Rogelio Cisneros
Monterrey Aerocluster
Claire Barnouin
Claire Barnouin
Executive Director
Monterrey Aerocluster
View from the Top

Supply Chain Disruptions Generate Opportunities

By Alejandro Enríquez | Fri, 08/14/2020 - 09:00

Q: What are your expectations for the aerospace industry considering the challenges the sector is facing?

RC: The entire aerospace industry has been greatly affected by the COVID-19 pandemic, a situation that no one could see coming. While we have observed that sales have fallen between 50-60 percent, we see opportunities for Mexico as the aerospace industry is heavily labor and time-intensive. For instance, Safran announced during the outbreak that it would build a new plant in Chihuahua, which points to the growing trend in the sector to move toward more cost-efficient centers. Safran will not be the only company to take this opportunity.

While Nuevo Leon has an excellent geographic location and a well-established manufacturing industry, we have not seen significant interest in aerospace manufacturing in the region. So, this period may open opportunities for the state to position itself in the sector. We expect that an increasing number of aerospace products will be built in Nuevo Leon and we expect to continue working closely with Queretaro and Chihuahua to strengthen the capabilities of the country. This year will be problematic for the aerospace industry but 2021 will bring many opportunities.

Q: What actions is the cluster taking to help its members adapt to the challenging environment?

CB: We are seeing greater synergies between aerospace organizations during this time. We are hold weekly meetings with FEMIA and the aeroclusters of Queretaro and Chihuahua, first focusing on the status of the industry and then on its reactivation. We will continue these meetings, now on a biweekly basis, as they allow us to continue collaborating and we are seeing a greater interest in developing joint strategies between the aerospace industry of different regions.

At Monterrey Aerocluster, we have been highly active in the organization of webinars and other training courses for our members. These webinars also offer our members the opportunity to meet each other, share their knowledge and showcase their capabilities. We are constantly sharing information with our members on the measures needed to restart activities safely and we have been working closely with members to address their concerns. For instance, some have expressed concerns about the membership fee to remain active members in the cluster, considering the financial challenges they are facing, so we are reviewing these situations on a case-by-case basis and developing support schemes where possible.

Q: What measures should the local and federal government take to support the industry during the crisis?

RC: The government has significant responsibilities during this unprecedented health crisis. No government in the world was prepared to face this situation. The Mexican government has switched from containment to a reactivation stage but no one expected the outbreak to last as long as it has. Now, it is necessary to develop measures that protect people but allow for the country’s economic reactivation.

We believe that Nuevo Leon is in an excellent position to attract new projects from major OEMs that are now looking for strategies to contain costs. The sector will also see new players as companies that had not previously participated in the sector will embrace new opportunities. We hope that the government will be ready when these opportunities begin to arise to continue offering support programs for SMEs willing to enter the aerospace industry.

Q: Although Mexico is becoming an increasingly relevant player in the industry, it still has significant gaps in its supply chain. How is the sector addressing this problem?

RC: Mexico has two significant areas of opportunity. The first is raw materials, which due to the strict regulations they must follow are oftentimes imported. Mexico would benefit greatly from attracting suppliers of raw materials like aluminum alloys to the country. The second area is the need to improve secondary treatments, such as heat treatment and special finishes. While this area still has a long way to go, it is slowly improving. Mexico is already very strong in sheet metal and precision machining processes but without access to raw materials and secondary treatments, the country will fall behind its peers.

Q: What areas should Mexico’s aerospace industry prioritize to continue being an attractive destination for FDI?

RC: The aerospace industry is extremely strict in terms of raw materials and processes in comparison to other manufacturing sectors in Mexico. Companies that already manufacture products, such as sheet metals for other industries, are not necessarily capable of undertaking aerospace projects. To fully penetrate the sector, we have to become specialists. The country has to continue developing these secondary treatments in order to continue attracting projects from major OEMs. We are analyzing which specialties should be prioritized to strengthen the sector, such as 3D printing with advanced materials. As a cluster, our role is to identify these areas and inform our members of the available opportunities.

Q: What are the cluster’s expectations for the industry in the coming years?

RC: There are three potential scenarios. The most optimistic projects a V-shaped recovery during 2021 thanks to Mexico’s many advantages, such as its human capital. I am more partial to the middle scenario, which projects that a recovery will begin by 2021 but will not be fully achieved until 2023 when we will return to the manufacturing volumes we saw during 2018 and 2019. The most pessimistic scenario projects a very slow recovery that will peak in 2025. This latter scenario might occur if companies in Spain or other European countries decide to look inward as they recover from the outbreak.

CB: For the recovery of the aerospace industry, it is essential for individuals to fly again and to do so, the aviation and the tourism sectors must highlight the measures they are taking to protect the health of travelers. We recently held a webinar with OMA, Aeroméxico and the Hilton Hotels to highlight the individual measures each player is taking to get people traveling again.

Alejandro Enríquez Alejandro Enríquez Journalist and Industry Analyst