Parts supplier Heico Corp. saw its Flight Support Group (FSG) business unit revenues improve 10% sequentially for its most recent fiscal quarter, yet another sign that a sustained commercial aftermarket recovery is underway.
The alternative-parts specialist’s fiscal 2021 fourth-quarter (Q4) results, which covered the three-month period ended Oct. 31, included a 34% year-over-year jump in FSG revenues, to $260.4 million, the company said.
More importantly, it marked the fifth straight quarter of sequential growth, pointing to continued uptick in demand for spare parts driven by an increase in air transport fleet activity.
Heico’s parts sales are shaped largely by near-term demand, making its results a reliable barometer for current industry trends. Company executives acknowledge that the upward revenue trend is neither universal globally nor is it likely to remain smooth as new COVID-19 threats emerge.
“There’s a lot of growth potential because not all of our markets have recovered,” FSG President Eric Mendelson said on a Dec. 16 earnings call. “So we still have a very big potential in the international market in particular, in Asia, and to a lesser extent, in Europe and South America, to see recovery. I think that we’ve got plenty of green shoots ahead of us. But there’s no question that the omicron [coronavirus variant] will hold back the industry. We’ll have to see really what happens over the coming days and weeks.”
Heico’s recovery, while steady, still has a ways to go to reach pre-pandemic sales levels. Q4 2021 FSG sales were 80% of comparable 2019 sales, and the pandemic’s lingering uncertainty will likely keep even the strongest segments from a full recovery for another year or so.
“I don’t think it’s likely that the domestic narrowbody [sales] will be back to 2019 levels in 2022,” Mendelson said, referring to his company’s business. “If it is, I think it’s more towards the end of 2022. We’re doing extremely well, but I want to be really careful to not get ahead of ourselves here. There are certain fleets that have been retired. So, that’s going to be a bit of a headwind. Maybe if it happens, it’s by the end of 2022.”
As a developer of OEM-alternative parts, Heico is heavily reliant on older platforms. It has considerable parts for workhorses such as the Airbus A320ceo and Boeing 737 Next Generation families, but it benefits least from heavy usage of current-generation models, such as the A320neo and 737 MAX. Airlines with a choice are flying these current-generation models most, both to leverage their operational efficiencies such as lower fuel burn as well as to take advantage of warranties and so-called maintenance honeymoons that help them minimize maintenance costs.
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