Mro market opportunities for canadian firms in mexico 2011

Maintenance, Repair and Overhaul (MRO)
Market and Business Opportunities for Canadian
Companies in Mexico’s Aerospace Industry
Report Prepared for
the Canadian Embassy in Mexico
Mexico City, Mexico
February, 2011
This document may not be fully accessible. For an accessible version, please
visit http://www.tradecommissioner.gc.ca/eng/document.jsp?did=119898

Table of Contents
EXECUTIVE SUMMARY 3
INTRODUCTION 4
1. The Aerospace Industry in Mexico 5
1.1 Statistical overview 5
2. Mexico, a place to do business 9
2.1 Economic overview and political outlook 9
2.2 Foreign companies with MRO agreements in Mexico 12
2.3 BASA, NAFTA and other FTAs and their impacts on companies doing
MRO in Mexico 13
3. Mexico’s air services sector 14
3.1 Global aerospace sector: where does Mexico fit? 14
3.2 Key MRO players in Mexico; key competitors in other countries 17
3.3 Airports and MRO clusters throughout Mexico and future developments 25
3.4 R&D and innovations in related MRO sectors 27
4. Mexico’s policies and investment incentives 28
4.1 Mexico’s policies for the aerospace sector: SCT, Ministry of Economy,
ProMexico, National Council on Science and Technology, State governments 28
4.2 Federal and State Government incentives for attracting MRO companies to
Mexico 30
5. Business opportunities 31
5.1 Repair stations (DGAC and FAA certification); key players
(competitors and potential partners) and their client structure 31
5.2 Challenges and trends for new entrants to the sector 37
5.3 Business opportunities in the MRO sector in Mexico 38
5.4 Segments/niches where there is a need for MRO companies 41
5.5 Future development of the aerospace sector in Mexico as linked to business
opportunities 43
5.6 Key contacts with potential partners by type of MRO 44
5.7 MRO procurement for government, civil, commercial and military MRO 44
6. How to do business in the MRO sector in Mexico 44
6.1 Main access strategies 44
6.2 Preferred business processes 48
6.3 Do’s and don’ts when participating in bids 49
ANNEX 1. Key contacts with potential partners by type of MRO 51
ANNEX 2. Key contacts related to commercial, military and large corporate /
private fleets 53
ANNEX 3. Bankruptcy of Mexicana de Aviación 56
ANNEX 4. Selected Bibliography 57
ANNEX 5. Survey 59

Executive Summary
The aerospace sector is the fastest growing manufacturing industry in Mexico. It offers
business opportunities to foreign MRO services companies. This Report is intended to inform
Canadian companies interested in developing or expanding their MRO business in Mexico.
1. THE AEROSPACE INDUSTRY IN MEXICO. Between 2005 and 2010, the number of
aerospace companies in Mexico increased by almost 400 percent, from 61 to 241. Currently,
there are 23 certified MRO companies operating in the country. Mexico’s biggest competitive
advantages are its location and lower wages for aviation technicians. Mexico offers an excellent
opportunity niche for MRO projects with current and future airlines’ fleets. Three factors point
to a good outlook for the sector in 2011: the restoration of the Category 1 in the FAA’s safety
rating in December 2010, the eventual return of Mexicana airline to the skies, and significant
investments announced by several Mexican airlines in the expansion of their fleets.
2. MEXICO – A PLACE TO DO BUSINESS. MRO companies from the U.S., Canada, Spain
and France are already doing business in Mexico. The Bilateral Aviation Safety Agreement
(BASA) in place since 2007 permits Mexico’s aeronautical authority to certify parts,
components, aeronautical systems and even complete aircraft manufactured and assembled in
Mexico destined to the U.S. and other markets. In accordance with NAFTA, Mexico allows the
duty free import of raw materials and inputs when the companies involved have the Certificate
of Approval for Production issued by the Ministry of Communications and Transportation.
3. MEXICO’S AIR SERVICES SECTOR. Mexico is considered to be one of the most
promissory emerging MRO hubs in the world as heavy airframe maintenance, a labor intensive
activity, is being developed by major OEMs. There are 5 main MRO players in Mexico: 2
linked to local airlines Aeroméxico and Mexicana* and 3 independent (ITR, Snecma and
Messier Services) with operations in eight states throughout the country. Innovation and
technology activities in the MRO sector are highly concentrated in Mexico City, Guadalajara,
Monterrey, Querétaro and Tijuana.
* Mexicana de Aviación file for bankruptcy in August 2010 and is presently under
restructuration which may lead to the return of the company into the market in 2011.
4. MEXICO’S POLICIES AND INVESTMENT INCENTIVES. Mexico offers fiscal, R&D,
certification, labor training and other types of incentives to attract FDI to the MRO sector.
5. BUSINESS OPPORTUNITIES. Canadian MRO companies could work with local airlines
planning to expand their fleets and outsourcing required MRO services, and with international
airlines formerly served by Mexicana MRO Services. They may also expand MRO services to
the private aircraft fleet since only a handful of local MRO repair stations have international
certifications. Public sector (federal agencies and state governments) as well as the military
sector are also important potential markets for MRO services in Mexico that will grow in the
future. Possible opportunities to explore include, among others, partnerships or alliances
between Canadian companies and Canadian and/or U.S. companies dedicated to aircraft
inventory management and services, to offer integrated packages to repair stations.
6. HOW TO DO BUSINESS IN MEXICO. Alternative entry strategies for Canadian MRO
companies are: local partnering, JV with regional companies and going it alone. When
participating in government procurement the main do’s include preparation, lobbying, emphasis
on innovation, access to local networks and local partnerships. Canadian companies must
evaluate their core competencies and choose their segments carefully.

Introduction
The aerospace industry in Mexico has been one of the most dynamic sectors. In the last five
years, the number of companies operating in the sector increased by almost 400 per cent to
reach 241. Some key international aviation firms have a presence in the Mexican marketplace
such as Bombardier. From 2002 to 2009, exports increased at an annual rate of 14 per cent, to
reach around USD$4 billion in 2010. Mexico has rapidly developed its capacity for aerospace
manufacturing including the development of engineering and design capabilities for military
and civil applications. Also, it has launched several large infrastructure projects for airport
development and airport expansion which will sustain the growth of the aviation industry over
the next years. According to the Mexican Aerospace Federation (FEMIA), Mexico is the 10th
largest supplier of aviation equipment to the U.S, ahead of China, Singapore, Taiwan and
Malaysia, and has the second largest fleet of private aircraft after the U.S.
In 2007, Mexico and the U.S. signed a Bilateral Aviation Safety Agreement (BASA) which
fully certified Mexican parts production and components of aeronautical systems and even
assembly of complete aircraft. As a result of the BASA, Mexico is attracting the interest of
foreign aerospace companies including Canadian companies, which are expected to invest in the
country to establish their production bases to provide for the North American and European
markets. In addition to the fact that labor costs in Mexico are lower than in Canada, benefits in
the procurement of parts and components and the export of finished products given by the North
American Free Trade Agreement (NAFTA) are also drivers for Canadian interest in investing in
Mexico since exports of aerospace components enjoy duty free access to Canada and the U.S.
The sector offers growing business possibilities for companies interested, particularly in the
areas of aircraft parts and spare parts, aviation services (including MRO services), airport
systems, and airport ground equipment.
The Canadian Embassy commissioned Americompass to prepare a Report on the MRO Market
and Business Opportunities for Canadian Companies in Mexico’s Aerospace Industry. A first
version and its PPT presentation were delivered on August 2010 when the Mexican aviation
sector was going through important changes, including the bankruptcy of Mexicana de
Aviación* and the downgrade of its aviation safety rating by the FAA. Now that this sector
seems to enter a period of recovery and increasing growth, the documents have been updated in
order to better inform Canadian companies interested in exploring, developing or expanding
MRO business in Mexico.
____________________________
* Mexicana de Aviación file for bankruptcy in August 2010 and is presently under
restructuration which may lead to the return of the company into the market in 2011.

5
1. THE AEROSPACE INDUSTRY IN MEXICO
1.1 Statistical overview
Recent evolution. The first aerospace company, WAS, set up a plant in Mexicali, Baja
California in 1969. A few small and medium companies followed the trend in the 80’s and 90’s.
After the signing of NAFTA in 1994, the Mexican aerospace industry experienced an
accelerated development. In a first stage (mid-90’s to 2005), the Mexican industry did simple
assembly and manufacturing of individual parts and components. In the last five years, it
evolved toward a second stage with the production of fuselages and landing-gear systems.
Domestic production. The aerospace sector is the fastest growing manufacturing industry in
Mexico. Between 2005 and 2010, the number of aerospace companies in Mexico increased by
almost 400 percent, from 61 to 241, 80 percent in manufacturing operations, 10 percent in
engineering, design and education and 10 percent to MRO. Major Tier 1 suppliers and OEMs
are Bombardier, Aernnova and ITR. Most firms are Tier 2 suppliers in the following sub-
sectors:
Manufacturing and assembly (192 companies):
Machining: 3-5 axis, milling, turning, grinding, EDM
Sheet metal fabrication: CNC punching, bending, tube bending, hydroforming,
welding-fusion/spot, assembly
Composite: Insulation blanker, pre-preg/hand layer composites and compression
molded
Electrical/Electronic: Harnesses, PCB, connectors
Engineered raw materials: Investment castings, ring, forging
Coatings: Tin plating, anodizing (chromic, sulfuric and hard coat), Chem fil,
passivation NDT: FPI, MPI, X-ray; Heat treat - Induction, vacuum annealing.
Engineering services and R&D (24 companies):
Assembly: Fuselages and structures
Design of aeronautical components, both for military and civil applications
Electronics: testing and prototype development and design
Systems integration
Software development services.
MRO services (23 certified companies):
Airfold repairs
Turbines and engines
Auxiliary power units (APU)
Airframes
Electric and electronic systems
Landing systems
Dynamic components
Propellers

6
Coverings, corrosion and protection
Interior arrangement and redesign1
.
Two thirds of companies in the Mexican aerospace industry are foreign owned (U.S., Canadian
and European).
Location. There are five aerospace regional clusters in the country encompassing 16 states:
Northwest: Baja California (50 companies), Sonora (39), Chihuahua (17)
Northeast: Coahuila (6), Nuevo León (21), Tamaulipas (10)
West: Aguascalientes (2), Jalisco (8), Zacatecas (1)
Center: Distrito Federal (7), Estado de México (5), Querétaro (19), San Luis Potosí
(6), Puebla (3)
South-Southeast: Yucatán (3), Guerrero (1)2
.
Employment. Aerospace companies employ around 30,000 people (2009e) and offer around
81,000 indirect jobs. 15 companies have over 500 employees: 8 in Baja California, 2 in
Chihuahua, 3 in Querétaro, 1 in Coahuila and 1 in Tamaulipas.
Foreign Trade. As shown in Table 1, since 2002 Mexico has been a net exporter of aerospace
goods and services with a surplus of USD$1.1 billion estimated for 2010.
Table 1
Mexico – Trade Aerospace Industry
(Million USD)
Source: FEMIA and Bombardier
Exports. Total Mexican exports of aeronautical components and engineering designs were
valued at USD$1.2 billion in 2002 and grew to USD$3.4 billion in 2008 (60% increase over the
period). Exports increased to over USD$4 billion in 2010. Most aeronautical parts and
components made in Mexico are intended for the U.S. market (81%), followed by France and
Germany (with 2.8% each), and Canada and the UK (with a share of 2.6% each).
Imports. Total Mexican imports in the aerospace industry reached close to USD$ 2.8 billion in
2009. The U.S. exported 72.5% of this total to Mexico. Mexico is the 10th
largest export market
for the U.S. Mexican aerospace imports are spread evenly between aircraft and aircraft parts,
aero-engines and avionics. According to FEMIA, the total Mexican market for spare parts is
estimated at USD$ 1.8 billion. In 2009, the top 9 Mexican imports of aircraft and aircraft parts
were: general merchandise to manufacture aircraft, turbo-reactors, reactor jet planes,
1
Proméxico, Mexico Landing for Success, 2009-2010 Edition
2
Miguel Horcasitas, “Aerospace Clusters in Mexico: Choosing the Right Location”, April 7 2010,
available at www.americanindustriesgroup.com
2002 2003 2004 2005 2006 2007 2008 2009 2010e
Exports 1266 1342 1299 1674 2029 2728 3300 3400 4050
Imports 1051 961 1055 923 1271 1924 2425 2378 2894
Balance 215 381 244 751 758 804 875 1022 1156

