Aerospace Sector on Its Way to Growth in 2023

The aerospace industry has expanded its footprint across the country and is growing exports yearly. However, growth stopped due to the COVID-19 pandemic in 2020, when the sector saw a 31.8% drop in exports. While 2021 brought a slight recovery to industrial aerospace operations in Mexico, it was in 2022 that the sector saw a greater recovery, which was also pushed by aviation growth and nearshoring trends, in which Mexico is positioned as an ideal destination for establishing operations.

From 2010 to 2019, Mexico’s aerospace sector achieved an average annual growth of 15%. Mexico’s aerospace sector was the fastest-growing industry during this period. In 2020, the pandemic brought annual exports down from US$9.68 billion to US$6.6 billion and in 2021 the situation only improved by 2.3%, according to FEMIA. In 2022, the sector is expected to have grown by 18% in comparison to 2021, with revenues surpassing US$8 billion.

The recovery of the industry is expected to continue in 2023, when FEMIA estimates that it will grow by 16%. By 2025, the Mexican aerospace sector will be stabilized, with export levels above US$12 billion.

Currently, Mexico ranks 12th as an exporter of aerospace components to the US. This figure, as well as overall export revenues, could grow if the sector continues to specialize in more specific processes, which offer an added-value beyond traditional maquila operations. About 79% of aerospace companies are dedicated to maquila, 11% to engine repair and construction and 10% to engineering and R&D operations.

The introduction of highly specialized processes and specific services contribute to the generation of a highly-developed manufacturing ecosystem that can enter the market for higher value-added parts, Humberto Ramos, CEO, HT-MX, told MBN. “Through advanced processes, companies in Mexico can access a larger and more complete supplier base and transfer more complex operations to the country, helping the local industry to put maquila operations behind it in favor of more advanced manufacturing processes.”

While the pandemic negatively impacted all industries in Mexico, including aerospace, it has also opened opportunities for the country. The pandemic, the Ukraine-Russia war and further logistics constraints exposed the failures of globalization, favoring nearshoring, which aims to bring production closer to the end market, thus shortening the supply chain and easing logistics.

It is here where Mexico is able to leverage several factors in its favor, including distance and time zones aligned with the US, which enable more affordable transportation costs and faster delivery times. The country also provides an experienced manufacturing industry, renowned for its high quality standards, cost-effectiveness and a highly trained workforce. While the aerospace sector in Mexico grows in reputation and experience, overall manufacturing activities in the country contribute about US$221 billion to the economy annually, making up 18% of national GDP.

“Reshoring and nearshoring trends represent a unique opportunity for Mexico. The country is in the right place but needs to engage with the right actors, people, companies and authorities. Everything must be aligned toward the same objectives,” says Óscar Rodríguez, CEO, Optimen and President, BJXAerospace.

The International Air Transport Association (IATA) expected the global aviation industry to return to profitability in 2023 as carriers cut losses throughout 2022. However, profits will remain within a tight margin (0.6%), as airlines are expected to post a total profit of US$4.7 billion by 2023. It will be the first profitable year since 2019, when the sector posted net profits of US$26.4 billion (3.1% net profit margin). In 2022, global airline net losses amounted to about US$6.9 billion, a major improvement following 2021’s US$42 billion in losses and 2020’s US$137.7 billion in losses.

Mexican aviation also faced a complex year in 2022, with the three major airlines (Aeroméxico, Viva Aerobus and Volaris) cutting losses and preparing for 2023 amid several challenges, from the country’s continued efforts to obtain a US Federal Aviation Administration’s (FAA) reclassification as Category 1 airspace, to the inauguration of Felipe Angeles International Airport (AIFA) in March 2022.

According to Jorge Nuño Lara, Minister of Infrastructure, Communications and Transportation (SICT), Mexico will recover Category 1 by the summer of 2023 through the strengthening of the country’s airport system, which will provide better services for passengers, while promoting tourism and boosting the economy, as reported by MBN. While the downgrade to Category 2 allows Mexican airlines to continue operating their current routes to the US, they are prevented from opening new ones.

Amid controversy, AIFA began operations in March 2022. While it continues to struggle to attract air traffic, it is slowly progressing toward decongesting air traffic in the metropolitan area of Mexico City, alongside with Mexico City’s International Airport (AICM) and Toluca International Airport (AIT), the latter of which restarted flight operations in July 2022. From its inauguration in March 2022 until Oct. 19, 2022, AIFA operated over 4,641 flights, mobilizing over 415,000 passengers, reported MBN. In the first two months of 2023, AIFA transported about 351,900 passengers.

AIFA’s administration has implemented new strategies that have allowed the airport to increase its number of daily activities, says Gen. Isidoro Pastor, Director, AIFA, and both airlines and passengers are satisfied with the airport so far.

“As far as the airlines are concerned, there has been no issue of nonconformity or adaptation. It is a space that makes them happy and allows them to develop operations for passengers and baggage documentation. If there is one thing passengers are satisfied with, it is security and waiting times,” he told MBN.