Mauricio Rojo

Mauricio Rojo

General Manager, Hawker Beechcraft Services Mexico
Stéphane Lauret

Stéphane Lauret

President, Safran Mexico
TBY talks to two executives in the aviation industry on operations in Mexico, customer profiles, and current activities.

The aviation industry in Mexico is starting to take off and companies are looking to the country to set up operations because of its lower labor costs and skilled workforce.

Why are so many tier one and two aerospace manufacturing companies establishing operations in Mexico?

MAURICIO ROJO Our people are fantastic and organized. When manufacturers give our workers the opportunity to improve their lifestyle, they are eager to become better. The help of external and local industries has proven that Mexican labor is not only cheap, but is also a nice blend between lower costs, attention to detail, and a sense of gratitude. Workers can afford cars and housing, and many of my employees' incomes have increased substantially over the last 12 years—some have bought houses and cars and others are travelling for the first time to the US or Europe.

How do strategic partnerships affect your operations in Mexico, and what types of joint ventures do you look for?

STéPHANE LAURET The main joint venture we have is with GE to produce an engine called the CFM56, which is equipped in 100% of the Boeing 737 fleet worldwide and is one of the two engines available for the Airbus A320. We have a 65% share of the market for A320s. With new and recent orders, we are producing more than 31,000 engines; so it is a real success story. In terms of growth, our clear priorities are the new Boeing 787 and 737 Max. For example, 95% of the harnesses for the Boeing 787 are manufactured in our plants in Chihuahua.

How has the corporate restructuring of Hawker Beechcraft in the US and the potential emergence from bankruptcy that was announced in 2012 affected operations in Mexico?

MR I wouldn't say that we were completely unaffected, but when you evaluate the numbers, there has been very little change. We were great in 2011, and exactly on target in 2012 and 2013. In 2012, we implemented our budget, and revenues were 20% over target. The immediate problem was that many of our vendors removed credit, as often happens during a bankruptcy, because they do not want to be caught up in a financial crisis. We were then stuck with a very significant delay in terms of vendors getting parts to us. They often wanted cash on delivery from us, so this affected cash flow, but we were very quick to respond and assure them that we are legally and financially accountable and operationally independent from Hawker Beechcraft in the US. We control all of our payables, treasury, and numbers, as these have been great for years.

Where are your operations focused?

SL The group is based in five places: Chihuahua, Querétaro, the State of Mexico, Tamaulipas, and Mexico City, where the headquarters is located. In our Mexico City office, we have a company that is the world leader for helicopter engines. Our Chihuahua site, which has more than 3,000 employees, is the world leader for engine harnesses. We have two factories in Chihuahua, and then in Querétaro we have another four factories for engine and landing gear parts as well as maintenance support. Safran is, among other things, the world's leading producer for single engines and landing gear. We also have other another factory with about 100 people in Tamaulipas, which focuses on a mix of aerospace and automobile parts. Right now, Chihuahua and Querétaro are the two main sites where we operate.

Do your customers mainly come from Mexico or do they fly in from elsewhere?

MR Our main customers come from Mexico. Toluca is the general aviation airport for Mexico City. Most of the owners and corporations are located in Mexico City and have their planes located there. About 30% of our customers fly out of the airport in Toluca, and the remaining 70% come from all over Mexico, even the most remote places. We work with customers from Cancún, Mérida, and Chihuahua.

How difficult is it to build a talented workforce in this industry in Mexico?

SL There was not a significant aerospace industry presence in Mexico 10 years ago, but in the last decade the industry has attracted a lot of investment from abroad. There are some very strong players here today, but there is also a lot more competition as the industry matures. We are therefore creating a strong campus presence to prepare for the coming years.