MEXICO CITY, Aug 28 (Reuters) - German aircraft parts

supplier Diehl Aviation has begun construction of a plant in

Mexico's central state of Queretaro, the firm said on Wednesday,

in an investment expected to top $46 million.

The location will allow the company to strengthen its

relationship with customers such as planemakers Airbus,

Boeing ( BA ), Bombardier and Embraer ( ERJ ), as

well as local airlines, Diehl said in a statement.

The plant, where production is expected to begin next year,

will initially make "extra-spacious luggage compartments" for

the Airbus A220.

The space will span more than 8,200 square meters, with an

expansion of between 4,000 and 6,000 square meters expected to

follow, Diehl said.

The plant will initially employ around 30 staff, increasing

to around 500 in the medium-term, it added.

Diehl announced plans to build the plant at the Farnborough

Airshow last month. Queretaro Governor Mauricio Kuri, speaking

alongside company executives, said at the time that Diehl

planned to invest 900 million pesos ($46.09 million).

Queretaro has become an aviation hub in recent years, with

Safran making landing-gear fittings, Bombardier

producing rear fuselages and Airbus building emergency-exit and

bulk cargo doors in the state.

($1 = 19.5289 Mexican pesos)