Mexico - Civil Aerospace: Expansion of low-cost carriers to fuel market growth (Strategy, Performance and Risk Analysis)
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The Mexican economy is closely aligned with that of Canada and the US under the North American Free Trade Agreement (NAFTA). The value of its bilateral trade with the US is close to half of its total GDP, with the US purchasing three quarters of its total exports. With President Trump in the White House, these bonds are likely to be strained. Mexico’s aerospace industry is a vital engineering hub; over 320 Mexican firms offer aviation engineering services and equipment. Initially, aviation firms used Mexico as a cost-efficient location for assembly tasks, but due to the strategic importance of the US-Mexico border, it has since grown into a sophisticated manufacturer of aerospace fuselages and parts.
Increase in the frequency of flights and a reduction in fares to drive passenger volume
Passenger demand will drive the number of aircraft deliveries and active fleet size in Mexico. The volume of new aircraft deliveries reached 37.0 in 2016, representative of an annual growth rate of 68.2%. Volume is anticipated to post a forecast-period CAGR of 9.0%, to reach 48.0 in 2021. The active fleet size recorded an annual growth rate of 19.8%, rising from 278.0 in 2015 to 333.0 in 2016 and is anticipated to post a forecast-period CAGR of a CAGR of 10.1%, from 363.0 in 2017 to 533.0 in 2021.
Proliferation of new airlines and increased procurement to drive capital expenditure
Capital expenditure (CAPEX) on aircraft and related equipment grew at an annual rate of 5.0%, to reach US$1.6 billion in 2016 and is expected to record a forecast-period CAGR of 0.7%, to reach US$1.8 billion in 2021 owing to an increased procurements from airlines and aircraft leasing companies.
Opening of new manufacturing facility and emergence of new carriers to drive growth
The active fleet size recorded an annual growth rate of 19.8%, rising from 278.0 in 2015 to 333.0 in 2016 and is anticipated to post a forecast-period CAGR of a CAGR of 10.1%, from 363.0 in 2017 to 533.0 in 2021.