Aftermarket (AM) revenue is expected to reach 120% of 2019 levels in 2024 and 127% of the pre-pandemic benchmark in 2025 given strong air travel demand, slowing retirements and supply constraints, investment bank Jefferies said in a new report.

“We continue to prefer AM > OE [original equipment] given the capacity-constrained market in addition to age of fleet,” the investment bank said in a Jan. 4 note to clients.

The International Air Traffic Association (IATA) estimates that an inventory of 40.1 million flights will be available in 2024, ahead of 2023’s 36.8 million and 2019’s 38.9 million.

“The recovery from here is largely driven by international traffic reaching 1% above 2019 levels by 2024 and +9% in 2025, as domestic eclipsed 2019 levels in 2023,” Jefferies said.

Auguring well for MRO demand are slowing retirements attributed to ongoing travails with Pratt & Whitney’s geared turbofan (GTF) engine and supply constraints. Jefferies predicts that widebody retirements in 2024-2026 will total 348, compared to an earlier estimate of 402, “given slower production ramp.” Meanwhile, narrowbody retirements will reach 1,857 compared to a prior forecast of 2,024 during the same period of time due to GTF engine-induced capacity constraints.

Jefferies is especially bullish about the prospects of aerospace parts supplier HEICO, whose shares it expects to benefit from a potential $80 million upside to 2025 estimated earnings before interest, tax, depreciation and amortization (EBITDA). HEICO posted record sales of $936.4 million in its fiscal 2023 fourth quarter (Q4) as it reaped the rewards of its $2.05 billion acquisition of parts supplier Wencor.

Despite the high costs involved in the Wencor acquisition, HEICO’s earnings-per-share in its fiscal Q4 still reached $0.74, exceeding estimates by Jefferies ($0.67 to $0.68), RBC Capital Markets ($0.69) as well as an analyst consensus ($0.70).