Podcast: Latin America's MRO Market Is On The Rise

Listen in as editors James Pozzi, Lindsay Bjerregaard and Lori Ranson discuss growth opportunities and in-region challenges in Latin America's commercial MRO industry.

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James Pozzi:
Welcome to Aviation Week's MRO podcast. I'm James Pozzi, Aviation Week's MRO editor for the EMEA region. Today, we are looking at the current aftermarket landscape of the Latin America region in preparation for Aviation Week's MRO Latin America Conference, which, of course, is the first event of the year for the MRO calendar and is taking place in Santiago, Chile. So joining me today are Lindsay Bjerregaard, who is managing editor for MRO at Aviation Week, who'll be attending MRO Latin America, and Lori Ranson, who covers North American and Latin airlines for Aviation Week and is also a senior analyst for CAPA – Centre for Aviation. Lindsay, Lori, thank you both for joining me.

Lori Ranson:
Thanks, James.

Lindsay Bjerregaard:
Yeah, thank you.

James Pozzi:
So let's get a bit of an overview, of course. Maybe start with Lori. As I mentioned, you cover the Latin America region pretty extensively for Aviation Week. I guess if you had to summarize the region right now, maybe in regards to the MRO market and one or two key themes for this, what would they be?

Lori Ranson:
Yeah, I think just to set the stage, demand in the region is holding steady despite a lot of uncertainty for airlines over the last year. A little bit of softness in Argentina because the government adopted a more liberalized approach, so airlines rushed into the market. A little softness from South America to the U.S., just given all the geopolitical issues that have happened over the last year. Consolidation continues. Chile's Sky Airline is going to be folded into ABRA Group, and in Mexico, Viva and Volaris are trying to merge. I think the biggest kind of news from a fleet perspective is LATAM's order for E2s and Flybondi, which is an Argentinian low-cost carrier, ordering A220s. It's a big deal for each manufacturer for small jets in the region. ABRA hasn't ruled out ordering small jets. So I think that that's going to be something to watch over, say, the next couple of years, how the airline's going to use those jets.

LATAM has already said they're going to deploy the initial E2s within Brazil, but I think there's opportunity for a lot of new routes with those aircraft. I think generally with sort of the MRO situation, airlines have gotten used to the fact that the engine issues on narrowbodies are going to persist for a while, but they're also a little bit optimistic in terms of deliveries. Now, this is starting from low expectations, but they're currently receiving their deliveries on time for the revised calendar deliveries that they've worked out with the manufacturers. So I think despite an overall challenging environment for airlines in general, the region is performing pretty well. Maybe just one last data point: last year, Latin America and the Caribbean's traffic growth, at least for a couple of months, outpaced all the regions worldwide. So that's something that's a really positive development.

James Pozzi:
Absolutely. Yes. And looking at the fleet, as you mentioned, some of those pretty key orders into the region, the A220s and the E2 jets as well. But looking at the fleet in preparation for this episode, Latin America seems to be quite a narrowbody aircraft-driven region overall. How are, I guess, fleet decisions perhaps for those aircraft you mentioned and maybe A320neo orders, 737 MAX growth—how are they, I guess, reshaping the MRO demand and the outlook in the region?

Lori Ranson:
I think that there's going to be a lot of demand for MRO once these aircraft mature. But I think first off, you have to get the current engine challenges sort of ironed out, and that's going to take a few years. And then you have to get 737-10s certified. I believe that's going to happen by the end of the year. But a lot of these airlines, I think, are laying the groundwork for maintaining those aircraft. And I think that they would prefer to do it closer to home just for financial reasons. So I think it's going to be really interesting to see how they approach maintaining these aircraft. And a lot of airlines in the region have expanded their in-house capabilities.

James Pozzi:
Yeah, absolutely. Would you say there's been a notable shift then in recent years to maybe bringing some of that work in-house rather than sending it overseas for the large maintenance checks, for example? Do you think there's a preference, I guess, for in-house airline MRO but also working with the regional providers in South America?