7
helicopters, aluminum parts for aircraft, air & space navigation instruments & equipment,
aircraft circuit selectors, aircraft switchboards and single engine aircraft3
.
Canada-Mexico trade. According to Statistics Canada, total aerospace exports to Mexico
amounted to USD$4.6 billion in 2007, while statistics from the Ministry of Economy show that
Mexico’s imports from Canada were USD$7.9 billion in the same year4
. Imports by Mexico
from Canada are mainly aircraft and spare parts. See Charts 1 and 2 below.
Charts 1 and 2: Canada-Mexico Aerospace Trade
Sources: Statistics Canada and Ministry of the Economy, Mexico
Investment
For foreign investors in the aviation sector, Mexico’s biggest competitive advantage is its
location. For years, major aerospace manufacturers used to send a growing share of their work
to suppliers in Japan, China and elsewhere. But these arrangements made it a challenge to get
finished components back to the companies. Many U.S. aerospace companies decided to build
capacity in Mexico to feed the industry’s production hub in Southern California. Mexico’s
closeness to the largest market in the aerospace industry – 7 out of 10 aircraft are manufactured
in the U.S. – allows for rapid adaptations of products and parts and delivery to North American
customers in less than a week as well as easy reach at a time when aerospace giants are under
pressure to hit deadlines and deliver new aircraft to customers.
3
FEMIA-SCT, “Consulta Abierta para Definir la Nueva Política Aeronáutica Nacional”, October 2010,
and Promexico “Mexican Aerospace Industry: Reaching Higher Altitude”, Negocios, October 2010
4
The main reason for the large difference in trade figures between Canada and Mexico in both directions
of trade is transshipment. Canadian goods shipped to Mexico via the U.S. are often recorded as exports to
the U.S. in Canadian trade statistics, while in Mexican statistics these imports are correctly recorded as
originating in Canada. Frequently, Canadian goods en route to Mexico are shipped through the United
States and consolidated in U.S. destinations before onward shipping to Mexico. These goods are
identified as having the U.S. as their final destination and are therefore not recorded by Statistics Canada
as Canadian exports to Mexico. Mexico, however, records these goods as imports from Canada.
CANADA: AEROSPACE EXPORTS TO
MEXICO (HS 88, USD$Million)
0
20
40
60
80
100
120
140
160
2003 2004 2005 2006 2007 2008
Parts Other 88 Pwred aircraft,Spcra
MEXICO: AEROSPACE IMPORTS FROM
CANADA (HS 88, USD$Million)
0
100
200
300
400
2003 2004 2005 2006 2007 2008
Parts Other 88 Pwred aircraft,Spcra

8
Other advantages offered by Mexico are low-cost manufacturing in high-mix/low-volume
production conditions, along with intellectual property protection and near-shore logistics
advantages. In Mexico, wages in manufacturing are a fraction of what workers in other parts of
the developed world earn. Besides, skills burnished through servicing the automotive sector
have been successfully transferred to the aerospace industry.
Safety rating
On July 2010, following an assessment of the country’s civil aviation authority, the FAA
announced that Mexico was not in compliance with international safety standards set by the
International Civil Aviation Organization (ICAO). As a result, the U.S. downgraded Mexico
from a Category 1 to Category 2 rating5
.
The action did not stop flights between the two countries, but it prevented Mexican airlines like
Aeroméxico and Mexicana de Aviación from expanding service to the U.S. Thereon, Mexican
airlines would not be able to carry passengers to or from the U.S. in so-called code-sharing
agreements with U.S. airlines. Mexico's Communications and Transport Ministry said in a
statement that the demotion was due "exclusively to administrative and organizational matters"
— a shortage of flight inspectors — and not a lapse in flight safety itself. It clarified that the
FAA measure did not imply any decline in the safety of civil aviation in Mexico and that
Mexico's airlines were safe and would continue to offer high quality service, comparable to the
highest international standards. Nonetheless, the downgrading was a very negative signal since
only few countries in the world had been given this low category. It portrayed the image that
Mexico was not able to comply with international aviation standards.
Mexican authorities reacted to this measure by allocating a budget of around $500 million pesos
in new equipment and recruitment and training of new inspectors. In December 3, 2010, Mexico
was returned to Category 1 and became the first country to be upgraded in only four months
after losing its rating, behind South Korea which was upgraded six months later. Mexico’s civil
aviation authorities emphasized their country’s commitment to recognizing IATA’s Operational
Safety Audit (IOSA) in its auditing processes. The FAA stated that Mexico had complied with
ICAO standards and had made significant progress in terms of the number and capabilities of
flight inspectors.
Expected development in the next five years
Although it is foreseeable that aircraft sales to airlines around the world will decrease in 2010
and 2011, the airline industry will demand around 15 thousand new aircraft globally. This
represents a significant business opportunity for the Mexican aerospace industry. In particular,
Mexico has an excellent opportunity niche in the aftermarket sector, for major MRO projects of
the airlines’ current and future fleets.
5
A Category 1 rating means the country’s civil aviation authority complies with ICAO standards. A
Category 2 rating means a country either lacks laws or regulations necessary to oversee air carriers in
accordance with international standards, or that its civil aviation authority – equivalent to the FAA for
aviation safety matters – is deficient in one or more areas, such as technical expertise, trained personnel,
record-keeping or inspection procedures. Source: www.faa.gov/about/initiatives/iasa/

9
New investments could reach between USD$5 billion and USD$6 billion in the next ten years.
Most recent examples of such trends include the agreement between Mitsubishi Heavy
Industries and Bombardier to transfer the manufacturing of certain Q400 aircraft model
components (rudder, elevator and horizontal stabilizer) to Bombardier’s facility in Mexico. As a
result, Mexican exports in this sector could grow from less than 1 percent of the U.S. aerospace
market today to around 6 percent of the U.S. market, or USD$2.8 billion by 2017. Employment
in the sector could reach 37,000 people in the next 5 years.6
Mexico has identified two strategic innovation sites for the aerospace industry – Querétaro and
Baja California – that will meet the capacities of the two manufacturing corridors in the country:
the Pacific Corridor and the Center/Northeast Corridor. The Pacific corridor will specialize in
the manufacturing of complex components (avionics) to optimize the supply chain linked to the
California-Seattle corridor. The Center-Northeast corridor will be associated with the super-
corridors of Texas-New England-Montreal where some of the large OEMs already are located
or will establish themselves, to develop highly complex assemblies and ultimately an aircraft
manufactured in Mexico with a high national content.
Querétaro is home to the prime aerospace cluster in Mexico and to the first and only National
Aeronautical University and Aerospace Industrial Park inside an international airport. The
aerospace cluster has flourished in Querétaro for five reasons: its privileged location, qualified
workforce, quality of life, infrastructure, and its productive integration with more than 600
industries with foreign investment. Aernova, General Electric and Bombardier are among the 12
companies operating in the cluster.
Baja California has more than 40 years of experience in aerospace. The state has the largest
concentration of aerospace companies nationwide. This is due mainly to the supply chain
proximity to California and Arizona and the availability of high quality labor force. The state
also has a strong competitive advantage in terms of infrastructure (highways connecting the
Mexican to the U.S. market, major cargo seaports, international airports, railway services and
direct border crossing sites with six ports of entry to the U.S.) The most emblematic aerospace
firms in BC include Honeywell, Lockheed Martin, and Gulfstream, among others.
2. MEXICO – A PLACE TO DO BUSINESS
2.1 Economic Overview
Economic recovery enters Phase III: improved domestic demand. Mexico’s recent
economic recovery has gone through three phases. Back in 2008/2009, Mexico experienced a
sharp decline in manufacturing activity—similar to what was experienced in the US. This led to
a massive loss of jobs that eventually (two quarters subsequently) hurt domestic demand. In
2009, Mexico saw a rebound of manufacturing activity (Phase I) that strengthened the labor
market and helped stabilize domestic conditions (Phase II). Now it is expected that domestic
demand will gain momentum, particularly in 2011-2012 (Phase III).
6
“Industria Aeroespacial, el Reto que Sigue”, Informe Especial, El Financiero, December 10, 2010, p. 24

10
Manufacturing activity continues to drive Mexico’s economic recovery. There is a
consensus that the worst of the contraction is over. As shown in Table 2, Mexico’s economic
activity is now trending upward and the consensus among analysts is that it reached a yearly
growth rate of 4.7 percent in 2010. The auto industry is believed to be the key to Mexico’s
emergence from the recession in 2009, particularly as several automakers across the world have
reallocated part of their production to Mexico to benefit from a weaker peso, skilled Mexican
labor, and the country’s strategic geographic location. Despite the rebound of manufacturing
activity since 2H09 and the fact that this has improved labor market conditions, domestic
demand is picking up slowly and growth is mostly externally driven. It is expected that
manufacturing activity will maintain an upward trend, boosting job creation, and permeating
into domestic consumption during 2011.
Table 2
Mexico: Main Economic Indicators
2003-
2007 2008 2009 2010 2011e
Real GDP, % change 3.4 1.5 -6.5 4.78 3.9
Consumption 3.1 1.1 -5.7 2.8 3.9
Investment 0.6 1.4 -2.6 2.1 1.5
Net trade -0.3 -1 1.7 -0.3 -1.9
Consumer prices, % Dec/Dec 4.1 6.5 3.6 4.26 3.88
Government balance, % of GDP -1.4 -2 -2.3 -2.8 -2.2
Exchange rate (units MXN/USD) 10.93 13.84 13.06 12.25 12.50
Merchandise trade balance (US$
bn) -7.7 -17.3 -4.7 -10 -18.9
Exports 217.8 291.3 220.7 258.4 281.7
Imports 225.4 308.6 234.4 268.4 300.6
Current account balance -5.9 -15.8 -5.9 -8.3 -14.8
% of GDP -0.7 -1.5 -0.7 0.8 -1.5
International reserves 66.7 85.4 98.7 107.7 112.7
Total external debt, (US$ bn) 175.6 195.7 193.7 188.7 188.7
Total external debt, % of GDP 20.4 17.5 22.8 19.1 18.5
Total external debt, % of exports 66.9 55.5 72.3 62.6 56.6
Interest payments, % of exports 4.9 4.2 5.9 5.4 4.7
Source: Banxico, JP Morgan
Growth without inflation. Inflation increased to 4.26% percent level in 2010, from 3.57% a
year earlier, due to implementation of the tax reform and rises in administered prices, and a
decrease to 3.8% is expected in 2011. The expectation is for the Central Bank to keep interest
rates unchanged probably throughout 2011.
Limited effects of the Euro area sovereign crisis. There is not much concern about the
potential impact of slower demand from Eurozone countries, as they just account for slightly
more than 5% of Mexico’s total exports.

