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Parts-supply specialist Heico is seeing some customers cut back on purchasing, but broader aftermarket demand remains strong amid continued new-equipment delivery struggles.
"We do have anecdotal evidence of certain customers cutting back this year," Flight Support Group (FSG) President Eric Mendelson said on a recent earnings call. "But that was really offset by strength at other customers."
Several airlines that have cut back likely "over-ordered a bit in 2023," he added.
FSG's results underpin strong aftermarket demand. Organic revenue growth was 15% year-over-year and 17% sequentially. The organic growth combined with business folded in via the company's recent acquisitions helped HEICO post some record financial numbers.
Heico's observations align with broader trends that see some carriers cutting back amid excess capacity, but others scrambling to keep seats in the air. In the U.S., LCCs have trimmed back growth plans and reduced flying as average fares remain flat while costs rise. Some full-service carriers are joining them.
But a steady wave of new aircraft delivery delays and in-service struggles on platforms such as Pratt & Whitney's PW1000G geared turbofan are bolstering demand for older technology. While supply-chain challenges offer aftermarket providers like Heico plenty of opportunity, they also create hurdles.
"We definitely have supply chain problems all over the business," Mendelson said. "Our vendors are challenged. We still have a large backlog of past due. And frankly, that's driven by certain vendors or many vendors' inability to produce according to their commitments. So that continues to be a struggle.
"I don't see a tremendous amount of improvement in the aviation supply chain," he added. "Basically, demand is just outstripping supply."
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