El Salvador has an emerging aircraft maintenance cluster centered around Aeroman, an MRO facility located at Comalapa International Airport. The cluster benefits from low-cost labor and tax incentives. It aims to attract more aviation-related companies and expand Aeroman's facilities. Government support through job training programs and investment promotion will help strengthen El Salvador's position as a regional aviation services hub.
3. El Salvador Profile
• Land area: Total: 20,742 km2
• Population: 5,744,113 (June 2007 Census)
• GDP (2007): Nominal Total: 20,372.6 USD
Million
• Nominal Per capita: 3,546.7 USD
• Real Growth: 4.7%
• Economically Active Population: 2.3 million
PROESA Information Kit El Salvador 2008
5. TACA
• TACA is an international airline carrier
headquartered in El Salvador.
• Fleet Size: 40 jets nearly all of
which are Airbus models.
• Cities they serve: 40 destinations
10 in North America, 15 in South America and
the rest in Central America and the Caribbean.
• Hubs: San Salvador, San Jose and Lima
www.answers.com/topic/grupo-taca and ww.taca.com
6. San Salvador Hub
The hub at Comalapa International Airport
makes connections between all of Central
America and North America (Los Angeles, San
Francisco, Washington, New York, Miami,
Dallas, Toronto, Houston, Mexico City,
Oakland) as well as Lima, Peru.
www.answers.com/topic/grupo-taca and ww.taca.com
8. El Salvador International Airport
• Distance 50 kilometers from San
Salvador, about 40 minutes.
• 17 gates and more than 2 million
passengers per year.
• With space for 17 airplanes on the
main terminal, 3 on the cargo terminal,
6 in Aeroman, and around 20 in the
quot;Long Term Parking”. 94.5% of the
airport's flights are on time.
ww.cepa.com
9. Modernization Project & Expansion
• The expansion of the airport will start in
2009.
• By the end of that year, the airport will
handle 4 million passengers
• And will expand from 17 gates to 30 gates.
Airport Expansion
ww.cepa.com
11. Aeroman
• Certified maintenance, repair and overhaul
facility (MRO)
• Provides heavy maintenance services
• Located at El Salvador International Airport, at
an economic free trade zone
12. History
• 1983: established as a Maintenance and
Engineering Division of TACA
• 1992: became an FAA 145 Repair Station,
providing service to third party companies
• 2006: Aveos Group bought 80% of shares
– Canadian firm with 4 facilities at Canada
– Leading MRO provider in the Americas
13. Present
• Airframe capabilities:
– Airbus A318, A319, A320 and A321
– Boeing 737 and 757
• Clients:
– TACA, Jet Blue, US Airways, Donbassaero (from
Ukraine), Air Tanzania, and others
• Services:
– Airframe Heavy Maintenance
– Engine on-wing
– Component shops
– Other specialized services
14. • Staff of more than 1500 people
– Technicians in avionics, systems, structures and
composites
– Engineers
– Support departments and administration
• Operations:
– 6 state-of-the-art bay hangars, providing service to
6 aircrafts simultaneously
– 100 aircraft visits annually
15. Future
• 2012
– 16 bay hangars
– Staff over 5000 people
– Total investment of US$120 millions
17. Direct world competition
• This kind of clusters (aviation) are now the
majority on develop countries
• On Europe, the Hamburg aviation cluster, on
the USA, the Florida cluster, and in Asia
Singapore, are the most important ones in the
industry
• The El Salvador cluster is now emergent and
attracting clients worldwide (First cluster in
Latin America)
18. Pros and Cons of El Salvador
Pros Cons
• Low cost rent of facilities • Technology
• Low cost labor • Hi training labor
• Flexibility on tax payment • Political instability
• Increasing institutions of • Low R&D
training • Low capital
• Location • Low development of
• Actually has a industry financial markets
hub
19. Strategic Partners
• This year (2009) the first free zone called San
José Aviation is emerging in El Salvador with
FDI from Costa Rica.
