATEQ

143, 144-145

Eolo

CIDESI

142, 143, 144, 152, 184

Equity International

CIDETEQ

143, 144, 145

ESA

63, 97, 137, 143

CIMAV Cirrus Citation

53, 54, 243

Clean Water

Expeditors

315

Coast Aluminum COCESNA

9, 106, 112-113, 179

Exova

167

EZ Air 9, 77, 81

FAA

213

246

ExecuJet

CIT Group

COFECE

Etihad Airways

261

300

178

Esterline

50, 144, 184

CINVESTAV

238-239, 241, 324

225

88 44, 106, 114, 117, 119, 121, 168, 191, 211, 232, 235, 265,

268, 270, 307, 311, 314, 317, 318, 323, 324, 325 FAMEX

14-15, 20, 138, 188, 331, 334, 348

296

FedEx

183, 219, 283

161, 172

FEMIA

1, 9, 12-13, 14, 20, 26, 36, 49, 51, 61, 77, 79, 86, 91,

Colegio de Pilotos Aviadores de Mexico Collectron International Management CONABIO

114, 132, 133, 137, 138, 141, 142, 152, 178, 179, 330-331, 332,

CONACYT

30, 50, 69, 97, 123, 130, 133, 137, 142, 144, 145,

338, 342, 343, 348

171, 184, 188, 191

Festo

CONAGUA

305

Figeac Aero

CONALEP

132, 148, 164, 185

Continental Airlines Copa Airlines

Filotek

318

271

First Greenwich Kahala

221

Flight Global

271, 273

Cramex

FlightStats

Cubic Defense

Curtiss-Wright

9, 10, 12

159, 161

Finmeccanica Helicopters

38, 204, 208

Coyote Logistics

171

208

Flymex

324

Fokker

49, 63, 71, 89, 96, 98, 109, 194, 314, 323, 342

10, 160, 172

Frisa

9, 109, 114

Dassault Aviation

36, 170

Frol

, 152

Dassault Systèmes

57, 171

Full Service NDT

179, 188

Delair-Tech Mexico

305

21, 280, 281, 284-285, 286, 289, 299

GAP

21, 189, 280, 281, 286, 288, 289, 292, 299

28, 29, 44, 114, 147, 312, 318, 333

Garmin

Despegar.com

205, 214-215

21, 28, 29, 37, 108, 114, 115, 116, 117, 119, 121, 167, 183,

53, 234, 249, 318, 325, 345

10, 12, 44, 47, 50, 169, 170, 293, 332, 347

GE Aerospace

10, 332

191, 201, 210, 229, 232, 233, 235, 238, 239, 247, 270, 271,

GECAS

167, 293

280, 281, 288, 294, 307, 311, 314, 317, 324, 325, 339

GEMEX

296

Discover the World Dover

213

General Dynamics

165

Ducommun Incorporated Dupart

10, 95, 168, 173

179

Dylo

120

EASA

44, 137, 266, 305, 311, 314, 323, 339

Eaton Aerospace

9, 73, 76, 81

Elastómeros de Querétaro El Financiero

, 152

200

Ellison Surface Technologies Embraer

119, 124

GACM

Delta Airlines DGAC

164, 172

54, 301

General Electric

111, 132, 301, 319

GKN Aerospace

9, 49

GKN Composites

9, 71, 80

Global Composites

, 152

Go2Jets

242, 250

GOL Airlines Google

38, 147, 312

23, 110

Grupo Carso

17, 36, 37, 45, 78, 88, 93, 97, 147, 148, 168, 170,

143

Grupo Condores Grupo Lomex

260

121, 232, 261, 272

187, 191, 208, 211, 261, 290, 311, 312, 313, 318, 334

GSC International

EmpowerMX

Gulfstream Aerospace

EMTEFA

346

147, 312

167

55, 257

Daher Aerospace

DECSEF

256

Hawker Beechcraft

179 48, 75

55, 119, 301

INDEX H-P Heliamérica

261

HeliServicio

260

Helmut Fischer HEMAQ