Lori Ranson:
I think that's a trend from a cost standpoint and also from just an MRO availability standpoint and everything that's happening with delivery delays. I know that Copa has said that it has brought some maintenance in-house just because of that fact, and they have the expertise to do it. They feel like they can do it faster and cheaper. So I think that's a trend that's going to continue, especially because there's a lot of competition among these airlines to keep their costs in line. And some of these airlines have some of the best unit costs in the world, so they want to keep those costs low. And I believe that they feel some of the maintenance can come in-house and they can do it much cheaper with the expertise that they have.

James Pozzi:
Absolutely. And from your point of view, do you think the existing MRO capacity is there right now, or could we expect more, I guess, investment and more capability additions to service this demand in the next five years or so?

Lori Ranson:
I think airlines are going to look to see what the best cost comparison is for them. It's all about cost for them. And if it's more cost-effective to send them out, they'll do it. But I think there's a preference to, especially given everything that's happened over the last years with the supply chain, with availability, engine availability—I think there's a big preference to control as much as they can right now, to rule out as much uncertainty as they can. Just given the backdrop that these operators and all operators have faced over the last five years, they definitely want things more in their control and want to keep what they can control in-house.

James Pozzi:
Absolutely. Yeah, of course. Very interesting, Lori. Thank you. And bringing in Lindsay as well into the conversation, perhaps we'll start with labor and a topic you obviously cover very extensively for us, Lindsay, and you know a lot about labor shortages in the region. Are they as acute as in other regions that you cover, or is Latin America somewhat insulated from maybe some of these trends you would see, for example, in North America where you're based or in Europe where I'm based? What would you see?

Lindsay Bjerregaard:
Sure. Well, I mean, I don't think there's really any country that isn't having at least some challenge with their MRO labor shortages. However, from what I've heard at least the past few years, it doesn't seem to be quite as pressing in Latin America as it is in other regions. I know a lot of Latin American companies are investing pretty significantly in their training initiatives and other types of perks to entice the local workforce. So one example would be Embraer. They have a mechanic training program called GIFT, which stands for Guiding and Inspiring Future Technicians. They've been expanding that. They also have similar programs in other areas of their business like engineering and technology. Aeroman, they're based in El Salvador. They're another one. I remember at a previous MRO Latin America, their CEO talked a lot about some of their on-premise facilities they have to sort of entice people to want to work there—things like soccer fields, a running track, basketball courts, all kinds of stuff like that.

And I will actually be interviewing Aeroman's CEO, Alejandro Echeverría, at MRO Latin America this year. And based on some of our initial conversation, it sounds like they're now focusing a lot on their leadership development initiatives. So beyond just recruiting new talent, they're actually trying to figure out ways to prepare some of these younger, newer workers to advance within the company. One thing I think is going to be interesting, particularly in the current political climate, is that at least in recent years, there'd been a lot of movement of technicians from Latin America going to work at MROs in North America. Those companies have been pretty desperate for talent, but we were already talking last year at MRO Latin America about how there might be sort of a blowback due to the Trump administration's anti-immigration push. So there was an expectation that maybe some of those workers would go back to their home countries.

And here in the U.S., that policy has only escalated over the past year or so. So I certainly wonder if there's been an impact in terms of more of these workers returning home. That would be a positive, I think, for the local Latin American workforce. But yeah, I mean, I wouldn't say it's a huge issue, but it's still definitely an issue.

James Pozzi:
Absolutely. Moving on to one of the panels you're moderating at MRO Latin America is related, of course, to AI and technology. You've moderated several of those over the last few years in all parts of the world seemingly. Are you expecting any regional trends in this pertaining to Latin America? Anything you can preview for the listeners related to this?

Lindsay Bjerregaard:
Yeah. So that panel, it's going to have executives from Avianca, from GA Telesis, Panasonic Avionics, and Skyselect. All of those companies are definitely doing things with AI. And actually to plug Aeroman again, Alejandro did mention to me that one of the things he's going to be talking about in addition to some of the capacity growth that they're going to be having at the company was how they're looking at technology development initiatives. They're looking at AI and how they can use that to process all of the data they have. So certainly you're going to hear more about that, but I don't want to get into it too much.

