How HEICO Got Rich Selling The Cheaper Copy

Hello Business Enthusiasts,

Welcome back to Business Knowledge, where every week we look at one public company that sells something forgettable and earns serious money from it. We tell the story, then dissect the habit worth stealing for your own business.

• Company in focus today: HEICO Corporation, Hollywood, Florida (NYSE: HEI)
• What they sell: government-approved replacement parts for jet engines and aircraft, priced below the original maker's parts
• Read this twice if you sell a cheaper version of something a much bigger company makes, and you worry they will cut their price to crush you

In today's issue, we look at the lawsuit that nearly sank a small Florida parts maker in 1989 and the German airline group that bought into it eight years later. You'll learn how to price under a market leader that can't afford to follow you down, all in about four minutes.

The lawsuit four times bigger than the company

In 1989, the owner of Pratt & Whitney sued a small Florida parts maker for $100 million. The whole company was worth about $25 million.

The Florida company was HEICO. Its Jet Avion unit made combustion chambers, the part of a jet engine where the fuel burns. United Technologies, Pratt & Whitney's parent, claimed the coatings on those parts used its patents, and the coated products made up about a tenth of HEICO's sales (Funding Universe company history).

The $100 million figure comes from the Pari Passu newsletter's HEICO history. The $25 million comes from the man who was buying in.

The family that bought the lawsuit too

That year, a Miami property developer named Laurans Mendelson and his sons, Eric and Victor, were piling into HEICO stock. "After a proxy fight and some ensuing litigation, we got control," Eric later told the ​University of Miami, describing the very end of 1989. He was 24 and admitted to buyer's regret soon after.

Walking away would have been easy. In 1990 HEICO was a small, troubled aviation products company with $26 million in revenue, facing a lawsuit worth four times its market value.

They stayed. The case ran for about a decade before HEICO settled and received a permanent license to make and sell the disputed parts. The reason they stayed explains the whole company.

The giant that can't cut its price

Engine makers often sell new engines on thin margins and earn the money back on spare parts for decades. HEICO makes approved copies of those spares and sells them 30% to 50% cheaper.

Parts Manufacturer Approval (PMA) is the FAA's sign-off that lets a company other than the original maker produce a replacement part.

Now let’s run the original maker's numbers, using a made-up example.

Say it sells 100 of one part a year at $100 and earns $50 on each, for $5,000. HEICO wins 20 of those sales at $65, so the maker keeps $4,000 on the 80 it still sells, and dropping its own price to $65 to win everyone back would leave just $1,500.

The giant keeps its high price, and HEICO keeps pricing against it. The second approved supplier gets rich on the first one's prices.

The airline that paid for a competitor

In October 1997, Lufthansa Technik, the maintenance arm of Lufthansa German Airlines, agreed to invest about $26 million for 20% of HEICO's parts business. Roughly $16 million of that money was set aside to develop new replacement parts over three years.

Look at who wrote that check. An airline maintenance shop buys huge volumes of engine spares, and it paid to create more competition for its own supplier. Lufthansa Technik still holds the 20% stake.

A big customer paying for your next product is the strongest proof a second supplier can get. Every other airline reads it as a signal that the cheaper part is safe to fit.

The mirror of our TransDigm issue

In one of our previous issues, we talked about TransDigm, where we watched a company win by owning parts nobody else may make and pricing them hard. HEICO feeds on the same high prices from the opposite side of the counter.

The results look different. TransDigm runs a 60.1% gross margin with debt at 6.0 times EBITDA, while HEICO runs 39.8% with debt at 1.6 times. Over the ten years to July 2026, HEICO's stock returned about 945% against TransDigm's 626%.

What the copy business became

In the fiscal year to October 2025, HEICO reported record net sales of $4.49 billion and net income of $690.4 million. Its parts and repair group alone sold $3.12 billion, up 18%.

HEICO says $100,000 invested when the Mendelsons took over grew to more than $130 million, close to 23% a year. Laurans Mendelson died on September 27, 2025, at 87, and Eric and Victor now run the company as co-chief executives.

The market has noticed. A recent Strategy Sprints analysis put the stock at about 58 times forward earnings, which leaves little room for a stumble.

Price under the leader this week

You need a leader with fat prices and a cheaper product buyers already trust. The leader's own math does the rest.

1. Identify the most profitable product from your competitor. Start by compiling a list of the top ten items your biggest competitor offers to your customers. Pay special attention to those that are frequently reordered at a premium price. If you find an item that is significantly overpriced compared to its production cost, you’re on the right track.
2. Analyze your competitor's pricing strategy. Use a spreadsheet to evaluate the financial impact of your competitor losing 20% of their sales versus the losses incurred from reducing prices across the board. If you determine that matching your prices would cost them more than simply losing your business, you’ve gained valuable insight.
3. Secure the necessary approvals from buyers. Reach out to three buyers and inquire about the certifications or supplier listings they require to consider switching to your products. Once you have this information, take the initiative to apply for those certifications. If the purchasing team recognizes you as an approved alternative, you’ve made significant progress.
4. Set your prices strategically below the competitor. Position your pricing at 30% lower than your competitor’s listed prices and ensure that this figure is included in every quote you send out. If your competitor maintains their pricing for two consecutive quarters, you’ve successfully established a competitive edge.
5. Propose a partnership with your largest customer for new product development. Offer them priority access to a new product in exchange for co-funding part of its development costs. If they express interest in which product will be prioritized, you’ve opened the door to a collaborative opportunity.

In 1989 a giant tried to sue HEICO out of the copy business. Nearly four decades later, that giant's price list remains HEICO's best salesman, and your biggest competitor's price list may be yours.