Kuka Aerospace L-3 Crestview

136-137

Labinal

106

171

91, 92, 301, 311, 348

50, 63, 88, 96, 169

Laser Manufacturing

152

High Technology and Heavy Industries General Of-

LATAM Airlines Group

fice

Latécoère

HondaJet

49, 88, 93, 109, 244, 245, 321, 345

Learjet

Honeywell

209, 227

159

44, 117, 241, 243, 244, 245, 319

8, 9, 14, 30, 37, 44, 56, 60, 63, 69, 75, 87, 88,

Lee Aerospace

89, 91, 92, 95, 96, 109, 114, 117, 134, 143, 169, 170, 194, 257,

Lisi Aerospace

91, 94, 98

319, 334

Lockheed Martin

Howmet de Mexico

179

Lufthansa

324

HTMC

Luxaviation

Hydra Technologies

141, 178, 188

Mabe

73, 95, 169, 256

40, 45, 183 246

143

HYRSA

149

Magnicharters

Hytera

192

Maintenance Steering Group

IATA

11, 16, 18, 193, 200, 201, 213, 299, 310

ICA

Manny Aviation Services

256

Manoir Aerospace

183, 202

Maquilas Tetakawi

171

IBA Group Iberia

200, 212, 324

271

MCS

294

324

ICAO

11, 18-19, 25, 39, 183, 270, 271, 280, 297

MD Helicopters

ICCS

236

Mercury Aircraft de Mexico

Icelandair Icom

213

Metalinspec Laboratorios

192

INADEM INCAT

14, 109, 165, 311, 312

Mexicana 57, 79, 140, 302

Mexican Air Force

164, 172

INDEX

49, 56, 342

MFCO

63, 93

178, 181

Mimsa

9, 118, 124

Mexicana MRO

22, 178, 179

Inmobiliaria Brom

Ministry of Economy of Chihuahua 271

Innocentro Aerospace

Ministry of Education 79

209, 282, 290, 311 INTERMEX

88, 260

Invenergy

296

ITESM

9, 10, 106-107, 194, 343

Monterrey Jet Center

108, 119, 318

MTS

56, 61, 96, 132, 158

10, 60, 61, 132, 134, 135, 139, 149, 179, 181

192

144

NAICM

20, 188, 339, 340-341

IPN ITP

300

11, 16, 17, 19, 21, 192, 201, 212, 224, 277, 280, 281,

284, 285, 289, 290, 291, 295, 298, 299, 304, 314 NASA

23, 178, 184

National Aircraft Resale Association

ITT Exelis

NFPA

Javid LLC

162-163

Noranco

9, 112

Nordam

Jetex

239, 241

JetLife

261

Jet Mach Jetpro

243

Oaxaca Aerospace OHL

Johnson Controls

116

Kaeser Compresores Kaman Aerospace Kenwood Kostal

63, 96, 98

192

Parker Hannifin PEMEX

223

137, 190-191, 349

301, 310, 311

21, 115, 280, 281, 286, 288, 289, 292, 299, 325 73

PCC Aerostructures

141

Kuehne+Nagel

OMA

169

233, 282, 290-291

Oliver Wyman 138

244

270

Nordstrom Grumman

238, 251

30, 57, 87, 96, 131, 185, 339, 342

Monterrey Aerocluster Motorola

International Bajio Airport

179, 186

Mirka

21, 28, 29, 37, 40, 119, 192, 200, 201, 202-203,

Interjet

114, 138, 179, 186, 311, 314, 323

Incertec

INEGI

106

40, 60, 114, 134, 138, 179, 186, 200, 282, 290,

291, 311, 314, 323

180

Indumet

178

PEMSCO

140

22, 188, 267, 272, 305 268

INDEX P-Z Pilatus PPC

Snecma

152

Soisa Aerospace

Pratt & Whitney

9, 14, 15, 20, 151, 178, 194, 315, 330, 334-335 159, 167, 311, 316-317, 324

Qet Tech Aerospace

62, 63, 99

Quasar106

Queretaro Aerocluster

10, 61, 130, 132-133, 134, 135, 149,

