Persistent supply chain struggles will prevent new-aircraft deliveries from accelerating quickly and keep pressure on aftermarket providers to support retirement-age airframes and engines, a top Heico executive said.
Speaking on a fourth quarter (Q4) earnings call Dec. 18, Heico Flight Support Group (FSG) President Eric Mendelson said his company continues to see “tremendous” supply chain challenges. While manufacturers are “marginally” increasing production rates in some areas, ongoing supplier issues will prevent a rapid rise to rates that Airbus and Boeing have said they are targeting.
“Personally, I am not putting any money down that supply from the OEM suppliers is going to turn around substantially,” he said. “I have not seen evidence of that.”
Both manufacturers are below production rates anticipated a year or so ago, particularly on narrowbody programs. Boeing is recovering from a series of production-related issues, while Airbus has suffered most from an under-performing supply chain.
One ramification is strong, steady demand for support of older aircraft and engines. Heico’s sales, dominated by OEM-alternative parts and repairs, have surged as a result. Heico’s FSG posted organic sales growth of 12% in Q4 and posted its 17th straight quarter of sequential improvement.
While Airbus, Boeing, and Embraer are targeting delivery increases in 2025, Mendelson expects customers to take a wait-and-see attitude before retiring older assets.
“I think airlines have been beaten so badly by the deferrals,” Mendelson said. “They don’t want to get into a situation where they don’t have the legacy assets to be able to complete their schedules. So, I expect them to continue to spend money ... not foolishly, but they’ve got to always have a backup plan.”
Mendelson said Heico’s arm’s-length integration of Wencor continues to go well. Purchased in 2023, Wencor continues to operate as a stand-alone business, but the two organizations are strategically combining synergies. Examples include combining vendors and deploying legacy parts manufacturer approval material (PMA) and designated engineering representative (DER) repairs throughout both organizations’ networks.
“Our teams are working very closely together in the parts and repair side to harvest those opportunities,” Mendelson said. “We’ve already been very successful by putting all of the Heico and the Wencor PMA [and] DER repairs together so our repair stations can focus on particular units and really drive costs down and service levels up to the customer.”
Heico sees “additional opportunities” to combine legacy Heico and Wencor offerings for customers. But day-to-day execution remains the higher priority.
“We’re in a unique situation where all of our aftermarket businesses are running at record numbers,” Mendelson said. “They are so busy just trying to accomplish what they have in their backlog in terms of getting the parts out the door and developing [new parts and repairs] that we’ve just left them alone.”
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