(Bloomberg) -- Mexico is cementing its lead as the world’s second-biggest market for private jets, snapping them up at a faster clip than bigger Latin American rival Brazil as it benefits from stronger economic growth.
While Mexico has long had a larger standing fleet, it had lagged behind Brazil in annual sales growth. That changed last year, according to planemaker Embraer SA. The direction is likely to continue in 2015 as Mexico’s economy is projected to grow while Brazil’s is forecast to shrink.
“It’s a matter of following the money,” said Brian Foley, a Sparta, New Jersey-based aerospace consultant, in an e-mail Monday. “It’s Mexico’s turn for now.”
Mexico, with only about half the population of Brazil, had 873 registered business jets at the end of 2014, topping the 854 for the South American country, according to JetNet’s annual iQ report, which compiles aircraft data. Mexico's fleet grew by 4.8 percent last year, compared with Brazil’s 3.6 percent increase, according to Embraer, the Sao Jose dos Campos, Brazil-based maker of business and commercial jets.
“We’re so motivated by the Mexican market that we decided to open a sales office in the country,” Breno Correa, sales and marketing director for Embraer executive jets in Latin America, said in a telephone interview March 12. “We already have one operations maintenance center in Monterrey and we’re looking at installing a second one in or around Mexico City.”
Mexico’s standing as No. 2 in fleet size is due in part to its close proximity to the U.S., which boasts the world’s largest private aviation infrastructure, said Rolland Vincent, president of Rolland Vincent Associates in Plano, Texas, an aircraft consultant.
Economic Divergence
Strong U.S. economic growth also buoys Mexico as it boosts exports that account for about a third of gross domestic product. Mexico’s economy expanded at the fastest pace in two years in the fourth quarter and is projected to expand 3.2 percent this year, the fastest pace in three years. That pace “bodes well” for business jet sales, Foley said.
Meanwhile in Brazil, the economy contracted for the second month in January and is forecast to shrink 0.3 percent this year. Brazilians are feeling the economic pinch as inflation erodes purchasing power and the unemployment rate surges.
Riding a commodities boom earlier this decade, Brazil was on course to surpass Mexico on private jet fleet size, Vincent said.
“We were forecasting even a couple of years ago that it was going to overtake Mexico, but things have changed,” said Vincent, whose firm provides aviation research reports to JetNets. “Brazil has stalled really and Mexico continues to just chug along.”
Growth Opportunity
For Embraer, Mexico represents a growth opportunity. It expects to expand its 2 percent market share there to 16 percent in the coming years, Correa said, about equivalent to Embraer’s global executive jet market share.
The sales surge in Mexico can partly be attributed to fleet renewals, according to Embraer. Mexican jets tend to be older than Brazilian ones, with about 80 percent more than 10 years old, compared with 45 percent in Brazil. That presents a big replacement opportunity, Correa said. Aging jets are seen as a safety risk following the 2012 crash of a 43-year-old Learjet that killed Mexican singer Jenni Rivera.
“Early on, preowned business jets would go into Mexico after they had served in the U.S.,” Vincent said. “That now has transitioned. It’s almost completely new purchase activity.”
Security concerns are another driver of the Mexican private aviation market, Vincent said.
Safe, Secure
“There is no safer, more secure way to fly than privately and that’s really a strong element there,” Vincent said. “It’s a shame, but that is a reality in that part of the world.”
While Mexico is a more interesting market this year, Embraer’s 10-year study of the industry shows that Brazil will surpass it in the long run, adding as many as 560 jets valued at $9.4 billion, compared with Mexico’s 140 jets totaling $3.2 billion.
This year, Embraer forecasts global sales of 90 light jets and 40 medium and large jets totaling $1.85 billion, or 28 percent of the company’s total revenue. It doesn’t break out numbers by country. Embraer has 850 executive jets in the world, 200 of which are based in Latin America.
Embraer’s best seller is its Phenom, a light jet, the kind that is popular in Mexico because the distances flown tend to be shorter, within the region and to the U.S. In Latin America, light and very light jets make up 54 percent of the fleet compared with 35 percent in Europe, according to a JetNet iQ Report, Vincent said.
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