152

205, 208

Switch Luz

78, 80

SYNERGION

296

72, 80

TACNA

Tata Technologies

180

TechBA Aerospace

189, 195

76, 81

Techmaster

Quest Aircraft

117

Quetzal Aerospace Radiall

141

159, 161 192

10, 114, 147, 303, 311, 312, 313, 333, 338

TECMAQ

109, 194

179

165

TE Connectivity

9, 159, 169, 173

Textron Aviation

9, 37, 53, 54, 55, 61, 88

238, 242, 269, 272

TIA

RENIECYT

23, 62

Tighitco

49, 63

Tradeco

271

304

193

RH Shipping

Rockwell Collins Rolls Royce

164, 165

The Offshore Group

Redwings

Revitaliza Consultores

153

Tecnum

247, 250

Raytheon Aircraft Services México RBC Bearings

TechOps

Tec Milenio University

Radiocomunicaciones SAKDA Rajet

28, 39

Star Alliance

8, 11, 36, 37, 134, 336

56, 87, 89

Southwest Airlines SpaceX

318

ProMéxico PwC

60, 134, 249, 261, 319

242, 250

Privé Jets ProJets

118

181

Transportes Aéreos Pegaso 117

159 256, 262-263

Russian Helicopters

266-267

170

Trelleborg UANL

107, 123, 318

UAQ

149

Ryanair

UNAM

137, 141, 178, 188, 339, 347

Rymsa

151, 178

UNAQ

10, 14, 30, 51, 60, 61, 130, 132, 137, 138, 140, 141, 147,

SAE

238, 321, 341

SAGARPA

149, 151, 185, 186, 259, 293, 312, 338-339, 347

184-185

Safran Group

22, 188

Saltillo International Airport Samsung

247

United Express

45 95, 256

Universal Weather and Aviation

UPS

School of Mexican Aviation Pilots SCT

106, 318

United Technologies

224

SAS Airlines

United Airlines

9, 17, 23, 28, 185, 288, 305

296

US Air Force

97, 184

US Airways Express

SECTUR

UTAS Aerospace

SEDECO

UTC Aerospace Systems

SEDENA

14, 20, 22, 188, 260, 348

UTG

158, 171

SEDESU

130-131, 342

UVM

347

SEMAR

60, 188, 259

Vertex

SEMARNAT

Semco Instruments SENASICA SENER

162

Visiongain

179, 187, 272, 352

Volaris 179

37, 40, 107, 200, 201, 311, 314, 324

21, 37, 40, 119, 192, 200, 201, 282, 290, 303, 311,

314, 317

Siemens

171, 181, 336, 337

WesternGeco

266

Sikorsky

256, 266

Westinghouse

9, 10, 12

Singapore Airlines SITA

298, 299

SkyTeam

Skytrax

208

213

9, 159

256

VivaAerobus

Senior Aerospace Ketema

192

Virgin Australia

283

235, 294, 295

219, 220-221

WestJet

World Bank

10, 11, 48, 200

Zodiac Aerospace 98, 101, 186

9, 10, 31, 56, I, 62, 63, 79, 88, 95, 96,

AIRCRAFT SPOTLIGHTS 24

Boeing 737 Family

Boeing 787 Dreamliner

Cessna Citation Latitude

Gulfstream G550 Jet

216

Airbus A380

226

LATAM Airlines

248

Aeroélica's TBM 930

264

Bell 429

274

Airbus H175

344

HA-420 HondaJet

PLANT SPOTLIGHTS 100

Zodiac Aerospace Chihuahua

122

CIIIA

146

TechOps Queretaro

166

Qet Tech

182

AIT

240

Eolo

322

Mexicana MRO

ADVERTISING INDEX 6

Siemens

Hellmann

Advance

Chihuahua’s Aerospace Cluster

104

Monterrey Aerocluster

107

Aerovitro

111

Renishaw

113

Exova

115

Aeisa

128

Queretaro Aerocluster

131

Axon’

