HEICO, PMA History, and Pricing vs OEM
Former President at Wencor
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Former President at Wencor
The expert has 35 years of experience in the commercial/defense aviation parts industry, including 9 years at HEICO. As CCO at Wencor he had full P&L responsibility for the Parts Manufacturer Approval (PMA) business.
Interview Transcript
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I find it fascinating that there are so many small job shops reverse-engineering parts. This leads to a question about the acquisition opportunity and acquiring these PMA shops. If I run a shop and reverse-engineer a component, undercutting the OEM by 30% to 40%, and the OEM matches my price. How often does the OEM do that? And if that happens, what is the market share of the PMA over the next five years?
The OEM seldom does that because their OEM margins are 80%. Each time they match a PMA, they're reducing their margin by 40% or 50%, which impacts the production team's budget. The production team can only produce a certain number of widgets and can't withstand that hit for long without missing their target.
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