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Mexican MRO Expanding With Domestic And Foreign Investment

MRO providers in Mexico expanding, as commercial airline growth creates new opportunities for investment in maintenance activities

In contrast with many mature regions, Mexico may soon need a few more good hangars. Traffic growth is healthy, and the country will get about 150 more Airbus A320-family jets in the next few years. Longer term, Boeing expects to deliver around 400 aircraft to the country in the next two decades.

There is significant capacity at MRO providers like Aeromexico and the newly independent Mexicana shop, and more might be added there. An independent MRO, QET Tech Aerospace, might expand with fresh funds. One attractive solution would be a sophisticated global MRO partnering with a Mexican company, but it is not yet clear that will happen.

None of this is urgent. Mexico has capacity for its immediate needs, and can always go south for extra room. But more hangars in Mexico would probably be more efficient and might attract work from some of its neighbors.

VivaAerobus is a Mexican low-cost carrier (LCC) transitioning out of its 737 fleet and moving into A320-family aircraft. The carrier has ordered 52 new A320s and A320neos for delivery from 2015 to 2021.

As an LCC, VivaAerobus seeks to outsource its major maintenance. CEO Juan Carlos Zuazua sees maintenance capacity in Mexico as limited, but expects it to grow with some new projects coming in. “Some airlines have integrated vertically, established their own MROs and now offer it to third parties, for instance Aeromexico and Interjet,” Zuazua observes. “And there are some private companies interested in developing MROs in Mexico.”

VivaAerobus has not had a heavy check due on its A320s yet, but the CEO believes there will be capacity available. He points to Mexicana MRO, which is no longer involved in its parent’s bankruptcy and which has “great capabilities for heavy maintenance.”

For the long term, Zuazua says Mexicana MRO is only one of several options. “We also work with Coopesa in Costa Rica and Pulsar in California. And there is an interesting project in Chihuahua coming for 2016 with local businessmen and ST Aero, which looks very promising.”

The airline has made no commitments yet. “We will evaluate all shops, their qualifications and most important, their cost.” More generally, he is optimistic that growing Mexican aviation will find the support it requires. “I see no problem with the combination of airline MROs and third-party MROs.”

Mexicana MRO is currently run by a commission for the benefit of its employees, explains Director General Marcos Rosales Gomez. Once part of a major airline, the MRO has been certified by FAA, EASA and aviation authorities in Argentina, Brazil, Chile, Ecuador and Peru, as well as Mexico. The company added El Salvador and Aruba to its certifications last year.

The MRO provider supports A320s and A330s, 737s and 767s and Fokker 100s at present. Its 200,000 square meters (2.1 million sq. ft.) of space in Mexico City are still a very substantial operation, although Mexicana’s 1,100 employees are down from the 1,500 18 months ago, before the MRO was spun off from the bankrupt parent airline.

Mexicana worked on 180 aircraft in 2014 and plans to grow volume by -10--15% in 2015. It will continue to focus on narrowbodies, but wants to work on more widebodies like the 777 and 787 in three to five years.

Gomez says Mexico’s shops have enough capacity now, but with traffic growing 3-6% annually, the country will soon need more. And he expects the opening of a new airport in Mexico City to increase traffic substantially. The first phase of the new airport is scheduled to open in 2020.

Mexicana MRO will move to the new airport when it opens. It has some unused space in Guadalajara, but plans to concentrate all its activities in Mexico City.

“We have been through difficult times,” Gomez acknowledges. But Mexicana MRO is leaner and disentangled now, and optimistic about its future.

Aeromexico’s joint venture with Delta TechOps, TechOps Mexico, is another significant resource. President Miguel Uribe says his new facility is state-of-art and eco-friendly, with solar cells, rainwater harvesting, waste-water recycling and LED lightning.

TechOps Mexico has three hangars with capacity for nine aircraft, and Uribe says it has the space and technical expertise to double capacity to 18 lines. Even with current capacity, up to two lines can be offered to third parties.

TechOps Mexico works on Embraer 145s and 190s, 737NGs, MD-88s and -90s. Uribe says it will expand in the future according to market opportunities.

QET TechAerospace is based at Aeropuerto Internacional de Ciudad Obregon in the northwestern state of Sonora. Mike Dornenburg, vice president-technical and commercial operations, says the MRO employs 54 people in all. He expects QET to double its staff this year to accommodate contracts for line maintenance and lease returns.