135

Omni-X

136

Helmut Fisher

156

Javid LLC

176

R.H. Shipping

185

CINVESTAV

198

American Industries

230

Collectron International Management

254

Transportes Aereos Pegaso

278

Toluca International Airport

308

TechOps

315

Mexicana MRO

320

Qet Tech Aerospace

328

FAMEX

331

Prior Aero

ACRONYMS AEM

Mexican Space Agency

AICM

Mexico City International Airport

AIQ

Queretaro Intercontinental Airport

AIT

Toluca International Airport

ALTA

Latin America and Caribbean Air Transport Association

ASA

Airports and Auxiliary Services

ASUR

Grupo Aeroportuario del Sureste

BASA

Bilateral Aviation Safety Agreement

CANACINTRA

National Chamber of the Transformation Industry

CANAERO

National Chamber of Air Transport

CENALTEC

High Technology Training Center

CENTA

National Center of Aerospace Technology

CIDESI

Engineering and Industrial Development Center

CIMAV

Research Center for Advanced Materials

CINVESTAV

Center for Research and Advanced Studies

CONACYT

National Council of Science and Technology

COPARMEX

Mexican Employer Confederation

COPRESON

Sonora Council for Economic Promotion

DGAC

General Direction of Civil Aviation

ESA

European Space Agency

FAA

Federal Aviation Administration

FAMEX

Mexican Aerospace Fair

FBO

Fixed Base Operator

FEMIA

Mexican Federation of the Aerospace Industry

GACM

Grupo Aeroportuario de la Ciudad de México

GAP

Grupo Aeroportuario del Pacífico

IATA

International Air Transport Association

ICAO

International Civil Aviation Organization

INADEM

National Institute of Entrepreneurship

IPN

National Polytechnic Institute

IS-BAO

International Standard for Business Aircraft Operations

ITESM

Monterrey Institute of Technology and Higher Education

MRO

Maintenance, Repair and Overhaul

Nadcap

(previously NADCAP, National Aerospace and Defense Contractors Accreditation Program)