11
Recovery in tax revenues but fall in oil income. Thanks to revenue from the oil industry,
Mexico’s governments have traditionally collected little tax. Despite recent fiscal reforms,
federal tax revenue amounts to only 11% of GDP, among the lowest in the world. But oil output
is falling rapidly, mainly because of an accelerated depletion of the Cantarell oilfield and a
constitutional ban on private investment in energy; oil income will probably continue falling in
2011. Even though the public debt is only 30.2% of GDP, the budget is tightening the belt by
raising taxes by 1% of GDP and cutting spending. The Secretariat of Finance estimates that
income per head will not recover its level of 2008 until 2012.
Strengthening of the peso ahead. The Mexican peso appreciated by 7.87% against the dollar
in 2010 mainly by increasing exports to its largest trading partner and larger inflows of foreign
capital. The trend is expected to continue in 2011 as a result of stronger U.S. growth, increase in
public infrastructure investment and rebounding of domestic consumer spending.
Political Outlook
President Calderon’s agenda for the remainder of his administration. President Felipe
Calderon’s agenda for the remainder of his six-year term that ends in 2012 includes more
comprehensive structural reforms. After mid-term elections in 2009, when the opposition
Institutional Revolutionary Party (PRI) regained a congressional majority, an ambitious 10-
point agenda for reform was announced by the president. The downside is that his power to
achieve it has waned: with only 143 of the 500 seats in the lower house, his party, the National
Action Party (PAN), cannot even sustain a presidential veto.
Ever since 2000, when Vicente Fox and the PAN ended seven decades of rule by the PRI, there
has been a broad consensus that Mexico needs a thorough reform of its corporatist institutions
and its oligopolistic economy if it is to create a vigorous, prosperous democracy. But the
opposition has been reluctant to forfeit short-term advantage or anger privileged insiders – from
teachers to television companies – by helping the government pass legislation. President
Calderón has tried to push through deep reforms – of the state oil company, the tax system, the
labor law and education, among others – but in most cases they ended up as diluted reforms.
The last cabinet changes seeked to cement his authority. For instance, the current head of
Pemex, who was appointed in September, 2009, has a private-sector background but also ties to
a different PRI faction, which suggests that Mr Calderón tried to stretch the limited scope for
private investment in oil contemplated by the energy reform.
National security. Mr Calderón’s crusade against Mexico’s powerful drug gangs has prompted
vicious turf wars in cities throughout Mexico. Although most of around 30,000 killed since
2006 appear to have been gangsters slaughtered by their rivals and some innocent people,
partisan squabbling between the president and the PRI has been on the rise and public support
for the crusade against drug traffic has waned.
Elections 2010. The PRI was expecting a clean sweep in the July 4 2010 elections. But instead
of winning the 12 governorships at stake, the PRI lost in three of the most important states in
play (Puebla, Oaxaca and Sinaloa), where its rule was marked by corruption and cronyism. The
result seemed to have justified Mr Calderón’s decision to forge local alliances with the left-of-
centre Party of the Democratic Revolution, with which he agrees about little else except

12
opposition to the PRI. But as The Economist noted, this vote opened up new possibilities in a
previously paralyzed system7
.
The PRI’s priority is to win back the presidency in 2012 and this requires walking a political
tightrope. Unconditional support for Mr Calderón’s programme would both strengthen the
president and burden the PRI with the cost of unpopular reforms. But uniform opposition would
expose the party to the charge of putting partisan advantage ahead of the national interest at a
difficult time for the country. The PRI’s attitude toward substantive reforms, such as another
energy law or modernising the political system, will depend in part on the battle inside the party
for its presidential candidacy.
Elections 2012. The challenge for the upcoming presidential elections in 2012 is for all three
parties, but especially the PRI and the PAN, to hammer out a set of political reforms which
would give the next president a reasonable chance of carrying out his mandate. Otherwise
Mexico risks continued gridlock, deeper disillusion with democracy and more violence.
In an effort to tighten the grip in the fight against violence and the promotion of a stronger
domestic market, immediately after the July 4th
2010 elections President Calderon replaced his
cabinet chief as well as the interior and the economy ministers. There is little doubt that this
reshuffle, as well as additional cabinet changes in January 2011, were aimed at improving his
relations with the parties in Congress, increase the chances of passing reforms, and consolidate
economic recovery.
2.2 Foreign companies with MRO agreements in Mexico
Table 3 includes some examples of foreign companies with facilities in Mexico which have
MRO agreements in place and the companies which MRO their planes in Mexico.
Table 3
Companies with MRO agreements in Mexico
Country Company w/facilities in Mexico
involved in MRO agreement
Company that MRO their
planes in Mexico
Canada Pratt&Whitney-ITR International Aero Engines,
GE, Rolls-Royce, CFMI (JV
between GE Aviation &
Snecma)
Spain ITR Airbus & Boeing
France Snecma Airbus & Boeing
France Messier Services Boeing & Bombardier
Source: Own research
7
“As you were”, The Economist, July 5 2010

13
2.3 BASA, NAFTA and other FTAs – how they impact on companies doing MRO in
Mexico (ex: labor, import of parts, etc.).
BASA
In September 2007, Mexico and the U.S. signed a Bilateral Aviation Safety Agreement
(BASA). With the BASA in place, Mexico’s aeronautical authority (Dirección General de
Aeronáutica Civil, DGAC) is able to certify parts, components, aeronautical systems and even
complete aircraft manufactured and assembled in Mexico destined for the U.S. and other
markets, in accordance with U.S. standards and in compliance with Federal Aviation
Administration (FAA) regulation.
Some implications of the U.S.-Mexico BASA have been the following:
1) both countries accept each other’s approvals and monitoring of maintenance and
modification of facilities, training of personnel, flight crew members, aviation
training establishments and flight operations;
2) there is reciprocal acceptance of airworthiness certification between Mexico and
other countries with BASA certification;
3) there is a significant cost reduction, especially for companies importing parts and
components to be converted into systems or aircraft sections;
4) BASA helps to streamline production and avoid costly secondary reviews.
The signing of BASA became an incentive for more foreign companies to set up shop in
Mexico. Some of the Tier 2-3 companies (e.g. MD Helicopters) have been able to obtain
AS9100 as well as NADCAP certification. In October 2009, ITR certified the first product in
Mexico under BASA and obtained the Letter of Approval of Design which allows the company
to export its product to the U.S.
The DGAC and the FAA are currently working on the procedures for implementation of the
BASA in the following cases:
Air Worthiness (IPA) – To comply with the certification of products designed and
manufactured in Mexico in accordance with U.S. standards
Maintenance Implementation Procedures (MIP) – To certify labs
Simulators certification (SIP) – To certify simulators
Environmental approvals and scenarios (EIP) – To certify environmental procedures
Training Implementation Program (TIP) – To set up centers for the training and
certification of personnel
Currently, such an agreement does not exist with Canada. A Technical Arrangement
(TA), described below, is being negotiated which will allow for a more efficient transfer
of products and components manufactured in Mexico.
In 2010, Transport Canada Civil Aviation (TCCA) officials met with the Mexico
DGAC (Dirección General de Aeronáutica Civil) officials on three occasions resulting
in agreement to proceed with work towards an aviation agreement and discussion

14
of steps involved with the process. In addition, the two aviation authorities exchanged
letters confirming the intent to move forward with a Technical Arrangement (TA). The
scope of the TA is anticipated to include maintenance organizations and parts design
and manufacturing approvals. Traditionally, TCCA's approach has been to start with an
aviation authority level TA with a long term goal to negotiate a BASA (treaty). The next
step, now in progress, involves information exchange which will allow completion of a
gap analysis of each authorities' regulations and supporting infrastructure. This will be
followed by a face-to-face meeting to discuss any discrepancies. TCCA officials will
meet with DGAC officials in March 2011 to continue discussions on this initiative.
NAFTA
Signed in 1994, NAFTA allowed Canadian and Mexican companies open access to each other’s
market. The main purpose of the agreement was the elimination of quotas and the gradual
decrease in import taxes on non-oil exports from Mexico in a maximum period of 15 years.
In order to deal with the vast amounts of raw materials and inputs required by the aeronautic
and airspace industries, Mexico introduced the tariffs 9806.00.05 and 9806.00.06 in Chapter 98
of Special Operations of the Tariff of General Import and Export Taxes (LTGIE), entitled
"Merchandises for the Assembly and Manufacturing of Aircraft and Aircraft parts". These
tariffs allow the duty free import of said raw materials and inputs when the companies involved
have the Certificate of Approval for Production issued by the Ministry of Communications and
Transportation.
Other FTAs
Mexico has the world’s largest network of free trade agreements: including NAFTA, Mexico
has reached 12 agreements with 44 countries including the European Union and Japan.
3. MEXICO’S AIR SERVICES SECTOR
3.1 Global aerospace sector: where does Mexico fit?
According to recent estimates included in Table 4 below, the global aerospace industry is worth
an estimated USD$450 billion. Mexico ranks 15th
overall in industry size, being also the 14th
largest economy as measured by GDP. Based on an industry revenue estimated at around
USD$3 billion, Mexico has a share of 0.67 percent of the global aerospace industry, compared
to 5 percent in the case of Canada.

15
Table 4
Mexico’s Ranking in the Global Aerospace Industry
Ranking Country Revenue
(USD)
1 USA $204
2 France $50.4
3 UK $32.7
4 Germany $32.1
5 Canada $22.3
6 Japan $14.1
7 China $12.0
8 Russia $10.0
9 Italy $9.9
10 Brasil $7.6
11 Spain $6.1
12 Singapore $4.3
13 India $4.0
14 Netherlands $3.4
15 Mexico $3.0
16 Others $4.2
TOTAL $450
Source: Aerospace Globalization 2.0: Implications for Canada’s Aerospace Industry,
A Discussion Paper, November 2009
According to a report by AeroStrategy Management Consulting in 20098
, Mexico was among
the top 9 countries in terms of aerospace total investments but first in manufacturing
investments (USD $33 billion in the last 20 years), ahead of the U.S. and the BRICs and 6th in
engineering – Russia and India have deep engineering pools. In 2008, estimated investment in
new plants amounted to USD$867 million, and between USD$1.2 and $1.5 billion in 2009 and
2010. For Deloitte, this industry has a great potential in Mexico. Such is its importance: "This
sector (aviation) will receive USD$200 million in loans in 2010, according to the financing
program of the National Bank of Foreign Trade for aeronautical sector"9
.
8
AeroStrategy Management Consulting, “Aerospace Globalization 2.0: The Next Stage”, September
2009, available at http://www.aerostrategy.com/downloads/commentaries/commentary_sept09.pdf
9
Deloitte, "Manteniéndose firme: Perspectiva de mitad de año 2010 para el sector global aeroespacial y
de defensa", cited by www.CNNEXPANSION.com, July 26, 2010.

