Rafael Alonso
Airbus Latin America and the Caribbean
View from the Top

OEM Dominates Mexican Market, Targets the World

Fri, 12/01/2017 - 17:37

Q: How is Airbus shaping aviation in Latin America?
A: Airbus has been present in Latin America for 30 years and has played a vital role in building the region’s dynamic aviation market. Airbus is proud to promote and support local aviation professionals at its training and manufacturing centers throughout Latin America. Airbus has made a long-term commitment to Mexico by employing highly trained local professionals via its Mexico Training Center and its suppliers’ manufacturing facilities, leveraging the high-quality local talent and ample selections of manufacturers that Mexico has to offer.
Since 1990, Airbus has achieved more than 60 percent of net orders in the region and just in the last 10 years, we have tripled the size of our in-service fleet in Latin America and the Caribbean. To date, we have sold more than 1,000 aircraft in the region and have a backlog of more than 450 orders. In Latin America and the Caribbean today, there are over 20 operators who fly our aircraft.
Q: Over 60 percent of all commercial aircraft flying in Mexico are Airbus. What made your aircraft so attractive to the country?
A: Mexico, Airbus’ top market in the region after Brazil, is a flourishing market with significant potential, a stable government, long-term investment plans and a booming market for commercial air travel. The growth of Low-Cost Carriers (LCC) in Mexico has been remarkable in the past 10 years, and has catalyzed the growth of commercial aviation in the country. Interjet, Viva Aerobus and Volaris have revolutionized regional air transport and has made air travel more accessible than ever. As these airlines grew, we have been able to adapt to their growth models and fleet planning strategies at a critical time as they were absorbing much of the demand covered by Mexicana when it left the market.
Globally, the demand for single-aisle aircraft is growing and the A320 family has prevailed as Latin America’s aircraft of choice. The A320 family has been successful for our customers in Mexico particularly because of its versatility. Because it is available in three different sizes (ranging from 140 to 240 seats), it allows the airline to choose the most suitable option to complement its business model.
Also, Interjet, Viva Aerobus and Volaris have all opted for the A320neo, the newest member of the A320 family, allowing them to operate efficient, latest-generation aircraft while improving their environmental footprint. New-generation engines, Sharklet wing-tip devices and the numerous cabin innovations of the A320neo result in a 15 percent fuel-cost savings per seat compared to previous-generation aircraft.
Q: How is the demand for Airbus aircraft evolving in Latin America and Mexico and how is Airbus adapting to these market changes?
A: Latin America is one of the most exciting regions for aviation. According to Airbus’ latest Global Market Forecast (GMF), over the next 20 years, Latin America will need over 2,500 new passenger and cargo aircraft to fulfill increasing passenger demand. We estimate passenger traffic will grow at an annual rate of 4.5 percent (a rate on par with the global average) and the region’s middle class to reach 500 million people by 2035, more than twice as many as there were in 2006.
In Mexico, aviation traffic has grown nearly 60 percent since 2000, and in the next 20 years more than 600 aircraft will be needed to serve the Mexican market. One of the main drivers of this growth is tourism, which is forecast to contribute 5 percent of the country’s annual GDP growth and account for 2.6 percent of added employment between now and 2024. This economic growth presents a key opportunity for Mexico’s carriers to expand their fleets and routes, especially in the international air traffic market.There is also a growing demand for training services for over 85,000 technicians and pilots in Latin America in the next 20 years. In response, Airbus has opened training and maintenance centers in Mexico City, Campinas, Brazil, and Buenos Aires, Argentina. This also allows us to directly support our customers’ growth and productivity.
Q: Which regions in Latin America do you expect to grow the most in aviation and in aircraft demand?
A: Airbus has almost 650 aircraft in operation and nearly 500 aircraft yet to deliver, most of which will go to airlines based in Brazil, Chile, Colombia and Mexico, home to some of the largest Airbus customers in the world such as Avianca and LATAM. Mexico’s economic and traffic growth has led airlines to acquire larger, newer and more efficient aircraft, and the average fleet age has been reduced by five years in the last decade. Many of these fleets belong to LCCs launched in the last 10 years, accounting for almost 60 percent of domestic traffic in Mexico in 2014. In 2016, 94 percent of LCC traffic came from Mexican or Brazilian LCCs, but the LCC model is emerging in other key markets such as Colombia, Chile, and Peru and we are seeing rapid growth coming out of these airlines.
