Heico Posts 16% Sequential Jump In MRO Sales

Credit: Nigel Howarth / Aviation Week

Parts and service revenue in Heico Corp’s commercial aviation-focused business unit jumped 16% sequentially last quarter—further evidence that an aftermarket rebound is underway as flight activity picks up in several regions. 

“Obviously, the airlines are buying more,” Heico Flight Support Group (FSG) President Eric Mendelson said on a May 26 earnings call. “Our sense is that most of that is being used. Some inevitably will end up on the shelf, but we haven’t seen what I would call serious restocking yet.” 

FSG sales were down 10% year-over-year for the three months ended April 30, its fiscal 2021 second quarter, to $230.2 million. The decline underscores there is still work to do to return to pre-pandemic levels, as the year-ago quarter included two months of downturn-affected sales. But the company’s latest results are the third straight quarter of sequential revenue improvement, and the 16% increase far outpaced the previous quarter’s 3% bump. 

Mendelson said trends point to continued improvement, though perhaps at a slower pace. 

“I think 16% quarter-on-quarter improvement is very high,” Mendelson said. “Who knows what it will be in the third quarter and the fourth quarter. I would be surprised to see that kind of improvement. I think our 16% number has surprised, and frankly, it surprised us.” 

While Heico’s performance offers some insight on overall commercial aftermarket demand, aspects of its business mean its recovery could out-pace much of the MRO world. Heico generates a significant portion of its revenue from U.S. carriers, which are benefiting from strong domestic leisure demand compared to airlines in most other regions and are flying more as a result.  

Heico also specializes in lower-cost parts—generally $5,000 or less per unit—that are considered too inexpensive to be threatened by used parts harvested from scrapped aircraft. This should help insulate Heico from a widely expected surge in used-parts availability as the global demand picture clears up and airlines finalize retirement decisions. 

Despite the differentiators, Heico’s outlook remains “conservative,” Mendelson said, pegging 2023 as the likely time frame when the company will consistently see 2019-level commercial aftermarket sales. The outlook tracks with aftermarket’s general consensus as well as IATA’s updated view on global passenger traffic recovery. 

Sean Broderick

Senior Air Transport & Safety Editor Sean Broderick covers aviation safety, MRO, and the airline business from Aviation Week Network's Washington, D.C. office.