16
Charts 3 and 4: Global Aerospace Investments in Manufacturing and Engineering
Source: Management Consulting, “Aerospace Globalization 2.0: The Next Stage”, September 2009
Figure 1: Global MRO Aviation Clusters
Source: Aerospace
In MRO, Mexico is considered to be one of the most promissory emerging hubs as airframe
heavy maintenance, a labor intensive activity, is being developed there by major OEMs (See
Figure 1 above). The Mexican MRO cluster complements existing MRO clusters in Southern
California, the Central U.S., South Florida and Quebec.
Out of total Latin MRO demand of USD$2.2 billion in 2009, Mexico is estimated to represent
around 23% (USD$506 million)10
, behind Brazil with 29% (USD$638 million).
10
Bill Bihlman, Latin America Air Transport MRO An Update and Forecast, Latin America & Caribbean
Airline Maintenance & Purchasing Conference, Mexico City, December 8 2010, p. 8
AEROSPACE INVESTMENTS - MANUFACTURING
(USD$Billion)
0
5
10
15
20
25
30
35
M
exico
China
USA
Russia
India
PolandM
alaysia
JapanM
orocco
AEROSPACE INVESTMENTS - ENGINEERING -
R&D (USD$Bilion)
0
5
10
15
20
Russia
USA
IndiaSingapur
KoreaM
exico
China
Japan
Brazil

17
Within the global value chain of North American and European OEMs, Mexico has a clear
comparative advantage as an MRO service provider, mainly for airframe heavy maintenance for
several reasons:
Location. The proximity to U.S. and Canadian aerospace supply chains facilitates
reliable, low-cost ground transportation. Mexico’s closeness to the largest market in
the aerospace industry – 7 out of 10 aircrafts that are sold in the markets are
manufactured there – allows for rapid adaptations of products and parts and delivery
to North American customers in less than a week.
Competitive costs. According to a recent comparison of the current industry
leaders, companies established in Mexico can save up to 30 percent in operation
costs11
.
Qualified labor force. Mexico has a good supply of skilled and experienced
aviation technicians and a low-cost, dependable, and skilled labor force, as
evidenced by Mexico’s strong record in the automotive and consumer electronics
industries.
Experience. The performance and credibility of Mexican repair stations has been
clearly demonstrated by the experiences in which maintenance works have migrated
from the U.S. to Mexico such as the Aeroméxico facility which supports the fleet of
MDs80 of Delta Airlines or Messier-Dowty which repairs the landing gear in
Querétaro, among others.12
Completion of the United States–Mexico BASA which lets manufacturers to
certify and ship components directly from Mexican factories.
Confidence in Mexico’s willingness to protect intellectual property. Since the
signing of NAFTA, Mexico has made a strong commitment to protect intellectual
property rights.
Mexico’s elimination of duties for aeronautic components.
3.2 Key MRO players in Mexico, key competitors in other countries
Commercial
The following table lists the key MRO players that can provide services to third-parties in
Mexico:
11
KPMG, “Competitive Alternatives 2010”, available at www.competitivealternatives.com
12
See Navarro Jesús, “Retos y Oportunidades para los Talleres Aeronáuticos en México”, Academia de
Ingeniería México, México, December 2, 2010, p. 13

18
Table 5
Mexico’s Leading MRO Service Providers
Company Country
of Origin
Location Opening Work-
force
Key Customers
1.Aeroméxico Mexico Mexico
City,
Monterrey
2006 n.d. Exclusive heavy
airframe for Delta
MD88s
2. Mexicana MRO
Services*
Mexico Mexico C.
Guadalajara
1997 1700 Air France, Air Jamaica
3. ITR
Turboreactores
Spain Querétaro 1998 400 Aeroméxico, Mexicana
SAS
4. SAFRAN
Group
(Snecma America
Engines Services)
France Querétaro 2007 70 Mexicana de Aviación
(20 years exclusive
contract), US Airways
5. SAFRAN
Group
(Messier Services)
France Querétaro 2008 240 Mexicana de Aviación,
Interjet, US Airways,
MESA, LAN
* Prior to bankruptcy
Source: Company brochures & Company presentations at AeroExpo Acapulco, 2009
The Map below shows the location of the main repair stations in Mexico that can provide MRO
services to third-parties in commercial aviation.
Map. 1. Location of the main Mexican repair stations able to provide MRO services to
third-parties in commercial aviation
Source: Navarro Jesús, “Retos y Oportunidades para los Talleres Aeronáuticos en México”, Academia de Ingeniería,
Mexico, December 2, 2010, p. 13

19
MRO services sector in Mexico has had a gradual development. In a first stage, it involved
mainly the overhaul of narrowbody planes operated in the U.S. Mexico’s relatively small MRO
players were focused on maintaining in-house fleets, with a small amount of ad hoc third-party
work on the side. In a second stage, as a growing number of companies invested in the industry,
Mexico was able to develop every segment of MRO services. Examples of recent investments in
the Mexican MRO market include the following:
Snecma Services and ITR–Pratt / Whitney: CFM56 maintenance
Honeywell: Machining and Systems Integration
Messier–Bombardier: Landing gear Shop
Rockwell Collins–IFE Manufacturing: Pratt & Whitney–Thrust Reverser Repair
Shop.13
In the third and most recent stage, Mexican MRO providers have been looking to increase their
third-party business as they add capacity and begin to target more aggressively potential U.S.
customers.
The main capabilities of MRO services providers operating in Mexico are listed in Table 6
below. ITR–Pratt / Whitney is the only player in the engine MRO market segment. Aeroméxico
and Mexicana (the latter prior to its bankruptcy) focus on airframes since they consider that
investment to expand into engine and components is too high.
Table 6
Mexico: Capabilities of Key MRO companies
Company Capabilities
Aeroméxico Empresa
de Mantenimiento
Narrowbody airframe
DC-9, DC-10, MD-80, 727, 737, 757, 767
Mexicana MRO
Services*
Narrowbody airframe
Aircraft: A320 (A318, A319, A320 & A320)
B737 (B737 & B 737NG)
Equipment: A330, B717,727,757 & 767, Bombardier CRJ200,
Fokker 100, McDonnell Douglas DC-9 & MD-80
ITR JT8D-STD, JT8D-200, TPE731, CFM56
Messier Services
America (SAFRAN)
MRO activity for landing gear and associated hydromechanical
systems with Airbus (A300,310,318,319,320 and 321),
Bombardier (CRJ, Dash 8 and Challenger) and Boeing
(B737NGB)
Component services approved by parent OEMs
Maintenance tooling & turnkey services
Spare parts for military landing gear
Technical Assistance and unscheduled support
Snecma America
Engine Services
(SAFRAN-ITR) OEM shop for CFM56 engines (-5A,-5B)
Source: Companies websites
13
See http://www.sh-e.com/presentations/berger_feb07.pdf

20
Following is a brief description of the main MRO companies operating in Mexico.
1) Empresa de Mantenimiento Aéreo, Aeroméxico
In 2006, Aeroméxico established a separate maintenance company within Grupo Aeroméxico
called EMA, which stands for Empresa de Mantenimiento Aéreo, to provide maintenance to
third parties.
In 2008, Aeroméxico opened a new two-line hangar in Guadalajara to offset the return of the
hangar leased from Mexicana de Aviación. The new $10 million “state of the art” hangar gave
EMA the same overall capacity which includes three lines in Guadalajara and three in Mexico
City. Two of the Guadalajara lines are dedicated to Delta Air Lines Boeing MD-80s under a 10-
year arrangement that began in 2006 and involved Aeroméxico overhauling all of Delta’s MD
80s in exchange for Delta TechOps overhauling all of Aeroméxico’s CFM56 engines. As part of
the partnership, Delta TechOps is supposed to help Aeroméxico market its excess airframe
capacity to other third-party customers. Delta TechOps will eventually take an active role in
helping Aeroméxico secure more third-party air frame business. In recent years, Delta MD-80s
have accounted for all of Aeroméxico third-party capacity because its other four airframe
maintenance lines have been eaten up by in-house requirements. But this will change after
Aeroméxico retires the last of its 60 Boeing MD-80s. Boeing MD-80 pre-return heavy checks
have eaten up a significant amount of Aeroméxico's maintenance capacity over the last four
years, but once its fleet renewal program is complete, giving it an average aircraft age of only
6½ years, it will be able to pursue third-party work outside Delta.
2) Mexicana MRO Services
Following is a description of the company as it existed and operated until August 2010 when it
filed for bankruptcy protection under Mexico’s insolvency law.
Mexicana MRO Services was a division of Grupo Mexicana de Aviación with its headquarters
located at the International airport in Mexico City. This division was founded in 1997 due to the
experience of providing integrated maintenance services for the first airline in Latin America
and the fourth oldest in the world. Mexicana MRO Services received aeronautics and ecologic
certification recognized in the industry, such as: DGAC, EASA and SEMARNAT / PROFEPA.
Since privatization in 2005, the company invested substantially in its service offerings. In the
summer of 2010, it aimed to grow third-party work via aircraft overhauls and component work
at a new facility in Guadalajara, and finished implementing an Oracle enterprise resource
planning software suite.
The company had operations in two locations: Mexico City and Guadalajara. In Mexico City,
within a total area of 1,730,139 sq. ft. and 1500 employees, Mexicana MRO Services offered
installations for the following:
Main hangar with 92,505 sq. ft. and a capacity for four positions. This permited totally
independent simultaneous operations with the following configurations: (a) 3 Narrow
Body & 1 Wide Body Aircrafts; and (b) 4 Narrow Body Aircrafts.

21
Painting hangar with 49,503 sq. ft. that operated in accordance with Mexican
environmental standards and with a maximum capacity to receive an aircraft with the
dimensions of a Boeing 767-300.
Totally illuminated platform with 1,568,288 sq. ft. and a capacity for 40 positions, the
largest of which was equipped with external electrical facilities and jet blast defectors.
Aircraft services included Airbus A320 family and A330 aircraft and Boeing 717, 727,
737, 757 and 767 aircraft.
In Guadalajara, within a total area of 1,055,853 sq. ft. and about 200 employees, Mexicana
MRO Services offered installations for the following:
Main hangar with 53,206 sq. ft. and a capacity for two positions. This permited totally
independent simultaneous operations for two narrow body aircraft.
Totally illuminated platform with 1,002,647 sq. ft. and a capacity for more than 10
positions, the largest of which was equipped with external electrical facilities and jet
blast defectors.
A 22,605 sq. ft. warehouse of components and spare materials, an infrastructure based
on planning, buying, logistics and warehousing, which allowed the optimization of time
in repairs.
The two-line base maintained only Mexicana de Aviación aircraft: Airbus A320 family
aircraft, Fokker 100s of domestic operator MexicanaClick and Bombardier CRJ200s
operated by new regional MexicanaLink. Most of it served as the head office and
operational base of MexicanaLink.
Operating under the philosophy of “One Stop Shop”, Mexicana MRO Services offered services
such as: line maintenance (transit services, daily and overnight checks, parking services and
ground handling); base maintenance (A & B checks, unscheduled maintenance); heavy
maintenance (C,D,E, etc. checks, structural & major modifications and repairs); and painting
services (full aircraft pre-paint configuration, strip & paint, scuff / sand & paint, polish,
finishing and detailing, interior painting, customized exterior paint scheme logo design and
application).
Mexicana MRO Services had workshops for total and partial separation and testing of
components for the families of A320, B727 and Fokker 100 for the specialties of avionics,
composites, among others.
In Mexico City, Mexicana had four overhaul lines: two were used for Mexicana and two for
third party customers, but after the second line opened in Guadalajara, most of the capacity in
Mexico City had been available for third-party customers. The Guadalajara facility – which
Mexicana had been leasing to Aeroméxico since 1992 –, had one maintenance line, with a
second opened in September 2009. It had been used to maintain Mexicana’s A320 aircraft and
its new fleet of Bombardier CRJ200s, freeing capacity in Mexico City for third-party work.
Mexicana’s third-party business already accounted for about half of Mexicana MRO’s revenues,
but this was expected to grow following the reopening of a maintenance base in Guadalajara.
Mexicana also joined the Airbus MRO Network, which the carrier hoped would position it to
win more maintenance work from Airbus operators.

