Heico Corp HEI

Heico Enjoys Broad Exposure to Aerospace and Defense Parts Manufacturing and Maintenance

Heico exploits the switching costs created by aerospace original equipment manufacturers for their spare parts. OEMs typically build the hefty cost of research and 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. Known in the United States as FAA parts manufacture authority, or PMA, regulatory approval is critical as most buyers can only buy OEM or PMA certified parts to retain the airworthiness certification of their aircraft. Most operators of newer aircraft stick with OEM parts because of long-term service contracts with engine OEMs or lease terms aimed at preserving the resale value of the aircraft, generally limiting Heico to supply parts for aircraft and systems in later stages of their service life.