Strong Demand Propels Heico's Durable Franchise in Aerospace and Defense Parts and Maintenance
Heico exploits the switching costs created by aerospace original equipment manufacturers for their spare parts. OEMs build the hefty cost of research, development, and regulatory airworthiness certification of their products into the prices they charge for servicing and/or replacing them in the aftermarket. Heico reverse-engineers these complex parts at a fraction of the original development cost, gains regulatory approval to sell or install its functionally equivalent parts, and charges around 30%-40% less than the original. The Federal Aviation Administration's parts manufacturer approval is critical, as most aircraft operators can only buy OEM or PMA-certified parts to maintain their aircraft's airworthiness certification. Most operators of the newest aircraft stick with OEM parts because of long-term service contracts with engine OEMs or lease terms aimed at preserving the resale value of aircraft, generally limiting Heico to supply parts for systems in later stages of service.
United States