Mexico's Aerospace Industry is Bouncing Back

Before 2020, Mexico’s aerospace industry was growing at an accelerated pace. But the COVID-19 pandemic brought a decrease in exports and drastically reduced travel, greatly slowing down aircraft production. As the Russia-Ukraine war and COVID-19 variants keep delaying the sector’s recovery, the rebound of the aerospace sector hinges on growth opportunities such as the forecasted demand of narrow-body aircraft and the upcoming space sector.

“Between 2014 and 2019, the aerospace industry was considered a new sector with exceptional growth mainly in commercial aeronautics,” said Luis Lizcano, General Director, Mexican Federation of the Aerospace Industry (FEMIA). During that period, the industry reported a positive trade balance of 18 percent and by 2016, Mexico was the 12th largest aerospace exporting country.

The industry kept growing at an accelerated pace before the COVID-19 pandemic. In 2019, Mexico had 368 aerospace business units. Of those, 86 percent were manufacturing plants, followed by Maintenance Repair Overhaul (MRO) units with 12 percent and design and engineering plants with 11 percent. Most of those plants were concentrated in the north of the country, with Baja California reporting the largest number of aerospace facilities. The industry was responsible for over 60,000 direct jobs in 19 states.

That year, aviation exports amounted to US$9.68 billion, making Mexico the sixth largest exporter of aerospace parts to the US. “Overall, 2019 was a successful year for the industry in Mexico,” said Lizcano.

However, the aviation industry received a blow in 2019 with the grounding of the Boeing 737 Max, but its production continued until early 2020. Once production of the 737 Max stopped, Boeing’s shares dropped by 3.3 percent. During that period, COVID-19 cases were quickly rising  and starting to seriously impact the global economy. Both the grounding of the 737 Max and the COVID-19 pandemic greatly affected the aerospace industry, with OEMs dramatically reducing production of new aircraft and global air passenger traffic decreasing to levels not seen in decades.

Globally, commercial aircraft orders decreased by 59 percent in 2020. In April 2020, Mexico’s aerospace exports dramatically decreased. Compared with 2019, exports contracted by 31.8 percent.  

Fortunately, Mexico’s aerospace industry started to bounce back in 2021 as exports increased by 6 percent. However, the sector has not recovered its pre-pandemic numbers. By late 2022, experts hope for an increase of 16 percent in exports but forecast that they will not surpass 2019’s levels until 2024, explained Lizcano.

The industry keeps facing several challenges delaying its growth. “Although the COVID-19 recovery phase is underway, the outbreak of SARS-CoV-2 variants continues to destabilize the market. By early 2022, the industry expected more vigorous growth but the Omicron variant delayed this process,” said Lizcano. Moreover, the Ukraine-Russia conflict caused a disruption in logistics and hindered the supply of titanium, which is produced in the region.

Boosting the recovery of the industry is the fact that people are traveling again, which will increase demand for narrow-body aircraft. Demand for air cargo also increased following the e-commerce boom, which forced airlines to transform their fleet according to the needs of the market.

The global industry market outlook suggests that in the future there will be an emphasis on fleet versatility. The cargo sector is still affected by the global context but the COVID-19 outbreak allowed the sector to become more relevant to the economy. During the COVID-19 outbreak, “cargo transportation was globally considered an essential activity for the continuity of economic activities and most importantly for the lives of people,” said Jorge L. Torres, Vice President, FedEx Express Mexico.

Although the sector is recovering, companies must focus on building more resilient supply chains that can handle future shocks. Supply chains must be prepared to endure highly disruptive events and quickly recover. Mexico also has the opportunity to restructure its supply chains by diversifying them to become less dependent on single sources. Other opportunities are also arising. “Space is becoming a trend and Mexico should start exploiting this opportunity,” said Lizcano.