Q: Which aircraft are increasingly in demand in the region and how does Mexico differentiate from the rest of Latin America in this sense?
A: Our 20-year outlook for Latin America predicts a demand for over 1,900 single-aisle aircraft and 550 widebody aircraft like the A330, A350 XWB and A380, worth an estimated US$330 billion. Single aisle aircraft are leading demand, and the A320 and A320neo families have become the preferred aircraft families for the region’s carriers. We are seeing the region’s top airlines modernizing their fleets with the A320neo family, allowing them to achieve efficiency gains even in a less-than-favorable economic environment. The A320neo is the market leader in the region with nearly 400 orders and almost 70 commitments from lessors for leading airlines such as Avianca, Avianca Brasil, Azul, Interjet, JetSMART, LATAM, Sky Airline, Synergy Group, Viva Air (presiding over Viva Air Peru and Viva Colombia), Viva Aerobus and Volaris. In Mexico, Viva Aerobus, Volaris and Interjet are all relying on A320 and A320neo family aircraft for the expansion and modernization of their fleets.
However, Latin America’s long-haul route expansion is imminent, and we are already seeing airlines respond by opting for larger, longer-range and more efficient aircraft such as the A350 XWB and the A380, which both began operating in the region in 2016 with LATAM and Air France, respectively. The long-haul market space presents a solid opportunity for Latin American carriers to claim back market share as today, European and North American airlines carry the majority of long-haul traffic into and out of the region.
Similarly, the intra-regional and domestic market within Latin America holds tremendous potential given that traffic is expected to nearly triple in the next 20 years, growing at a favorable rate of 5.3 percent. Passengers in North America and Europe can count on at least one flight per day to connect them to the 20 largest cities in their regions, but in Latin America this figure is smaller. Only 43 percent of the region’s top 20 cities are connected by one daily flight, leaving the rest of the region’s cities with less-than-weekly connections or none at all.
Q: What are your expectations for the growth of the Mexican aviation industry?
A: The future of the aviation industry in Mexico is promising. Mexico is a very important market for Airbus at both a regional and global level, which can be seen in the number of milestones we have achieved in the country in recent years. We recently opened the Airbus Mexico Training Center in Mexico City (the first such training center in the region), which offers A320 simulator training and courses to support growing customer needs for training and services regionwide. In 2016, Interjet, Viva Aerobus and Volaris (the first North American-based airline to receive it) all began operating their first A320neos, the newest and most efficient aircraft in the A320 family, the most widely sold aircraft family in aviation history.
And we cannot forget about the largest aircraft in the world, the A380, which first began operating in the region in 2016. Transporting more people on fewer flights via very large aircraft like the A380 is the solution to rising aerial congestion as, not surprisingly, by the end of 2036, Mexico City and Cancun airports will each be receiving more than 10,000 long-haul passengers on a daily basis, making them two of nine aviation megacities in Latin America.
Q: What are your expectations for the growth of Airbus in Mexico in the short to middle term?
A: Today, about 140 aircraft are in operation in Mexico through four customers: AeroUnión, Interjet, Viva Aerobus and Volaris, which represents 63 percent of the country’s commercial aircraft market in service. The growing demand for single-aisle aircraft in the country will help airlines, especially low-cost airlines, continue to grow. Travel per capita in Mexico is expected to double over the next 20 years and Mexico’s economic growth is 3.7 percent, higher than the regional and global averages. This presents a good opportunity for Mexican companies to expand their fleets and routes, especially internationally.
Mexico is a strategic business market for Airbus and an important component of our global manufacturing footprint. We expect this partnership to only become more fortuitous as the years go by. Across Airbus, we work with more than 95 Mexican companies and there are over 5,000 direct and indirect Airbus employees in Mexico via its supply chain.