James Pozzi:
So plans to invest in digital capabilities as something I imagine is on the radar for everyone. But yeah, certainly we'll look out for the coverage of that on aviationweek.com. And Lori, back to you then. Looking ahead, I guess, what particular parts of the MRO segment would you say are currently, I guess, underserved in Latin America? I mean, widebody maintenance was something a company mentioned to me recently, particularly for that region. Engines has come up a few times as well, and maybe even component shops as well. Is there any kind of one market segment you think could be sort of primed for investment and we might see more players either invest in or enter the region for?

Lori Ranson:
Yeah, I think I agree with you with respect to widebody capacity just because there's a widebody shortage right now in terms of demand for new widebody aircraft. So airlines are going to be holding on to their older widebodies for a lot longer just because there is a shortage. So I think there's an opportunity there for airlines. LATAM is doing a little bit of that now. It opened a new maintenance facility in Brazil recently, as you all know, and they're going to be doing some of their own widebody work there. So I do. I think that's probably the biggest opportunity and obviously engines, but some of that still is out of the control of airlines and MROs because the engine makers need to make the components available, they need to make reliable engines. And there is some improvement there and airlines acknowledge that, but they also believe that the whole engine issue isn't going to resolve itself for several years.

So I don't know if there's necessarily an opportunity there, but I think that's going to be a big focus for airlines and MROs just to ensure that they can secure components if they're available and that they can perform the work in a way in which engines and components can be delivered back quickly, that turnaround times can improve. So I would say those two areas are kind of very opportunistic right now. But again, it all requires investment. So you have to kind of do the risk reward analysis in terms of where you put your investment.

Lindsay Bjerregaard:
Speaking of, I'd love to piggyback on that, Lori. You mentioned LATAM's new maintenance hangar in Brazil. There have been some pretty big new investments within MRO in the Latin American region in the last couple of years here. One was obviously LATAM there. GE Aerospace announced just a couple months ago that they were planning to double their MRO capacity at their facility in Celma, Brazil. They're claiming that this expansion's going to make that the largest LEAP engine overhaul facility in the world, and they're expecting to attract more international customers with that. But then on the airframe side as well, you saw Etheltechnics opening its first facility in the Dominican Republic this year. In Chile itself where we're going to be having the conference, their first independent MRO, APAS Chile opened in Santiago in 2024, and the host sponsor for the conference and their senior vice president of business development is actually going to be talking on a panel about private investment in MRO companies.

So things like private equity investment, right? We saw that happen with MRO Holdings, which is one of the biggest independent MROs in the Latin American region. So if you're going to be at the conference, that's a panel not to miss because I think there's going to be a lot of discussion about how companies are looking at growing in that region. And I think it is primed for new MRO capacity for several reasons. There's growing domestic demand. We're seeing tight MRO capacity in North America nearby. And then going back to labor, Latin America always says that they have cheaper qualified labor compared to other regions. So that could be attractive to companies that are looking for more cost-effective MRO as well.

Lori Ranson:
Yeah, I totally agree, especially with respect to cheaper labor. And it could also be an attractive market for North American carriers to offshore their maintenance because it's close enough that it's a good sort of cost-based way to achieve your maintenance goals and keep your costs in line. So yeah, I think that's going to be interesting to watch how these independent MROs position themselves to capture business both within the region and in North America.

James Pozzi:
Excellent. A lot of factors at play here and a lot of ground covered over in just 15 minutes or so. So we come to the end of the episode today, but Lindsay and Lori, thank you very much for joining us today and giving us your insights.

Lindsay Bjerregaard:
Thanks, James. And I do want to quickly shout out. There's going to be an article in the upcoming issue of Inside MRO that Lori wrote about some interesting things that are happening with data in Latin America. So stay tuned for that as well.

James Pozzi:
Absolutely. Well worth reading. So thank you very much today and shout out to our producer, Corey Hick, for making us sound great. And thanks to our audience for listening to today's MRO podcast. Remember, a new episode drops every Monday morning on Apple and Spotify. I like to call it MRO Mondays—see if that catches on. And just one more thing, if you like this podcast, please remember to leave a star rating and review. Thank you for listening.