Strengthening the Supplier Base Leads to CompetitivenessBy Gabriela Mastache | Wed, 04/08/2020 - 18:18
Q: What are the most significant challenges that Mexican aerospace suppliers face to enter Boeing’s value chain?
A: The most important challenge to become part of the supply chain of any aerospace company is certification, which is a very lengthy process. In the past, the government helped companies with the certification’s costs and in this regard, it is important to mention the outstanding job that FEMIA does to help the industry.
Still, I believe that certification processes will continue to be the most pressing challenges for any new company that wants to be part of the aerospace industry. These certifications often imply that they might not get any revenue for a couple of years while undergoing the certification process.
Q: What is Boeing doing to continue developing the capacities of its Mexican suppliers?
A: We have around 20 employees in Mexico who work in supply and quality and we organize events within the country’s different aviation clusters. At these events, we work with our existing suppliers and introduce new technologies, we discuss how they can improve the quality of their products and how we can continue working together. Our suppliers are an extension of our factories, so they are critical to us. More than 65 percent of the cost of the airplane comes from suppliers. So quality, cost and delivery are critical to Boeing.
Q: What opportunities will the Mexico-US Open Skies agreement bring for Boeing’s commercial and executive aircraft?
A: Any time there is an Open Skies agreement it means there is going to be more opportunity for new airlines to come into the area and vice versa, which means an increase in volume and capacity. The aerospace sector in Mexico is growing at 14 percent annually and we believe we will continue seeing this growth as people continue to fly more. We predict that Latin America itself is going to need about 3,000 new airplanes. Half of those are new airplanes for growth, the other half is replacement. Of the over 42,000 airplanes that we forecast in the next 20 years, about 3,045 are for Latin America.
Q: What are the main factors powering demand for new commercial aircraft in Latin America, specifically in Mexico?
A: We look at the economic growth of the country. On average, we predict around 3 percent growth in the region. Some countries will grow more, some less and Mexico is predicted to grow less than that estimated 3 percent. However, we continue to see growth in the number of people who will need and want to fly in the region. That is where the 3,000 prediction comes from. Of those, how many are specifically for Mexico is hard to say. However, we intend to grow the market in the next few years. We are putting a lot of focus and emphasis on Latin America, and with the acquisition of Embraer in which we hold an 80 percent stake, Latin America becomes even more important for us.
Q: How is Boeing helping new commercial airlines come to Mexico or grow their operations in Mexico?
A: We continue to work with smaller startup airlines, where we team up not only as airplane providers but also in the financing arena, either directly with the Boeing Capital Corporation or helping with any new lease they might need, so they can start operating. We also help airlines go through all the financial analysis when they cannot afford to buy new airplanes.
The other way we can help is growing the operation. We continue to grow our services component. Our new Boeing Global Services organization, which is a conglomerate of companies, continues to grow. We just acquired KLX, which is a worldwide distributor of parts. We are building capabilities to distribute more parts for a lot more airplanes that are being delivered and we are increasing our production rates.
Q: How is Boeing adapting its line-up to better fit the needs of Mexican passenger and cargo airlines?
A: Many of the airplanes have greater connectivity. We see the airplane as what we call a flying network, where you can connect to the airplane. This means that there is a huge amount of data that is being collected on airplanes, not only from the engine but from the aircraft. Being able to transmit all this data to the ground, analyze it and predict any failures helps us to have the parts ready so we can get the airplane back in service as soon as possible.
We are also introducing a whole new flight deck for the 777X model. In this model, pilots can use their iPad and just like in a car, have the navigation map and all the information they need on the front panel and they can control everything. In Mexico, we have yet to sell a 777X, but we hope we will soon.
Q: What is Boeing’s strategy to increase its participation in the fleets of Latin American airline operators, which is a market largely dominated by Airbus?
A: Our strategy has been to work more with suppliers and grow our supply base. In that way, we can even generate a lot more employment than by having a factory in the country.
Although the products we offer are very comparable. We have some airplanes that are strategically placed and are more capable, like the 787. The Boeing airplane is preferred because its flying and maintenance costs are less than those of the competition. It has good technology for passengers as well.
In the single-aisle segment, it is still going to be a battle, but I think we can provide a complete package in terms not only of financing but also of total support for aircraft maintenance. If the customer just wants to concentrate on attracting passengers and flying the airplane, we can do the rest.
Q: What do you consider are the most important gaps in Latin America in terms of the development of new components?
A: We are always looking for suppliers that are ready to work with composites. Mexico has the capabilities to develop, from small parts to larger items like doors, and there are many companies that are already doing this. Although it is an arena where it is still a little harder to get in, the capabilities are there. On a global level, we are seeing that countries like Morocco, are starting to compete in this regard, and companies that want to enter this segment are being boosted by governments, so Mexico cannot be left behind in this regard. However, being able to compete in factors like quality and cost is still going to be key.