22
While Mexicana overhauled nine aircraft types and planed to add three more by mid-2010, the
focus was to have one family of aircraft for third party work, or a maximum of two. A320s
would have continued to be Mexicana’s main third-party product as well as Boeing 737s,
although Mexicana did not operate the latter.
Mexicana MRO used to do 100% of Mexicana's airframe and 60% of its component
maintenance, work accounting for 60-70% of its overall load. Third-party work used to be about
30-40% of its activities, depending on the year. Mexicana MRO’s largest customers were Air
Jamaica (it had been doing all of the airline's work for the last two years), CIT Group, Boeing
Capital Corp., Pegasus Aviation, AWAS Aviation Services and Tame of Ecuador. It also
supported the fleet of Mexico's police force (Policía Federal Preventiva)14
. In March 2009,
Mexicana MRO Services joined the Airbus MRO network.15
Bankruptcy of Mexicana MRO Services
Following is a description of the situation and outlook of the bankruptcy process of Mexicana
MRO Services.
In August 2010, Mexicana MRO filed for bankruptcy in Mexico and cancelled all its
maintenance contracts, including those with Air France and Air Jamaica. In December, the
company was granted bankruptcy protection by a Mexican judge and started the process of
restructuring a total debt of $185.5 million pesos using Mexico’s insolvency law. What this
bankruptcy would mean for Mexicana MRO Services is still unclear. In the meantime, there are
more questions than answers, for example, it is not certain what will happen to its former
customers. For example LAN Chile could be required to send more aircraft to TAM.16
The future of Mexicana’s MRO unit depends on what happens to Mexicana’s fleet. Because
nearly half of Mexicana MRO Services’ work is for other subsidiaries, any downsizing might
result in subsequent cuts to its workload and workforce. Downsizing also would leave routes
and maintenance business with several major carriers such as Air Jamaica, Alaska Airlines and
US Airways open to competitors at a time when Latin America is growing as a center for
commercial aircraft maintenance.
Analysts consider that the most likely scenarios for Mexicana MRO Services in the near future,
once the bankruptcy procedure is over and the debt is restructured, are as follows:
1) Mexicana MRO stays afloat as the maintenance arm of Mexicana de Aviación. In this
case, it could be assumed that Mexicana is able to continue air operations but on a much
smaller scale and keep a few mainline aircraft. As a result, Mexicana MRO would have
to scale down its workforce. The company would have to find ways to raise money and
14
See
http://www.aviationweek.com/aw/jsp_includes/articlePrint.jsp?storyID=news/om1009cvr.xml&headLine
=Latin%20American%20MRO
15
See http://www.mronewsfocus.com/downloads/pdfs/mronewsfocus_mar_09.pdf
16
See Aerostrategy, Latin America Air Transport MRO, an Update and Forecast, December 2010

23
stay afloat. It could sell shop shares to other companies and it could also gain business
as aircraft from the old Mexicana de Aviación are sold or leased to new operators. The
final outcome would be determined to a large extent by the unions. If the company and
the unions are not able to cooperate, it is unlikely that Mexicana MRO will be able to
stay afloat.
2) Mexicana MRO winds up on its own. In this case, the company could seek stability
within a diversified parent company, as Sabena did with TAT Group and SR Technics
has done more recently with Mubadala.
In any case, it seems unlikely that Mexicana MRO will end up with its original size and
capacity. If it is structured at a smaller scale, Canadian MRO companies can step in to cover the
needs of those clients that Mexicana MRO Services would not be able to serve. If the company
survives as a stand alone company, Canadian companies may explore the possibility of
alliances-partnerships.17
3) ITR Turborreactores
ITR Turborreactores is a subsidiary of the Spanish company ITP and a JV with Rolls-Royce.
Incorporated in 1988 and with cumulative investments for USD$48 million to date, ITR has
yearly sales of up to USD$ 78 million. In 2008, ITR and Snecma Services opened a joint
venture within ITR's Querétaro facility known as Snecma America Engine Services (SAMES)
dedicated to the overhaul of CFM-56-5. ITR has specialized on JT8D engines, of which it has
repaired more than 1,000 units. The company has conducted over 3000 internal repairs. 32
repairs have been approved by the OEM and FAA’s DER (Pratt Source approved for NiCd
application on HPC disks). Engines repaired by ITR are currently operating in four continents.
The company is poised towards the integration of design, manufacturing and repair of gas
turbine engines.
Among the MRO capabilities ITR has the following can be cited: complete engine repair and
overhaul, in-house repair of modules, individual components and accessories, overhaul for main
components JT8D-200 & STD, technical assistance in the field and on line, and repair
development.
4) SAFRAN Group
The SAFRAN Group, one of the world’s foremost aerospace companies with four core
businesses of aerospace propulsion, defense security, aerospace equipment and communication,
is the largest aeronautic employer in Mexico and the largest French investor in the country.
In the MRO sector, the Group has two facilities. The Querétaro facility of Messier Services was
completed in January 2007 and provides support for landing gear and hydraulic units
manufactured by its parent companies, Messier-Dowty and Messier-Bugatti and other leading
manufacturers. The purpose-built, self-contained 100,000 square-feet facility with 240
17
See:
http://www.aviationweek.com/aw/generic/story_channel.jsp?channel=mro&id=news/awst/2010/08/16/A
W_08_16_2010_p14-246621.xml

24
employees performs overhauls and component repair services on DHC8, CRJ, Airbus A330/
A340, A300/A310 and the Airbus A320 family and Boeing 737NG aircraft. During the
development phase, the Querétaro facility received support and training from the Messier
Services global network. The DGAC Mexico, FAA and EASA regulatory authorities have
approved the facility to perform landing gear overhaul and hydraulic repair.
The second SAFRAN facility, also in Querétaro, is Snecma Americas Engine Services
(SAMES). This company was incorporated in 2008 as a JV with ITR with 70 employees and is
the OEM shop for CFM56 engines. The company has an exclusive contract with Mexicana, but
also works for Northwest, US Airways. SAMES has capacity to overhaul about 30 engines
annually, but aims to eventually overhaul as many as 200 CFM56s a year. There is ample space
to expand the CFM56 line as demand for ITR’s core product, the JT8D, decreases.18
5) Other
Interjet. The company, which was incorporated in late 2005, opened a maintenance facility in
May 2007 at Mexico City's alternative airport in Toluca with a surface of 100,000 square meters
for repair services and painting of Airbus A320 and A340. The workshop can provide the
following MRO services to third parties: structural services, prevention of corrosion, aging
program, improvement of interiors, repair of landing gear, painting and structural changes to
navigation systems.
Interjet’s maintenance operation secured FAA approval in 2008, authorising it to work on U.S.-
registered A320 family aircraft. Until 2008 it only did work on its own A320 fleet. On August
2009, Interjet completed the first heavy maintenance check for a third party customer. The
company re-delivered an A320 registered to U.S. low-cost carrier Frontier Airlines, an aircraft
owned by Aviation Capital Group and formerly operated by U.S. leisure carrier USA 3000.19
Business
The MRO sector has failed to keep pace with the growth of the business aviation fleet in
Mexico, and the lack of capacity and technical expertise is a frequent complaint of local
operators. Business jet MRO differs from its commercial counterparts because there are more
types, in much smaller numbers and the ways the aircraft are cycled is different. The main
airline-based MRO houses, Mexicana and Aeroméxico, tend to leave business jet maintenance
to specialists because of the low volumes involved and the expertise required rarely justify the
investment. Mexico’s private fleet takes often MRO services in the U.S., mainly in Houston.
Local MRO capability is concentrated in the surroundings of the international airports of
Mexico City, Toluca and Monterrey International Airports. Key players include companies such
as Monterrey Jet Center.
18
See www.safran-group.com
19
See http://www.aeronewsline.biz/t173-mro-actualites

25
Government
Several Mexican agencies with airplanes of their own have their MRO facilities operating under
permit by the DGAC. According to interviews with Aeropuertos y Servicios Auxiliares (ASA),
these agencies send most of their aircraft to MRO abroad. However, the most important
workshops and their respective location are: PGR - Cuernavaca, Morelos; Banco de Mexico -
Mexico City; Comisión Nacional del Agua - Mexico City; Secretaría de Seguridad Pública -
Mexico City; Consejo de Recursos Minerales - Pachuca, Hidalgo; Gobierno del Estado de
Hidalgo - Pachuca, Hgo.; SAGARPA - México D.F.; Policía Federal Preventiva - Mexico City.
Military
Between January and June 2009, the Mexican Air Force (FAM) spent around MXP$ 6.5 million
in the maintenance, disassembly and overhaul, repair and calibration of 11 aircraft in order to
keep the fleet operating. These aircraft included 3 air surveillance platforms Embraer EMB-
CRJ145, as well as 2 C-26 Fairchild for drug detection.
FAM purchased parts to keep operating the only Jet Star T- 33 that it still has from the original
fleet of 50 aircraft purchased in 1961. Until 2006, FAM had 13 T-33, but 12 were discontinued
because their maintenance became unsustainable.
Between 1972 and 2005, there were 190 air accidents that implied the total or partial loss of the
aircraft of the FAM. FAM’s budget for 2009 included, in the chapter classified with number
2000, that the aircraft Aermacchi, the Helicopters Bell type 212, 206 y 412, the aircraft Aravá,
as well as the Boeing 727 and 737 and the Bonanza, would be sent to MRO services. The
Mexican Navy operates an MRO facility in El Zalate, Los Cabos.
3.3 Airports and MRO clusters throughout Mexico and future developments
Mexico has the most developed airport infrastructure in Latin America. Every city of more than
50,000 inhabitants benefits from airport services. Mexico City airport is the largest in Latin
America in number of passengers and operations.
Mexico’s infrastructure:
85 airports (59 international and 26 domestic)
1,736 runways
4 holding companies: ASUR (9 airports), GAP (7 airports), OMA (7 airports), ASA
(58 airports)
7 airports concentrate 73% of the passenger flow per year
Mexico City airport handles 46% of passengers who travel every year in Mexico
and 59% of total cargo
In 2010, 65 million passengers traveled through Mexican airports, 4% less than in
2009.20
20
DGAC, La Aviación Mexicana en Cifras, 1989-2009, available at http://www.sct.gob.mx

