Heico continues to see strong demand for its commercial parts and services with no signs of a slowdown despite evidence that airlines are trimming capacity.
“Thus far we have not seen” signs of airlines cutting back on purchasing, Heico co-CEO Eric Mendelson said on the company’s fiscal 2026 third quarter earnings call Aug. 26.
IATA’s latest traffic figures showed revenue passenger kilometers (RPKs) down 1.7% in June, with about 1 point of that linked directly to Middle East conflict-related disruptions. The latest OAG schedules for the upcoming winter season show a decline of 4.6% in total departure seats. While many airlines have not finalized their winter plans, the signs suggest higher fuel prices and other macroeconomic headwinds are beginning to affect booking patterns.
Flight-hour reductions take time to affect aftermarket demand. But some businesses, such as parts distribution, are hit before services with longer lead times, such as airframe or engine overhauls.
Heico’s focus on developing more cost-effective parts and repairs compared to original equipment manufacturer (OEM) offerings gives it some buffer when RPKs fall and cost-cutting starts, Mendelson said.
“When RPKs do slow down, airlines get even more serious about cost savings,” he said, boosting demand for lower-cost parts and repairs.
The strategy sacrifices revenue potential in exchange for higher margins and broader customer appeal. Heico’s Flight Support Group (FSG) saw its fiscal third-quarter net sales rise 18% to a record $947.8 million, bolstered by 12% organic revenue growth. Parts and distribution was up 15%, while the component repair business saw a 5% gain. FSG’s net operating income rose 19%.
“We have a number of businesses where their value proposition is to develop alternative repairs and use alternative parts,” Mendelson said. The use of internally developed, parts manufacturer approval (PMA) material drives repair costs down, which leads to lower costs for customers.
“That brings down the revenue, [but] it increases the value to our customers,” Mendelson said. “We’re not passing through the exorbitant cost of OEM products onto our customers. We’re trying to do these repairs as much as we can with PMA, which has a lower sales price, but it’s a much more profitable venture for us.”
Heico posted a 23% gain in sales to $1.4 billion. Operating income for the quarter jumped 34% to $355.2 million while net income was up 33% to $235.4 million.
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