• With 69 acres, equivalent to 50 football fields
• On march (the first stage), they started with 3
new companies Will do maintenance to airplanes
Storage
Aviotrade Aviotechnology
Company
20. San José Aviation Free Zone
• This free zone is considered more like an strategy
partner than a direct competition to the companies
already established on the cluster
• We consider that it will help the cluster to develop
and to be more attractive to the world aviation
industry
Repairing,
warehouses,
international
maintaining
maintaining
companies and companies and
Airlines airlines
airlines
21. San José Aviation Free Zone
• Those companies are going to work in two ways:
Distribution
Repairing
of parts
• In the future they want to establish the third way:
Making parts in the
country
• This free zone believes that right now 40% of its
production will be going to Aeroman
http://www.laprensagrafica.com/index.php/economia/nacional/13999.html
22. San José Aviation Free Zone
• Also 30 companies have been chosen to be
invited to come to the free zone
• On the positive points that this free zone
offer:
Low cost
Lots of
workers
Training
institutions
Attractive
23. Leading MRO to attract
Lufthansa Technicks vrs. ST Aerospace
• Lufthansa facts:
– Six divisions: Maintenance, overhaul, engines,
components, landing gear, VIP aircraft completion
– 19,199 employees worldwide
– 32 technical maintenance facilities around the
world
– Market share of 15 percent
– 660 customers worldwide
– 2007 sales of $5.175B and EBIT of $452M (8.74%)
http://www.laprensagrafica.com/index.php/economia/nacional/13999.html
24. Leading MRO to attract
Lufthansa Technicks vrs. ST Aerospace
• ST Aerospace facts:
– Two divisions: Aircraft maintenance & Modifications
and Component & Engine Total Support
– 7000 employees worldwide
– Facilities in the Americas, Asia Pacific and Europe.
– Market share of 4% percent
– Main clients: All Nippon Airways, FedEx Express, Japan
Airlines International, Republic of Singapore Air Force,
Royal Air Force of Oman, UPS, Venezuelan Air Force,
Northwest Airlines
– 2007 sales of $3.48B and EBIT of $440M (12.6%)
Source: http://www.staero.aero
25. Leading MRO to attract
Lufthansa Technicks
• The world’s leading provider for maintenance, repair and overhaul
(MRO) of airplanes, components and engine
• Specialized in Airbus A320, Boeing 737 (Classic and Next Generation)
• 2007, Investment in new facilities located at Shamshabad, the site of
the upcoming Gandhi Hyderabad International Airport
• $20Million in a two-bay hangars and its state-of-the- art workshop.
• 20,000 square meters facility
•Specially designed training program to develop qualified
technicians and aircraft engineers
• Lufthansa needs for this facilities 400 highly qualified personal
Source: http://machinist.in/index.php?option=com_content&task=view&id=1332&Itemid=2
26. B/E Aerospace:
• It is the worldwide leading manufacturer of aircraft
passenger cabin interior
• Business Segment
– Consumables -- distributor of aerospace fastener and
consumables, and stocks in 40 locations world wide
– Commercial aircraft
– Seating manufacturer
– Galley insert equipment
– Offers a broad range of interior reconfiguration
– Business jet
27. B/E Aerospace:
• Other products:
– Oxygen system, Lighting system, Structures
• Presence:
– Florida´s aviation cluster
• Location products:
– EUA, Canada and West Europe
• Location customer support:
– Latin America, Middle East, Asia, Australia
• Awards:
– Crystal Cabin Award 2009 Hamburg
28. Harris
• Communication and information
technology sector
• Presence in 150 countries and 16,000
employees
• Provides customized critical components
for air traffic control system – i.e.
communications and weather system
30. Context for Firm
Strategy and Rivalry
Factor (input)
Demand Conditions
Conditions
Related and
Supporting
Industries Government
31. Factor Conditions
• Labor low cost: Entry-level mechanic at
Aeroman earns $4,500 a year vs. $44,000 a
year in Canada and veterans earn $15,000 vs.
$52,000
• Universidad Don Bosco launched in 2005 a
two year mechanics course
• Location (between North-America and South-
America).