26
The main new projects underway are:
The primary project to increase infrastructure in aviation is to construct 3 new
commercial airports in the Mayan Riviera, Mar de Cortes and Ensenada.
31 existing airports will be substantially expanded, including Toluca, Puebla,
Cancún, San Jose del Cabo, Loreto, Nuevo León, Monterrey, Guadalajara and
Puerto Vallarta.
Two additional expansion projects and a new airport plan (in Merida) are currently
under study. Of the investment required (USD $5.5 billion) by the aviation portion
of the plan, over 45% will come from private sector and the remainder from the
Mexican government.
Following is a description of the eight Mexican states (including the capital, Mexico City or
Distrito Federal) where most of MRO establishments are located:
1) Querétaro
3 MRO companies:
o Industria de Turboreactores (ITR)
o Messier Services Americas (SAFRAN Group) Landing gear shop
o SAMES (Snecma Ameritas Engine Services) CFM56 maintenance
Industrial experience from metal mechanic & autoparts
Close proximity to Mexico City and Central Mexico
Its airport has the longest runway in Mexico
The National Aerospace University is located in Querétaro and was formally
inaugurated on March 2009
Supplier base is being developed, mostly related to Bombardier
2) Mexico City
6 MRO related companies:
o Mexicana MRO Services
o Eurocopter
o Partes Aereas Concorde
o GIMA Aerospace
o Navair de México (Spain)
o European Aeronautic Defense and Space Company, EADS (France)
Location of the largest and most important international airport in Mexico
3) State of Mexico
o Representaciones, Asesoría, Mantenimiento y Servicios Anexos (Ciudad
Nezahualcoyotl)
o Llantas y Artefactos de Hule (Cuautitlán)
o Aerovics (Toluca)
o Centro de Servicio Avemex (Toluca)
o Raytheon Aircraft Services Mexico (Toluca)
o Interjet (Toluca)
4) Nuevo León

27
o Monterrey Jet Center (Apodaca)
o Honeywell Aerospace (Monterrey) Machining and systems integration
o GE Aviation (Monterrey)
o United Technologies Corporation (Monterrey)
o Aerodiesel Engines (Santa Catarina)
o Protexa (Santa Catarina)
Created on August 2009, the Monterrey Aero Cluster intends to transform
Monterrey into one of the largest locations for turbine and aerospace components by
2010. Still pursuing a key project to detonate the cluster.
Local universities are developing programs related to the aeronautical industry.
5) Coahuila
1 MRO related company (Saltillo Jet Center – Ramos Arizpe)
6) Baja California
3 MRO related companies (Chromalloy and Rockwell Collins – Mexicali
Pratt&Whitney - Tijuana)
Mature aerospace environment with companies established in the city over 40 years
ago.
Supports primarily the U.S. state of California due to geographic proximity.
Good aerospace educational programs provided by local universities linked to the
industry.
7) Tamaulipas
1 MRO related company (Chromalloy Dallas Mexico – Nuevo Laredo)
8) Guerrero
1 MRO related company (Turbinas de Zihuatanejo – Zihuatanejo)
3.4 R&D and innovations in related MRO sectors
At federal level, CONACYT (Consejo Nacional de Ciencia y Tecnología) and the Ministry of
the Economy are promoting private investment in innovations in the aerospace sector through
fiscal incentives and programs such as INNOVAPYME, PROINNOVA e INNOVATEC. These
agencies also manage the Fund for Technological Innovation, a trust that was set up to support
SMEs and that seeks the technological participation of at least 10 SMEs in order to increase
their competitiveness through the development of new products, manufacturing processes,
materials or services. At the state level, governments are setting up industrial clusters to
promote linkages between industry and universities. For example, Baja California and
Querétaro have a very large and effective educational structure which is greatly focused on the
aerospace business.
Several institutions in Mexico have reached levels of excellence in the development of
manufacturing technologies. Examples include CIATEQ, ITESM, CeDIAM, UANL (CIIDIT),
UNAM, CIMAV, CIDETEQ, CIDESI and IPN (CIDETI, CICATA) with projects linked to the
aerospace industry in areas such as electromechanical design, robotics, mechatronics,
nanotechnology, metallurgy and new materials, among others.

28
Even though investment in R&D by Mexican industry is relatively low, there has been a
significant increase in recent years. Local policies and strategies are now better aligned to
international recommendations in the field of innovation, particularly from the OCDE.
Innovation and technology activities in the aerospace sector in Mexico are highly concentrated
in Mexico City, Guadalajara, Monterrey, Querétaro and Baja California regions. The
capabilities of companies involve the design, innovation and engineering services such as:
systems design, engineering design, manufacturing design and systems integration, to cite a few
examples.
4. MEXICO’S POLICIES AND INVESTMENT INCENTIVES
4.1 Mexico’s policies for the aerospace sector: SCT, Ministry of Economy, ProMexico,
National Council on Science and Technology, state governments – impact and role of each
of these players.
Following is a brief description of the main agencies involved in the development of the
aerospace sector in Mexico from public, private and academic sectors.
Government agencies
Ministry of the Economy. The Secretariat of Economy (SE) designs and implements programs
to increase the competitiveness of economic sectors with high aggregate value and technological
content in sectors such as the aerospace. It maintains a bilingual website
(www.economia.gob.mx) offering an array of information, forms, links and transactions.
Among other options, interested parties can download import/export permit applications, make
on-line tax payments, and chat with on-line advisors who can answer specific investment and
trade related questions.
Ministry of Communications and Transportation (SCT). The General Direction of Civil
Aeronautics (DGAC) of SCT is the authority in Mexico for the aerospace and aeronautical
sector. Every company operating in the sector should be registered with this authority, either to
operate as a communication service or for the manufacturing, assembly of aerospace products
and MRO, engineering, R&D services, etc. With BASA in place, the DGAC is directly
responsible for approving the design and manufacturing in Mexico of civil aeronautical
products, and oversees these parts and products under a BASA’s airworthiness procedure
scheme. The Federal Aviation Administration (FAA) recognizes the DGAC as the agency with
full capacity to certify products and services of any corporation, and such certification is fully
recognized by the FAA.
Ministry of Finance (SHCP). Authority responsible for setting customs tariffs to parts and
components for manufacturers or assemblers of aircraft.
National Council on Science and Technology (CONACYT). This agency is responsible for
science & technology policies in Mexico. This agency acted as the leader Working Group of the
Aerospace Route Map, the 5-year strategic development plan for the sector.21
21
Available at www.ProMexico.gob.mx/.../ProMexico/.../PlanVueloNacional.pdf

29
ProMexico. In June 2007, President Calderon created ProMexico, a federal entity charged with
promoting Mexican exports around the world and attracting foreign direct investment to
Mexico. ProMexico coordinates federal and state government efforts, as well as related private
sector activities, with a goal of harmonizing programs, strategies and resources aimed at
common objectives and priorities while supporting the globalization of Mexico's economy.
ProMexico maintains an extensive network of offices abroad as well as a multi-lingual website
(http://www.ProMexico.gob.mx) which provides information on establishing a corporation,
rules of origin, labor issues, owning real estate in Mexico, the maquiladora industry, and
sectoral promotion plans, among other topics. Currently, in Canada ProMexico has offices in
Montreal, Toronto and Vancouver.
Table 7 below summarizes the main actions taken by the federal agencies to promote the
development of the aerospace sector:
Table 7
Role of main Federal Agencies in the Development of the Mexican Aerospace Sector
SE SCT SHCP CONACYT PROMEXICO
Certification
Support
Program
Responsible for
implementation of
BASA
EASA
Transport
Canada
One Tariff for all
Aerospace
Industry Exports
Leader in the
development of the
5-year Strategic Plan
for the Aerospace
Industry
FDI and
Domestic
Investment
Support Programs
Development
of Suppliers
Program
Certifications for
Manufacturing
MRO
VAT return in 20
days
Incentive Programs Trade Missions
(Japan,
September 2009)
Investment
Support for
Companies
(Dirección
General de
Oferta
Exportable)
Participation in the
Legal Issues
Committee (Under-
secretariat of
Transportation)
Recognition of a
FEMIA
Certification
INNOVAPYME
PROINNOVA
INNOVATEC
FONCYT
FONCICYT
IDTI
Aerospace
events:
Farnborough
(July 2010)
Aerospace
Meetings,
Guadalajara
(October 2010)
Source: FEMIA
State governments of Baja California, Sonora, Chihuahua, Coahuila, Nuevo León and
Tamaulipas in the North; San Luis Potosi, Aguascalientes, Querétaro, Jalisco, State of Mexico,
Mexico City, Puebla and Guerrero in the center of Mexico; and Yucatán in the Southeast, are
actively promoting the development of aerospace clusters, and competing against each other to
attract FDI in this sector. For MRO, the most successful to this date in achieving their goals
have been Mexico City, State of Mexico, Querétaro and Nuevo León.

30
Private industry
Mexican Federation of Aerospace Industry (FEMIA). Non-profit association of private
aerospace companies established in 2007 with currently 50 members. FEMIA’s objectives may
be summarized as follows: “increase the size of the sector, in order to improve competitiveness
through programs of large value added; develop broader supply chains; convince member
companies to be selective on R&D investment; gain advantage during governmental purchases
in order to acquire technology and consider offsets; achieve equal opportunities for companies
established in Mexico with those established in foreign countries at the time of governmental
search for aeronautical services; take advantage of Mexico working for the U.S. defense
industry, since other countries are not able to do so.”22
During the 2010 Farnborough Air Show, ProMexico presided over the signing of memoranda of
understanding to strengthen cooperation between FEMIA and the Flemish Aerospace Group, as
well as with the UK’s aerospace agency ADS.
Mexican Chamber for the Electronics, Telecommunications and Information Technologies
Industries (CANIETI): Private association for the promotion of the electronics, IT and
telecommunications industries. CANIETI co-sponsored the “Aerospace Meetings” event in
Guadalajara in October 2010 aimed at strengthening the capabilities of design and
manufacturing of centers in Jalisco, as well as the national supply chain for the aerospace
industry in the area.
Academic sector
Mexican Aerospace Education Council (COMEA): Association of 12 academic institutions
set up in 2007 and based in Querétaro which seeks to develop human capital, R&D and
technology transfer. One of their active participants is the Technological University of Jalisco
(Universidad Tecnológica de Jalisco) which recently set up a 2-year program with Aeroméxico
to prepare aeronautical technicians.
4.2 Federal and State Government incentives for attracting MRO companies to
Mexico
Following is a list of the most relevant fiscal and non-fiscal incentives offered to MRO
companies:
1) Fiscal. The most important tax incentive that Mexico offers to FDI in all sectors of the
aerospace industry, including MRO, is no import duties on all raw materials and equipment.
There is also an immediate tax credit on capital investment as well as special grants for strategic
projects. Bombardier is one of the companies that has benefited the most from fiscal incentives
to install a plant to manufacture aeronautical components in 2005 in Querétaro.
Several Mexican state governments also offer additional incentives such as land donation and/or
lower property tax, which reduces the cost of leasing land in industrial parks. A case in point is
Baja California that offers 100 percent payroll tax exemption, 20 to 50 percent discounts on
22
Emilio Otero, “The Mexican Aerospace Industry”, PPT Presentation at the Aeroexpo Acapulco 2009.

