OEM-alternative parts specialist Heico Corp. is seeing an uptick in demand on parts for older aircraft, but is stopping short of betting on wholesale life-extensions.
"We've seen some increase in spending on some of the older equipment,” said Eric Mendelson, CEO of Heico's Flight Support Group (FSG), without getting into specifics.
The dip in production rates on several widebody programs, including the Boeing 747-8 and 777 a well as the Airbus A330 and A380, combined with steady fuel prices and strong passenger demand bodes well for adding life to older twin-aisle aircraft. But so far, life-extension programs have not risen to the trend level.
"Clearly, with widebody build rates being down and fuel being down, that should bode well for extending some of the time on some of the older equipment,” Mendelson said. “But we don't have that factored into our numbers right now, because we don't know what the future is going to bring.”
It's too early to say that work on older aircraft is jump-starting commercial aftermarket demand, but that could soon change. While traffic growth as measured by revenue passenger kilometers has risen 6% or more in recent quarters, International Air Transport Association figures show, the increase in the number of aircraft five years and older has been lower—around 3%, Canaccord Genuity said. This year, it should be higher, which bodes particularly well for the widebody aftermarket.
"We should start to see an acceleration in [aftermarket] demand for widebody aircraft, where production levels over the next 2-3 years will step down on the 777 and A380, remain flat on the 787, and see some increase on the A350,” Canaccord said in a recent research note. “However, demand for parts on the 737 and A320 could see increased pressure as both Boeing and Airbus push to production rates in the high-50s/month on these aircraft.”
Canaccord is projecting the number of aircraft older than five years will grow about 4.5% this year.
Meanwhile, Heico’s FSG segment saw net sales climb 5% in the company’s fiscal second quarter, which wrapped up April 30. The six-month sales figure is up 7%. Organic growth for the periods was 5% and 6%, respectively.
Heico is projecting a full-year increase in the mid- to high-single digits at FSG, Mendelson said. The projections include contributions from electric interconnect parts distribution specialist Air Cost Control (ACC), which Heico purchased during the quarter.
Mendelson noted that ACC, which distributes connectors, wire, cable, fastening systems, and electromechanical parts, is largely complementary to Heico’s existing businesses with strong distribution channels, such as Seal Dynamics.
“We are immediately finding opportunities for our distribution companies to work together,” he said. "There really is no product overlap. I [have] some significant expectations for great opportunities down the road."