Aerospace Resurgence: Full Speed Ahead

What a roller coaster! We went underwater as an industry in 2020 and had to find innovative ways to make money, reduce costs and keep the business afloat. All in the middle of health fears, never-ending negativity, manufacturing plants afraid of personnel infections while operating, clients unable to see customers or do sales in person, among others. The numbers now show that in 2023, the industry is posting quite a recovery, with a return to record exports plus an increase in new aircraft sales both for Airbus and Boeing. The trend seems to be on an upward trajectory  from now until 2029. 

The key to this will be talent. People who are able to make commitments and take projects to the next level of demand. Technicians, designers and engineers are key to maintaining momentum. The role of artificial intelligence (AI) will complement the pool of educated and trained talent to operate in this environment. Technology continues to be integrated into modern business practices as we continue to understand how to engage AI. However, well prepared talent is mobile right now across Mexico as more new investments continue to arrive and land in key States. It is extremely difficult to scale up startups or do a big ramp up without qualified personnel. It is also very important to guide these new ventures to areas where talent pools are available; the worst case scenario is to have a big, promising business arrive in a certain destination only to find out that actual talent is not entirely willing to stay and develop in a company. Consulting firms need to take this into consideration and ensure quick succession plans, even if people are moving around. 

Another key challenge is infrastructure. Most infrastructure around industrial parks requires a great deal of improvements, including necessary concrete roads and bridges that lead from residential and commercial areas to the workplace and back. This is a tremendous opportunity, especially if Mexico is to capture most or all of the relocation of manufacturing companies coming back from China or abroad to supply the North American market. The current strength of the peso reflects our maturity in terms of all the incoming investments but the question  is whether we can sustain that by providing for the huge infrastructure needs around nearshoring specifically. In the end, infrastructure is key to talent acquisition, retention and growth so that projects can become sustainable long term. 

One more challenge is power generation, Mexico has not limited electricity capacity for the current population and has found ways to increase its energy load. From solar to wind investments, which have not necessarily been widely supported in the last four and a half years, there seems to be a shift due to most state governors’ demands to continue to drive employment and fuel economic activity internally. Hydroelectric plants have been reinstated after years of inactivity,either because they were suspended or obsolete systems, with the hope of increasing capacity at dams and solar parks as well. The Federal Energy Reform of 2018 remains in limbo due to a Supreme Court challenge and the federal government has opted to constrain or review the licensing of energy generation, such as eolic parks for wind power and solar in some cases, specifically in the northern parts of Mexico. Nearshoring requires at least 25% more capacity to receive and make space for these much needed and new, incoming locations for manufacturing sites.

The last key factor and the single most important for life itself: water. In the last few years, there has been a serious drought in the center of Mexico due to the inability of the government to increase tariffs in the most populated areas, which has led to limited investments in dam infrastructure, which is greatly needed to supply not only the population but the various centers of productivity. Again, if there are going to be more opportunities to land companies as a result of nearshoring, water should be not scarce but abundant. We need innovative new ways of sustaining it. There need to be strong educational campaigns for the public to understand water use and to be aware that this resource is very undervalued. Cost and availability are key requirements for its use. The northern region, after years of drought as well, was blessed at the end of 2022 and early 2023 with rain while snowstorms hit the US  with unprecedented ferocity that states like California, Arizona and Nevada were able to recover somewhat significantly. However, these states also agreed recently to keep 25% of their own water for 2023 until 2025 to deal with any surprise crises. Does this mean Baja California and Sonora border towns will receive less water? Probably not but even if so, this should be enough of a red flag to raise the alarm and make the public participate more actively to conserve the current flow. All of the above is needed to have some extra capacity to receive new investments from Asia or abroad. 

The aerospace industry has begun to fully recover from the COVID 19 pandemic and everything from infrastructure, to energy generation and water conservation are key concerns but, despite the challenges, the talent is here to be hired and developed further, even in the face of sustained inflation, high consumer prices and the strongest peso exchange rate in the last eight years. In the next three months, we should know how we will close this year.