31
water services connections and up to 30 percent discount on water utility fees, depending on the
type of water treatment and recycling systems that the companies use.23
2) R&D. The most relevant incentive is the fiscal credit on income tax to projects involving
R&D and design of processes and products. Also, CONACYT manages the Science and
Technology Fund for R&D to promote the development of technology or transfer of technology.
In addition, Mexico implements the Program “AVANCE” to promote the creation of businesses
with high value added based on scientific and technological developments.
3) Certification. A further budget of USD$6 million is available to help companies secure the
foreign certification, in particular NADCAP standards that are required by overseas OEMs.
4) Labor training. Mexico offers various labor training support programs. Usually, in their
efforts to attract FDI, federal states compete with each other offering different kinds of training
programs with support of local universities.
5) Other. There are also state and local incentives for example in infrastructure, offering low
cost land in industrial parks, etc.
What SE is at federal level, the Ministry of Economic Development (Secretaría de Desarrollo
Económico) is at state level – the authority responsible for promoting the aerospace investments
and providing guidance and information to potential investors.
5. BUSINESS OPPORTUNITIES
5.1 Repair stations (DGAC and FAA certification); key players (competitors and
potential partners) and their client structure
In the last 10 years, the total number of MRO establishments in Mexico has gradually increased
as shown in Table 8 below:
Table 8
Number of Repair Stations in Mexico
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
# of
Repair
Stations
203 217 224 243 250 260 275 286 298 249
Source: SCT/DGAC, La Aviación Mexicana en Cifras 1989-2009
The recent growth of the MRO sector can be attributed to two main factors: a) with global
economic downturn, airlines have had to concentrate in their core business, flying aircraft, and
they increasingly prefer to outsource their MRO operations in an effort to lower costs; b) for
local airlines the cost of hiring external MRO personnel is lower than that of internal staff
because the latter generally implies higher wages, benefits, etc., and this can make internal
MRO unprofitable.
23
Jesús Estrada Cortés, “Cruising Altitude in the Aerospace Industry”, Negocios, Oct. 2009, p. 22-26.

32
Other important drivers of the growth of MRO activities in Mexico are as follows:
Airlines are revitalizing their fleets, making noisy and polluting aircraft less attractive.
The increasing environmental awareness leads to stricter recycling legislation as well,
following the trends in the automotive sector in the nineties.
Due to high fuel prices, the demand for fuel efficient aircraft increases, resulting in an
early phase out of inefficient aircraft.
Due to the competitive environment more and more airlines are focusing on their core-
activity. As a result they outsource their MRO activities and rely on independent third
parties to do their maintenance work.
The dip in air traffic after influenza crises resulted in an overcapacity on the market.
Airlines reacted by withdrawing aircraft from service and parking them. Now that the
global and local economies have recovered and are growing, demand for air traffic is on
the rise as well. Consequently, stored aircraft return into service, giving rise to an
increase in MRO demand required to redeploy stored aircraft.
Following the GDP growth, the demand for passenger traffic is growing as well,
consequently leading to an increase in aircraft demand. Increase in the number of
aircraft results in an increase in MRO-activities.
The DGAC is the authority responsible in Mexico for the granting of certifications to repair
stations who wish to do repairs or maintenance of Mexican aircraft. In order to be certified in
Mexico, foreign repair stations need to comply with the following requirements: 1) submit a
repair station manual approved by the Civil Aviation Authority in its country of origin; and 2)
pay the corresponding fees.
Once the foreign repair station obtains the certification of the DGAC it will have to comply with
the following main requirements: 1) perform only the services and functions specified in the
certificate granted by its civil aviation authorities; 2) ensure that the concessionaire or operator
of the aircraft is authorized to repair the aircraft abroad by the DGAC; and 3) present to the
DGAC a report every semester of the works done. Certification of a foreign repair station has a
validity of 2 years24
.
The main problem faced by local repair stations is that, as indicated in Table 9 below, out of 249
MRO establishments in Mexico in 2009, only 23 (9.2 percent) are licensed by international
authorities, mostly the FAA of the U.S. Two repair stations (Mexicana de Aviación and
Turboreactores) are licensed by the European Union. Eurocopter is the sole MRO provider
operating in Mexico that is certified by France.
To be certified by the FAA, a Mexican repair station must comply, among others, with the
following requirements:
a) submit a repair station manual as well as a quality control manual;
24
SCT, “Requisitos para la Convalidación y Certificación de Talleres Aeronauticos Extranjeros”,
available at
http://www.sct.gob.mx/fileadmin/DireccionesGrales/DGAC/Marco%20Jurdico%20y%20Regulatorio%20
Normativo/Normativo/Circulares%20Obligatorias/CO%20AV-04-05.pdf

33
b) submit an organizational chart of the repair station and the names and titles of managing
and supervisory personnel;
c) submit a description of the housing and facilities, including the physical address;
d) submit a list of the maintenance functions, for approval by the FAA, to be performed
for the repair station under contract by another person;
e) submit a training program. In addition, the equipment, personnel, technical data, and
housing and facilities required for the certificate and rating must be in place for
inspection at the time of certification or rating approval by the FAA.
In addition to meeting the other applicable requirements for a repair station certificate and
rating, an applicant for a repair station certificate and rating located outside the U.S. must meet
the following requirements:
a) Applicant must show that the repair station certificate and/or rating is necessary for
maintaining or altering U.S.-registered aircraft and articles for use on U.S.-registered
aircraft, or foreign-registered aircraft;
b) Applicant must show that the fee prescribed by the FAA has been paid. If the person is
located in a country with which the United States has a BASA, the FAA may find that
the person meets the requirements based on a certification from the civil aviation
authority of that country. Before a repair station certificate can be issued for a repair
station that is located outside the United States, the applicant shall certify in writing that
all employees for the repair station, its contractors, or subcontractors performing a job
function concerning the transport of dangerous goods (hazardous material) are trained
as outlined in the most current edition of the International Civil Aviation Organization
Technical Instructions for the Safe Transport of Dangerous Goods by Air. A certificate
or rating issued to a repair station located in the United States is effective from the date
of issue until the repair station surrenders it or the FAA suspends or revokes it. A
certificate or rating issued to a repair station located outside the United States is
effective from the date of issue until the last day of the 12th month after the date of
issue unless the repair station surrenders it or the FAA suspends or revokes it25
.
c)
Table 9
Repair stations in Mexico with International Certification
Name Certifying Authority Country
1. Aerovías de México FAA U.S.A.
2. Mexicana de Aviación* FAA U.S.A.
3. Mexicana de Aviación* JAA European Union
4. Eurocopter DGAC France
5. Aeroelectrónica FAA U.S.A.
6. Llantas y Artefactos de Hule FAA U.S.A.
7. Aerovic’s FAA U.S.A.
8. Centro de Servicio Avemex FAA U.S.A.
9. Oxígeno V.C. FAA U.S.A.
10. Chromalloy FAA U.S.A.
25
Source: http://www.airlineinfo.com/public/repair%20stations%20oversight.pdf

34
11. Monterrey Jet Center FAA U.S.A.
12. Hanhausen-Varcacia FAA U.S.A.
13. Turborreactores FAA U.S.A.
14. Turborreactores FAA European Union
15. Messier Services America FAA U.S.A.
16. Saltillo Jet Center FAA U.S.A.
17. Consorcio Aviacsa FAA U.S.A.
18. Compañía de Aviación FAA U.S.A.
19. ANBC Aerolíneas FAA U.S.A.
20. Ametek Lamb de México FAA U.S.A.
21. Hawker Beechcraft Services FAA U.S.A.
22. Honeywell Aerospace de México FAA U.S.A.
23. Snecma America Engine Services FAA U.S.A.
Source: SCT/DGAC, La Aviación Mexicana en Cifras 1989-2009
In Table 10 below, we identify the key players in the MRO market and the main types of
services they provide:
Table 10
Main Types of Services* provided by Key MRO players in Mexico
AFR:Airframe maintenance; ENG: Engine maintenance; COM: Component / systems maintenance;
AVI: Avionics maintenance; REP: Repair services; INT: Aircraft interiors.
Source: Companies’ websites
The client structure of the main key players is as follows:
Aeroméxico. In 2006, the company signed a 10-year arrangement with Delta that involved the
overhaul of all of Delta’s MD-80s in exchange for Delta TechOps overhauling all of
Aeroméxico's CFM56 engines. This very important contract represents half a million man hours
a year. Until now, Boeing MD-80 pre-return heavy checks have eaten up a significant amount of
Aeroméxico's maintenance capacity over the last four years. Once its fleet renewal program is
Company Location AFR ENG COM AVI REP INT
AEROMÉXICO Mexico City X X X X X X
ITR
TURBOREACTORES
Querétaro X X X
MESSIER SERVICES
AMERICAS
Querétaro X
MEXICANA MRO* Mexico City
Guadalajara
X X X X
SNECMA AMERICA
ENGINE SERVICES
Querétaro X

35
complete, giving it an average aircraft age of only 6½ years, it will be able to pursue third-party
work outside Delta26. Aeroméxico’s client structure is as follows:
International carriers – Air France, Alaska Airlines, Allegiant Air, LLC, AM Connect,
American Airlines, APB Aviation Partners Boeing, Atlas Air Inc., Avianca, Awas,
Boeing Capital Corporation, Continental Airlines, Iberia, International Lease Finance
Corp., LAN Chile, Pegasus Aviation Inc., Polar Air, Spirit Airlines , US Airways;
International couriers: UPS;
Private – GE Commercial Finance Aviation Services;
Local charter companies – Aero Charter de Mexico, Aerotransportes Mas de Carga,
Grupo Aéreo Monterrey, Centro de Capacitación Alas de América, Mexicana de
Aviación;
Government – Office of the President of Mexico, Office of the Attorney General.
ITR. Its facility has been dedicated to the maintenance of CFM56 engines for clients mainly
from commercial airlines.
Messier Services Americas. Since its opening in 2007, the facility has been operating as
Bombardier’s landing gear shop. In 2007, US Airways signed a 5-year contract with Messier
Services to provide complete overhaul of landing gear for their whole fleet of A320 family (100
aircrafts) and 9 A330 aircrafts. In 2009, the company agreed to supply landing gear overhauls
for a fleet of 68 LAN Airlines Airbus A320 series jets. The French MRO also agreed to perform
exchange and overhaul for the South America’s carrier fleet of A340s.
Mexicana MRO Services. As part of the bankruptcy procedure, the contracts that the company
had were temporarily suspended, pending the reinscription of Mexicana and its subsidiaries in
IATA.
During the negotiations related to the insolvency procedure of Mexicana, the new probable
owner of Mexicana, PC Capital, announced that ground workers of the company would not be
affected because the company had the intention of maintaining Mexicana’s MRO operations.
Snecma Services. In 2006, Mexicana and Snecma reached an agreement on an exclusive 20-
year contact covering MRO services for the CFM56-5B engines powering the Airbus A320
fleet.
Other
Interjet. The company was the last important MRO establishment in Mexico to achieve
certification from FAA three years ago, and since then it has successfully approved all audits
from this agency. So far they have provided MRO services mainly to the fleet of the company,
but in an interview at the site they showed us letters of recognition for repairs to third party
aircraft. With the enlargement of the current facility and the conclusion of the ongoing building
26
See: http://www.flightglobal.com/articles/2009/03/16/323782/mexico-seeks-to-expand-third-party-
maintenance.html