NAFTA

North American Free Trade Agreement

NAICM

New Mexico City International Airport

NASA

National Aeronautics and Space Administration

OMA

Grupo Aeroportuario Centro Norte

SEDECO

Ministry of Economic Development

SEDENA

Ministry of National Defense

SEMAR

Navy

TUA

Airport Use Fee

UAV

Unmanned Aerial Vehicle

UNAM

National Autonomous University of Mexico

UNAQ

Queretaro Aeronautic University

UVM

Valle de Mexico University

PHOTO CREDITS 4

PC-7

Zodiac Aerospace

Daher – TBM

Zodiac Aerospace

MBP

ProMéxico

Aernnova

SEDENA

Zodiac Aerospace

CANAERO

MBP, MBP, MBP, Quasar106

AIT

Sukhoi

ICAO

MBP

SEDENA

MBP

DGAC

Air France

AEM

MBP

Boeing

MBP

SITA

BAP Aerospace

Safran, MBP, MBP

Gulfstream

Zodiac Aerospace, MBP

Techmaster

Queretaro Aerospace Cluster

MBP

Airbus

Innocentro Aerospace

Airbus

MBP, MBP, MBP

Boeing

MBP, Techmaster, AIQ

Boeing

Cessna

Gulfstream Aerospace

Ministry of Economy of Chihuahua

Fokker

Zodiac Aerospace

Safran

MBP

Safran

UNAQ

Cessna

Honeywell, MBP, Lisi Aerospace

Cessna

MBP

Honeywell

MBP

Lisi Aerospace

MBP

141

Axon’ Interconex

MBP

142

MBP

143

CIDESI

MBP

144

CIATEQ

MBP

145

Queretaro Aerospace Cluster

100

Zodiac Aerospace

146

TechOps

102

Cessna

148

MBP, MBP

106

MBP

149

MBP

108

MBP

150

MBP

109

TECMAQ

151

Rymsa

110

MBP

152

Aeroconsulteck

112

MBP

153

Tecnum

114

MBP

154

UNAQ

116

MBP

158

COPRESON

117

MBP

160

Daher Aerospace

118

Mimsa

161

Collectron

119

Full Service NDT

162

MBP, MBP

120

Dylo

163

Queretaro Aerospace Cluster

121

Avihel

164

The Offshore Group

122

CIIA

165

Sargent Aerospace

124

MBP, Mimsa, Full Service NDT

166

TAR Aerolíneas

125

Avihel, MBP, Mexicana MRO

168

MBP

126

Cessna

169

MBP

130

SEDESU

170

Trelleborg

134

Queretaro Aerocluster

171

UTG

136

Helmut Fischer

172

Daher Aerospace, Collectron. The Offshore Group

138

MBP

173

MBP, MBP, MBP

139

MBP

174

Bombardier

140

AAMEC

180

Tata Technologies

PHOTO CREDITS 181

Indumet

222

Kuehne+Nagel

182

Toluca International Airport

223

Kuehne+Nagel

184

MBP

224

AeroUnion

186

MBP

225

MBP

187

MBP

227

LATAM Airlines

188

DECSEF

229

Airbus

189

TechBA Aerospace

232

Cessna

190

MBP, Oaxaca Aerospace

234

Aeroèlica

192

Radiocomunicaciones SAKDA

235

Avemex

193

MBP

236

MBP

194

MBP, ProMèxico, MBP

237

Cabifly LATAM

195

MBP, UNAQ,

238

MBP

196

Airbus

239

Eolo

202

Interjet

240

Eolo

203

Sukhoi

242

MBP

204

Avianca

243

Jet Mach

205

Avianca

244

Aerolíneas Ejecutivas

206

MBP

245

HondaJet, MBP, HondaJet

207

Air France

246

MBP

209

MBP

247

Rajet

210

TAR Aerolíneas

248

Aeroélica

212

MBP

250

Avemex, MBP

213

MBP

251

Aerolíneas Ejecutivas, MBP, Eolo

214

Despegar.com

252

CIIIA

215

Kayak

257

Cramex

216

Airbus

258

MBP

218

MBP, Aeroméxico

259

Airbus Helicopters

220

UPS Mexico

260

MBP

221

UPS

261

Grupo Lomex

262

Russian Helicopters, Russian Helicopters

316

MBP, Qet Tech

264

Bell Helicopter

318

MBP

265

Transportes Aereos Pegaso

319

MBP

266

MBP

322

Mexicana MRO

268

PEMSCO Helicopters

324

MBP

270

MBP

325

ASENSA

271

MBP

326

Airbus

272

Redwings, Grupo Lomex, MBP

330

MBP

273

MBP, MBP, Cramex

332

MBP

274

Airbus Helicopters

333

UNAQ

276

HondaJet

334

ProMéxico

282

AIT

335

CIIIA

284

MBP

336

Siemens PLM

285

GACM

337

MBP

288

GACM

338

UNAQ

290

MBP

339

UNAQ

293

Parque Aeroespacial Querétaro

340

MBP

294

MBP

341

UNAQ

295

Universal Aviation Mexico

342

MBP, SEDESU, Fokker

296

Prior Aero, Iberdrola

343

MBP, MBP, HondaJet

298

MBP

344

HondaJet

300

MBP

346

MBP, MBP

301

American Industries

348

MBP, SEDESU, MBP

302

AMPIP

349

MBP, F-16 Fighting Falcon

303

Grupo GME

356

UNAQ

304

Revitaliza Consultores

358

SEDESU

306

Mexicana MRO

312

TechOps, TechOps

Inner front cover - HondaJet

314

MBP

Inner back cover - Bombardier

CREDITS SENIOR JOURNALIST & INDUSTRY ANALYST: Alicia Arizpe JUNIOR JOURNALIST & INDUSTRY ANALYST: Gabriela Mastache PUBLICATION COORDINATOR: Polet Piñones JUNIOR PUBLICATION COORDINATOR: Alexandra Brandt EDITORIAL MANAGER: Nadine Heir ASSOCIATE EDITOR: Mario Di Simine EDITORIAL DIRECTOR: Vanessa Buendía COMMERCIAL DIRECTOR: Jack Miller COMMERCIAL MANAGER: Laurens Schöningh COLLABORATOR: Brenda Salas COLLABORATOR: Sara Warden COLLABORATOR: Sophie Murten COLLABORATOR: Tomás Sarmiento COLLABORATOR: Alejandro Salas COLLABORATOR: Alejandra Gómez COLLABORATOR: Dominic Pasteiner COLLABORATOR: Ana Isabel Andrade COLLABORATOR: Luis Águila DESIGN DIRECTOR: Marcos González GRAPHIC DESIGNER: Ailette Córdova WEB DEVELOPMENT: Arturo Madrazo DIRECTOR GENERAL: Jeroen Posma PUBLICATION ADMINISTRATOR: Alena Lipková ADMINISTRATIVE ASSISTANT: Gabriela Román CIRCULATION MANAGER: Ana Cristina Garantón

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