Luis Lizcano
Director General
FEMIA
/
View from the Top

Aerospace Sector Sees Recovery Approaching

Wed, 06/09/2021 - 16:53

Q: As 2021 advances, what is the status of the aerospace industry and what new opportunities has FEMIA identified?

A: Last year, FEMIA outlined several recovery scenarios, including a 45 percent reduction in exports in the worst case, 35 percent in the middle case and 25 percent in the best-case scenario. The industry closed 2020 with a 31 percent contraction in exports, right in between of the middle and best-case scenarios, which leads us to believe that losses were not as bad as initially predicted. However, this was a significant hit for the Mexican aerospace industry, which is now working to recover. We expect the industry to recover to its 2019 levels by the end of 2022 or the beginning of 2023, which would imply exports returning to US$9.6 billion per year. About 95 percent of Mexico’s production is exported, mainly to the US.

The reduction in manufacturing allowed us to comprehensively reevaluate our supply chains, which was complex considering the high demand the sector faced. Before the COVID-19 outbreak, aviation and demand for new aircraft were at an all-time high. Thus, major aircraft manufacturers had thousands of aircraft in their backlog with new orders to be delivered nine or more years later.

Q: How is the industry changing in preparation for a recovery in the demand of new aircraft?

A: The slowdown caused by the pandemic allowed the industry to focus on optimizing its processes and supply chain. Because of the outbreak, there is an interest in reducing the number of single-source suppliers to eliminate reliance on a single company for key components, which would also make supply chains more efficient and reliable. These trends will mean more opportunities for Mexico and the country has to be ready to take them, otherwise another country will. These preparations might require some investment and, while some might think that a crisis is a bad time to invest, what is invested at this point will be recovered many times over once the sector recovers. We are developing strategies to link our abilities with those of other industrial sectors and increase the overall capabilities of the sector as a whole.

FEMIA is also working with different financial institutions to develop financial alternatives to support small and medium aerospace companies but the country’s financial situation has not made this easy.

Q: How is FEMIA coordinating with Mexico’s aerospace cluster to generate a comprehensive strategy for all of Mexico’s aerospace industry?

A: We are working with the Mexican aerospace clusters to support the sector. The clusters operate regionally with a focus on their local businesses, so they are in touch with the specific needs of the companies in their states. FEMIA, on the other hand, is a national organization that complements companies needs at a national and international level. For that reason, it is important to coordinate our agenda with the clusters in order to address both regional and national concerns. Together, we are working to develop suppliers and business, while engaging other industries and helping them gain the proper training to work for the aerospace sector. We are also closely coordinating with the clusters and with academic institutions at various states to develop education programs.

Q: How will FAMEX help to promote and strengthen the local aerospace sector during these difficult times?

A: FAMEX is without a doubt the most important aerospace event in Mexico. It is also one of the largest aerospace events in the world. This year, the aerospace industry will only have two in-person events: FAMEX in September and Air Show Dubai in November. These events will help the industry kickstart its recovery. We have high expectations that FAMEX will be a success with significant participation from the industry’s main players. FAMEX 2021’s partner country will be the US, Mexico’s largest commercial partner and export destination and the world’s leading aerospace market. Mexico is in a great position to strengthen its production and economy as part of the US and Canada block thanks to the USMCA. Manufacturing across the world will increasingly be based in regional blocks as nearshoring trends take effect.

Q: What new opportunities will come to Mexico from the return of the Boeing 737 Max?

A: The Boeing 737 Max crisis paused many operations in Mexico that were directly involved in manufacturing parts for this aircraft. While we expect that its return to the skies will mean a return of these production programs, that will happen later as OEMs are prioritizing the delivery of aircraft that were postponed because of the pandemic.

The return of the 737 Max will undoubtedly be good for Mexico’s aerospace companies as it is one of the world’s most popular aircraft and the country has many manufacturing programs related to it.

Q: How did the pandemic affect employment for the sector and what efforts are being undertaken to recover those jobs?

A: As small and medium companies working for the aerospace sector often also produce for other industries, it is hard to measure the total impact the pandemic had on employment in this industry. However, we are certain that the worst is over. While there was a significant loss of jobs because of the pandemic, we are seeing employment numbers steadily climb up.

The aerospace industry is a high-value added sector that requires specialized knowledge and abilities. As technology becomes increasingly complex, it becomes necessary to train professionals who can work with that technology. Mexico has significant capabilities to handle value added activities such as engineering and design and many projects coming into the country require professionals trained in those areas. The aerospace industry has some of the most complex processes of any manufacturing sector so it is essential to have well-trained professionals with clear knowledge of this industry. Universities and training centers are always attentive to the sector’s trends to develop education programs that target the advanced needs of this industry, including design, engineering, advanced manufacturing and many other aspects of Industry 4.0. It is necessary to remain up to date with state-of-the art technologies or we will fall behind.

Q: What are your expectations for the recovery of the industry?

A: We expect that 2021 will mark the start of the sector’s recovery. The recovery might not be fast; this year, we expect it to be minimal but this would also mean no further losses. We are hopeful but cautious for 2021 as we still need to observe how vaccination campaigns progress and how commercial aviation recovers. The recovery of the aerospace industry hinges on commercial air travel. Last year, passenger traffic in Mexico fell sharply, at some points during the year it was only at 9-10 percent of what it was in 2019. Now, passenger traffic has climbed back to 50 percent of its pre-pandemic levels.

Photo by:   MBP