Fuente: http://www2.canada.com/montrealgazette/news/business/story.html?id=ebb07a17-0e73-42ba-9892-a36c52b8b7f5
32. Factor Conditions
Fuente: El Salvador 2008, Kit Investor Information Kit, PROESA
33. Context for Firm
Strategy and Rivalry
Factor (input)
Demand Conditions
Conditions
Related and
Supporting
Industries Government
34. Demand Conditions
• U.S. main carriers outsource about 68% of
their MRO (Maintenance, Repair and
Overhaul). With 80% for low-cost carriers.
• quot;I do think we are going to see more North
American work being done in Asia, Eastern
Europe and Latin America, particularly with
the wide-body aircraft,quot; said Derek Nice, CEO
of ExelTech Aerospace Inc.
Fuente: http://www2.canada.com/montrealgazette/news/business/story.html?id=ebb07a17-0e73-42ba-9892-a36c52b8b7f5
35. Demand Conditions
• Customers: Iberia, LAPA, Aerolíneas Argentinas,
America West and JetBlue.
• Boeing (727, 737, 757 y 767), Airbus (319, 320,
321 y 300).
• Good service, low cost and delivery time.
• Southwest airlines planned to outsource to
Aeroman.
Fuente: http://exploretacaairline.com/esp/article.html?pagesrc=archives&id=456 and http://travel.latimes.com/articles/la-trw-fixplanes30apr30
36. Context for Firm
Strategy and Rivalry
Factor (input)
Demand Conditions
Conditions
Related and
Supporting
Industries Government
37. Context Firm Strategy and Rivalry
Fuente: http://www.weforum.org/en/initiatives/gcp/Global%20Competitiveness%20Report/index.htm
38. Context Firm Strategy and Rivalry
Fuente: http://www.weforum.org/en/initiatives/gcp/Global%20Competitiveness%20Report/index.htm
39. Context for Firm
Strategy and Rivalry
Factor (input)
Demand Conditions
Conditions
Related and
Supporting
Industries Government
40. Related Industries
• Universities
• Airlines
• Tourism
• Airport Facilities
• Free Zones
Fuente: http://www.elsalvador.travel/
41. Context for Firm
Strategy and Rivalry
Factor (input)
Demand Conditions
Conditions
Related and
Supporting
Industries Government
42. Government
• Investment Law to encourage specially FDI.
• Benefits:
– Include friendly procedures.
– Equal treatment for all investors.
– Liberty to make investment.
– Transference of founds abroad.
– Access to local financing.
– Property protection and security.
– Creation of the National Office of Investment (ONI) as
a dependency of the Ministry of Economy.
Fuente: El Salvador 2008, Kit Investor Information Kit, PROESA
43. Government
• International Services Law.
• Benefits:
– Exemption of tariffs and duties in the introduction
of machinery.
– Income tax exemption.
– Exemption of municipal taxes on the company.
– Exemption of VAT for the purchase of goods and
services.
Fuente: El Salvador 2008, Kit Investor Information Kit, PROESA
44. Government
• Free Zones Law.
• Benefits:
– Income tax exemption.
– Municipal tax exemption on the assets.
– Tax exemption on real estate transfer.
– Tax exemption on imports of machinery, lubricant
and fuel not produced in the country.
– Free admision of raw materials.
– No limits on foreign capital.
Fuente: El Salvador 2008, Kit Investor Information Kit, PROESA
46. Recommendations
• PROESA has to play an important role attracting
more companies related to the cluster
• Plan to develop a new engineer career focus on
aircraft technical maintenance
• Incentives to locate new companies closer to the
airport
• Incentives to generate more competition between
airlines to increase the demand for services to the
cluster
47. Recommendations
• Keep Attracting important world aviation institutions
to train local universities in aviation knowledge
• Implement English programs since first school years
• Promote exchange programs with other prestige
institutions with MRO knowledge
• The government has to make a better effort to
improve security to promote FDI
48. Conclusions
• The country has comparative advantages like
geographic location
• Competitive advantages like the experience curve of
more than 20 years
• The cluster must continue to attract companies that
can add more value
