When Growth Means Change

Rapid growth in air travel led to an increase in aircraft orders and created a significant backlog for major OEMs. Some companies see in this backlog a strong opportunity for individual companies and for Queretaro’s manufacturing sector, which is developing new capabilities as it gradually consolidates, says Jerónimo Sánchez, Executive Director of Hyrsa Aerospace, a fully Mexican company that manufactures fittings, bushings and connectors.

“The global aerospace sector has a significant backlog and existing manufacturers cannot keep up with aircraft demand,” says Sánchez. By the end of 2016, Airbus reported a commercial backlog of 6,874 aircraft. Boeing’s backlog hit 5,715. While orders have decreased during the past two years, the aerospace sector remains confident that this strong backlog will translate into a period of stability, leading many to see the industry as a sure business opportunity, especially in Mexico. “The aerospace sector involves long- term projects in comparison to other sectors. Some of these contracts can last between 10 and 15 years, which is beneficial for Mexican manufacturers,” says Sánchez. “Local manufacturers are producing tried and true products that already have a developed market.”

The industry’s potential has not gone unnoticed among investors. A clear example is Queretaro, which developed a booming aerospace industry in less than two decades. Sánchez credits the collaborative work of all players for this growth. “Both public and private sectors are making a great effort to strengthen the industry. The aerospace sector is also gaining importance in the state and for the past three years I have seen more interest from the government in supporting the sector.”

Growth can also mean evolution and this seems to be the case for Queretaro. “At first, Queretaro’s aerospace sector was mostly comprised of subsidiaries of major OEMs, which received significant support from a government that was focused on attracting of FDI.” Yet, Sánchez points to a small but growing number of local SMEs and the support from the local government and major companies as a sign that the sector is becoming more welcoming to Mexican businesses.

“Foreign manufacturing companies are increasingly recognizing the importance of SMEs in Queretaro’s supply chain and our collaboration with them is strengthening and leading to new projects.” The objective of this collaboration is to manufacture entire parts instead of only components, says Sánchez, adding that the state has Mexican SMEs with the certifications to manufacture components for aerospace, including parts for landing gears, fuselage and turbines. Others are also working with advanced materials for the sector including composites.

While a growing number of parts are being manufactured in Queretaro, the state is still highly reliant on imports to manufacture them. “The state now manufactures wings and fuselages but these parts can involve up to 90 percent of imported components.” Sánchez and many other members in the sector are trying to change this. “Alongside foreign companies we are pushing toward the substitution of imports for local products.”

The state is working to consolidate its supply chain. Some SMEs have been certified with the support of the Program for the Development of High Technology Industries (PRODIAT) but there is still room for improvement in the development of the supply chain and in the integration of SMEs. “Some SMEs are afraid to enter the aerospace sector due to high initial investments and long ROI times but it is a significant and profitable opportunity,” says Sánchez, emphasizing the importance of incorporating them into the supply chain. “SMEs are the basis of every manufacturing sector.”

For Sánchez, the aerospace industry was a personal challenge. Hyrsa started operations over 50 years ago in the food and beverage industry before diversifying into the aerospace sector. Hyrsa’s goal is to become a national supplier for OEMs and MROs in the short term. “We have the capabilities to continue growing. We use only 30 percent of our installed capacity for the aerospace sector and, at the rate we are growing, I expect to double our capabilities in one and a half years.” In the long term, Hyrsa aims “to become the key machining company for small parts for aerospace.”