36
for training that will host a fixed simulator, they portray themselves as the number 2 key
supplier of MRO services after Mexicana.
Aeromar, which claims to be the world's first airline to perform a 36,000-cycles check on an
ATR 42, is now preparing to add capability for the ATR 72. While Aeromar's Mexico City
MRO base has capacity to overhaul four aircraft simultaneously, it has no plans to grow its
third-party business beyond the two or three ATR 42 it now maintains annually.
Although Aviacsa suspended operations, it is worth noting that it also had MRO ambitions. It
had a large MRO facility in Mexico City with limited third-party business and was planning to
open a new facility in Saltillo that would be 10 times the size. Aviacsa was not looking to
partner a foreign MRO company as it had secured financial support from the state government
of Coahuila. They were planning to make an investment in Saltillo since there is a lot of help
coming from the local government as they want to develop a local aerospace industry. In
January 2011, it was announced that Aviacsa was getting ready to fly again given the progress
achieved in the restructuring of its debt and the recertification of its aircraft and crews27
.
Key foreign competitors of local MRO firms
In search of lower costs, and due to the lack of capacity in Mexico, several Mexican airline
companies send their planes to MRO abroad. For example, in 2006 Volaris signed a 10-year
contract with Aeroman in El Salvador for the MRO of its fleet. In 2008, this same company
selected TRAX Maintenance to fulfill the airline’s MRO requirements.
In 2005, Mexicana de Aviación awarded a 10-year maintenance contract to GE Engine Services
for support of its 20 CFM56-5B/P engines that powered the airline's 10 Airbus A318 aircraft.
This maintenance contract built upon GE Engine Services existing relationship with Mexicana
Airlines. Before its bankruptcy, the airline had a five-year maintenance agreement with GE for
its Airbus A319 fleet powered by CFM56-5B/P engines. CFM56 engines are a product of CFM
International, a 50/50 joint company between Snecma Moteurs and General Electric Company.
On the other hand, last June, 2010, Aeroméxico signed with AFI KLM E&M by extending the
contract to maintain its fleet of B777s for a further two years. The first agreement, initialed in
2008, convinced Aeroméxico –an AIR FRANCE KLM partner within the SkyTeam Alliance–
to maintain the cooperation. It has accordingly decided to renew the partnership by entrusting
the maintenance of its four B777s to AFI KLM E&M. All four aircraft will undergo a C-check
at the start of the IATA year.
In December 2010, Bombardier Aerospace added three AOG line maintenance facilities (LMF)
in Monterrey. Aerovitro of Monterrey was named an AOG LMF for the Challenger and Global.
This was the second Bombardier–approved maintenance facility in Mexico.28
27
See “Aviacsa reestructura y alista despegue” in Expansión, January 11, 2011
28
See “David A. Lombardo, “Hot Section; Bombardier Adds 60th
Service Center” in AIN Online,
December 1, 2010, available at http://www.ainonline.com/news/single-news-page/article/hot-section-
bombardier-adds-60th-service-center-27743/

37
5.2 Challenges and Trends for New Entrants to the Sector
New companies seeking to enter the sector in Mexico may face the following challenges:
Need to pay a cost for the late entry to the market. Since there are a good number of
MRO companies, both local and international, already doing business in Mexico, any
new entrant will have to go through the “learning curve” of getting to know the local
business environment, establish contacts, etc. This will take some time and probably
increase the cost of doing business locally.
Face increasing competition. Any new entrant will also have to face the increasing
competition of local and international firms who are already settled in the Mexican
marketplace or that are planning to do so. It is likely that several airline companies that
do not have their own MRO facilities look either to set them as subsidiaries or as JV
with local or foreign partners.
The most relevant trends that will affect the entrance of new companies to the marketplace are:
Rapid growth of the MRO market. As the global and Mexican aviation industries
recover in 2011 and beyond, the local MRO market will continue to grow supported by
low labor rates, proximity to large North American market looking to outsource,
continued growth of the Mexican airline industry, stable and high quality workforce and
demonstrated performance and credibility.
Entry of European (possibly Asian) competitors. If Mexico is able to sign an agreement
similar to BASA with the European Union, this would undoubtedly become a very
important incentive for European firms to enter the Mexican marketplace, to benefit
from the access to the largest aircraft market in the world.
While the economic downturn has affected MRO development in Mexico as it has in
the rest of Latin America, to a degree – some projects delayed, others not come to
fruition yet – the pause is not expected to last. The need for additional MRO capability
and capacity in the region, favorable government actions to encourage development and
employee training, and the cost advantages offered will assure continued MRO growth
in the future.
Local airlines with MRO facilities will continue to bet on their third-party maintenance
business to make the entire company grow (case of Aeroméxico, Interjet).
Local airlines (Aeroméxico) and low-cost carriers (VivaAerobus, Interjet, Volaris) plan
to expand their investments in new aircraft in order to keep their tariffs low and be able
to compete.
By segment, newcomers will face the following trends:
Government – Trend to outsource MRO services
Commercial – Consolidation of LCCs (Interjet and Volaris)

38
Executive – Rapid growth of niche markets (e.g. helicopter MRO), new entrants in
regional airports (Los Cabos)
Military – Need to renew the fleet, especially for anticrime purposes
5.3 Business opportunities in the MRO sector in Mexico
Domestic Demand
In 2008, Mexico had the largest aircraft fleet in Latin America, both in commercial and
executive aviation.29
As shown in Table 11 below, in 2009 the fleet was composed of 7,952
aircrafts (1,742 commercial, 5,858 private and 352 governmental).
Table 11
Total Number of Registered Aircraft
Aircraft 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Commercial 1173 1170 1158 1213 1398 1406 1489 1646 1723 1742
Business 4786 4798 4761 4885 5281 5331 5403 5561 5735 5858
Government 517 567 433 440 393 435 324 365 352 352
Total 6476 6533 6352 6538 7072 7172 7216 7572 7810 7952
Source, DGAC, La Aviación Mexicana en Cifras 1989-2009
Currently, Mexican and Brazilian operators have the largest fleets in Latin America, followed
by Chile, Colombia and Venezuela. The Mexican fleet is between 13 to 17 years old. The fleet
of approximately 1742 active commercial jet aircraft in 2009 is dispersed among 8 operators
and around 30 aircraft families. The most important type of aircraft is the A318, 319, 320 and
321, followed by the 737-6/7/8/900.30
Chart 5 below illustrates the growth in the number of registered aircraft in Mexico in the last 20
years, considering the commercial, business and government segments.
29
US Commercial Service, available at www.buyusa.gob/mexico/en/airport_aviation.html
30
See Jonathan M. Berger “Latin American MRO Market Overview & Forecast, Dec. 4 2007, available at
www.sh-e.com/presentations/berger-04Dec07.pdf

39
Chart 5: Registered aircraft in Mexico
Mexico: Number of Registered Aircraft
1990-2009
5000
5500
6000
6500
7000
7500
8000
8500
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
#RegisteredAircraft
Source: DGAC, La Aviación en Cifras
Potential clients
Commercial. In recent years, this segment of the industry has had to operate in a highly
challenging and consolidating marketplace in Mexico and in Latin America. In 2009, Mexican
commercial aviation was badly hit by the global financial and influenza crises and ensuing
decrease in tourism. Several low-cost carriers (LCC) suspended activities. Still, the Mexican air
fleet was the 5th largest in the world.
Table 12 shows the type of equipment operated by the Mexican airlines in 2009. The most
common are the AIRBUS A319-100 and A320-214, B737-700, B737-200.
Table 12
Mexico: Aircraft Operated by Mexican Airlines, 2010
OPERATOR FLEET SIZE TYPE OF AIRCRAFT
AVERAGE
FLEET AGE
Aeromexico
50aircraft+1stored+4on
order/planned
Boeing 737 (39) Boeing 767 (6)
Boeing 777 (4) MD-80 (1) 8.1
Mexicana 8 aircraft stored* Airbus A320 19.1
Volaris 26 aircraft Airbus A319 and Airbus A320 4
Interjet
22 aircraft+2 on
order/planned Airbus A320 6.2
Viva Aerobus
11 aircraft+3 on
order/planned Boeing 737 22.8
Aviacsa 2 aircraft Boeing 737 28.3
Magnicharters 8 aircraft Boeing 737 23.3
Aeromar 16 aircraft
ATR 42/72 and Canadair CRJ-100
series 15.5
* As of February 17, 2011
Source: WWW.PLANESPOTTERS.COM

40
Business. Mexico has the second largest fleet of private aircraft in the world after the U.S. and
before Brazil. It is one of the three leading consumers of executive aviation products in the
Latin American region (Mexico, Brazil and Venezuela), which attribute for almost 90% of the
regional demand for executive jets. The private sector is the main consumer of jets due to
business trips and complex itineraries. Several Mexican state governments have at least one or
two aircraft for official use. Some corporations have their own aircraft fleets. Other alternatives
such as air taxi services and “time shared” with other users, which reduce maintenance and
hours’ flight costs, have been successful business models in Mexico for aircraft, jets and
helicopters. Apart from Mexico’s business aviation industry growing at 7% a year for the last
seven years, this industry is expected to sustain between 4-6% growth regionally during the next
decade, equating to approximately 500 and 700 new jets of all makes and models being
demanded region-wide. It will purchase more than half of the 11,500 units (USD$256 billion)
expected to be sold in the next 10 years. The main types of planes or jets in Mexico are:
Bombardier’s Learjet, Cessna models, including Citation, Falcon 7X, Diamond Aircraft, Honda
Jet and Hawker (from Hawker Beechcraft).
Lately, the helicopter market has been booming in Mexico for several reasons: new businesses
moving into the country, improving economy, expanding offshore oil and gas business and
replacement of an aging fleet. Those selling their older helicopters are generally replacing them
with new, and demand for used helicopters remains healthy. There are around 400 helicopters in
service in Mexico City and around 75 helipads. Although Bell has the major market share in
Mexico, the Eurocopter’s AS 350B3 is becoming the helicopter of choice for first responders–
police, emergency medical service and traffic patrol, as well as search-and-rescue. In the past
four years, the B3 has won 90 percent of all tenders in those categories. Both companies see
also major growth area in offshore support of the oil and gas industries, Bell with its 15-
passenger 412 and Eurocopter with its AS 350 and EC 14531
.
Government. Public sector (federal agencies and state governments) is an important market for
MRO services in Mexico. Aircraft brands common among federal agencies include Lockheed,
Cessna, Northrop and Bell, among others of European manufacture. Some federal agencies and
state governments operate their own aircraft for use of top officials. Being of a variety of
manufacturers and at times in poor physical condition, these aircraft often require greater
maintenance and diversity of parts to remain in operation. Government agencies with significant
fleets such as the Attorney General, (Procuraduría General de la República, PGR), the Federal
Police (Policía Federal Preventiva, PFP) operate their own MRO workshops, but in recent
years tend to also send work out to better equipped facilities locally or abroad if comprehensive
work is needed. In particular, the PGR requires a particularly varied range of MRO services, as
its fleet includes a large number of aircraft seized in anti-crime operations.
Military Aviation. The Mexican Air Force will have no choice but to replace a large part of its
fleet within the next 10 to 20 years, although until now it has found ways to extend the life of
older aircraft through MRO services in order to save money. The Ministry of Defense (Mexican
Air Force) and the Ministry of the Navy used to do the MRO services to their aircraft at their
military bases throughout the country. Since they have renewed part of their fleet and acquired
31
Kirby J. Harrison, “Helicopters carry the day in Latin America”, Aviation International News,
September 2006.

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