Airbus seeks to increase sourcing in Mexico

Frederic Garcia Airbus Mexico CEO Interview

By Graeme Stewart

To say that Airbus Group, the European global leader in aeronautics, space and related services, has a strong commitment to Mexico is like saying Mexican soccer fans are quite fond of their national team.

The commitment is absolute and Airbus proves that by putting its money, time, experience and expertise into the burgeoning Mexican aerospace industry.

In fact, Airbus expects to increase its supply investment in Mexico from US$200 million to US$500 million annually within the next five years. In addition, the Group is considering the possibility of finishing its helicopters in Mexican facilities, according to Frederic Garcia, Airbus Mexico’s CEO, who added that the evaluation of the project will be completed shortly.

The busy Mr. Garcia, who, despite his Spanish surname is thoroughly French, took time off to speak to MexicoNow about the love affair between his company and the Mexican nation.

He explained that Mexico had several advantages for the aerospace sector’s development, such as free trade agreements, attractive plans for foreign investment, friendly policies to develop supply chain and procurement, a hard working and skilled labor force and the Bilateral Aviation Safety Agreement signed with the US which allows certification for aerospace parts produced in Mexico.

Mr. Garcia emphasized that the Mexican aviation industry generates more than 40,000 jobs and, according to data from the Ministry of Economy, earnings of over US$6 billion were reported in 2014.

Currently, 6 per cent of global aviation industry supply comes from Mexico so, according to Mr. Garcia, the industry has: “A very promising future and could grow up to 10 per cent of the market, representing US$300 billion export.”

He agreed that a substantial increase in acquisitions was anticipated for the global aerospace market within the next 20 years and it is forecast that Mexico would become one of the most important countries in the sector as a result of its favorable industrial policies and its skilled labor pool that allow Airbus, which employs nearly 400 people in Mexico, to maintain and increase its investments in the country.

Also, the growing demand for air services and the construction of the new airport in Mexico City make Mexico one of the most attractive markets for Airbus. For the next 20 years, 600 new aircraft will be needed, involving production costs of more than US$60 billion.

Within the next eight years, Airbus will deliver 158 new aircraft to airlines such as Volaris, Viva Aerobus and Interjet which will allow those companies to offer international flights.

Mr. Garcia said: “Mexico is one of the most strategic countries worldwide for our Group and the country’s favorable industrial policies and skilled labor force are important for maintaining and increasing the company’s presence there. According to our projections, the global aerospace procurement market is expected to increase substantially over the next 20 years and Mexico could become one of the most important countries in the sector given the skills base and structural reforms made in recent years.”

While the Airbus Helicopters plant in the State of Queretaro is the best example of direct investment in Mexico by Airbus Group, the company’s interests also span civil aircraft, military transport craft, security and surveillance solutions, as well as space and satellite systems.

Airbus Helicopters is the market leader for helicopters and is currently the only manufacturer with maintenance and industrial sites in the country, with more than 40 per cent of the market share in Mexico.

Mr. Garcia told MexicoNow: “The aerospace industry has grown a lot in Mexico over the past 10 years, mainly due to the free trade agreements. The main advantages that Mexico presents to the industry are those free trade agreements – Mexico is the champion of the free trade agreement, having treaties with more than 45 countries.

“Also, Mexico has the Bilateral Aviation Safety Agreement signed with the US which allows certification for aerospace parts produced in Mexico. And it has a competitive and highly skilled workforce with a very competitive labor cost.

“There is a strong incentive to train the workforce and in many States there are university courses in aeronautics. That means that when former students come to Airbus, they already have significant skills which we them hone to our standards through training courses. Generally, our Mexican workforce is competitive, highly skilled and very focused.”

Mr. Garcia was also impressed with the way intellectual property was respected in Mexico and added: “That gives the country added value for our industry and that is most welcome.”

Another factor in the success of Airbus in Mexico has been the assistance from both the Federal Government and the State Governments.

Mr. Garcia said: “They have been really helpful. We also have been working closely with ProMexico and it is interesting to know that with their help we can set up a plant in record time. In Queretaro we established a plant within two years on ground that was no more than a cactus field to begin with. It was a very quick and efficient process. Quite amazing.”

Mr. Garcia couldn’t think of many disadvantages of setting up in Mexico although he admitted that if the aerospace industry was to grow in the country, the Federal Government would have to make some public policies for the sector.

He explained: “Mexico represents 6 per cent of the global aviation industry and if that is to increase to 10 per cent of the market, then the Federal Government has to be aware of the need for public policies for the sector. They are starting to be aware of that and we have had preliminary talks on the matter.”

He gave the supply chain as an example where public policy could be used and explained: “The supply chain in Mexico is growing but it could be helped at Tier 3 and Tier 4 level by Government public policy. But we are on the right track as shown by the fact that all the main players in the Mexican aerospace sector are increasing investment. Safran is, Honeywell is and UTC is. All our suppliers are increasing their expenditure in Mexico because they believe in the future of the procurement and supply chain in Mexico.”

On the future of Airbus Group in Mexico, Mr. Garcia said: “We are currently working with the Government on a strategy for our helicopters and also the talks on the need for public policies will continue. And we will continue to strengthen links between educational institutions and the industry. That is a trend that has been successful but we would like it to be reinforced and make it even more successful.”

Mexico, he said, was now considered among the top supplier countries for Airbus Group and the company was committed to increase dramatically its sourcing activities in Mexico over the course of the next few years.

He added: “We have every intention of partnering Mexico in the aerospace industry well into the future.” Returning to the soccer analogy: If that’s not a win on foreign soil, we don’t know what is.