QET uses one-off approvals to complete heavy checks on Boeing, Airbus and Embraer aircraft. The MRO has passed an audit for an FAA certificate and expects to soon receive FAA approval for a battery shop, A320 line maintenance and CRJ200 heavy maintenance. “We will be working on expanding these capabilities quickly,” he says.

The company has a hangar with capacity for four narrowbody or six regional jets, but can accommodate more for a short time. In January it housed two 737s in the hangar set for recycling in February, and keeps half of the hangar available for heavy maintenance. 

The MRO provider has a two-phase plan for expanding hangar capacity in collaboration with the state of Sonora. It is also looking at empty widebody hangars in Guadalajara and Tijuana. But QET would need an investor to be able to expand its facilities and capabilities to other models, such as ERJs, A320s and 737s.

An immediate shortage of technicians is not one of the challenges facing aviation in Mexico, according to Dornenburg. “There is presently an overcapacity of skilled aviation mechanics available because of the Aeronautics University Of Queretaro (UNAQ) and the difficult times at Mexicana.”

Line service also appears quite adequate. Aviation Integrated Services Group (AISG) performs line maintenance and maintenance training, according to President Bogart Balmori. The company provides line services for 64 airlines at 22 Mexican airports, giving it the largest customer count among Mexican line-MRO providers.

At its base in Cancun and also in Mexico City, AISG trains mechanics to work on A320s and 737s and will soon expand to Embraer 190s. Students are given courses in safety, human factors, electrical wiring interconnection systems (EWIS) and evaluating structural damage. AISG trains about 150 techs a year for both its own staff and others. It is certified by the Mexican DGAC, EASA, FAA and a number of international aviation authorities.

“We have no plans to do heavy maintenance,” Balmori says. “That would be a different ball game.” He does plan to increase his staff of 145 employees proportionate to aviation’s growth in Mexico.

There are several significant providers of line maintenance in Mexico, and Balmori believes this sector is well-covered. However, “Mexico definitely needs more heavy maintenance. Mexican carriers have to send aircraft outside Mexico.”

Balmori says the only airline thoroughly prepared for growth is Aeromexico, with shops operated for itself and Delta Air Lines. “They have huge infrastructure, but also huge fleets and are mostly dedicated to Aeromexico and Delta fleets.”

The AISG chief expects VivaAerobus, Volaris and Interjet to have about 150 A320-family aircraft in a few years and does not see sufficient capacity to support them. He doubts Mexicana MRO can do the job, at least in its present condition. “I don’t think it has the financial resources to endure or develop for the future unless a major company purchases them. They are behind in standards and technology. If a major company purchases them, then they can be successful.” He hopes Mexicana, if purchased, stays independent rather than working for just a single airline.

Balmori has heard a rumor that Lufthansa Technik might come into Mexico, but LHT has now committed to Puerto Rico. If another MRO does start up, location might be important. Balmori says an MRO that wants to serve chiefly the Mexican market should be centrally located. For example, Guanajuato is well-situated for serving Mexican carriers.

If an MRO also wants to support the U.S., Caribbean, Central and northern South America, Balmori recommends locating on the Yucatan peninsula, for instance, at Cancun. “It’s connected to everywhere,” he argues. Indeed, Cancun now leads Mexico in the number of operations and international flights.

Queretaro might be another option. Messier-Bugatti-Dowty has a landing gear shop there that overhauls 40% of the A320 landing gear and 10% of the 737 landing gear in the Americas. MBD Senior Vice President-Sales and Business Development Alan Doherty expects the 737 share to increase.

Doherty says Queretaro has been an extremely good location for doing overhaul business in Mexico. “It’s an extremely modern city with good services. There is a big university [UNAQ] with a good graduate program. Bombardier also has a shop there.”

Located at Queretaro International Airport, UNAQ offers extensive courses in both aircraft manufacturing and maintenance. There are programs in avionics maintenance, aircraft maintenance and engine maintenance and precision manufacturing available to the university’s 3,000 students. 

Bombardier began manufacturing in Queretaro nearly 10 years ago. More than 1,800 employees make harnesses and electrical subassemblies for business and commercial aircraft, and airframe structures and flight controls for Q400s and CRJ700s, 900s and 1000s.

In the northern state of Chihuahua, major aerospace OEMs make a variety of structures for fuselages, wings and cabins. Local facilities also fabricate seats and emergency systems.

Fokker creates empennages in Chihuahua and Honeywell makes turbine components. Nordam manufactures thrust-reverser components, while Safran makes electrical systems there.

Chihuahua’s main advantage is its northern location and very good road connections to the United States, which may make it more attractive for manufacturing aircraft components than for overhauling them. 

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