Every hour a jet engine spends in the air, something inside it wears down. When that part reaches its limit, the operator cannot shop around for a bargain, it has to buy a certified replacement on the manufacturer’s schedule. Dylan Jovine’s Flight Royalty Three is built on that fact. The three companies in the basket, TransDigm, Howmet Aerospace, and HEICO, occupy different corners of the same aftermarket, but they all collect a toll on the parts that keep the world’s engines flying.
Three Companies, Three Moats
TransDigm, ticker TDG, is the anchor of the promo and the closest thing to a pure aftermarket rollup. It buys niche aerospace component makers, holds the certified parts, and prices them by what they are worth to the buyer rather than what they cost to make. That “value pricing” approach has produced margins that drew Congressional attention, but it has also produced an extraordinary shareholder-return machine. The company borrows to buy back stock and pay special dividends, which is why its balance sheet carries negative book value even as its aftermarket cash flows keep growing.
Howmet, ticker HWM, sits one step earlier in the supply chain. It forges the superalloy parts that survive inside the hottest section of an engine, along with specialty airframe fasteners. Where TransDigm aggregates hundreds of small part franchises, Howmet owns the hard industrial process of shaping nickel and titanium alloys, a capability few suppliers can match. It also carries a much cleaner balance sheet, with about $3 billion of debt against a market cap near $115 billion.
HEICO, ticker HEI, attacks the same market from a different angle. It makes Parts Manufacturer Approval parts, FAA-certified copies of other makers’ components sold at a discount. When an airline wants to cut maintenance cost without giving up certification, HEICO is the supplier they call. The result is a family-run company with low debt, about 65 percent defense and 35 percent commercial revenue, and a share price near $374.67.
The Economics That Bind Them
What unites the three is the replacement cycle. New engine sales are the headline number, but the aftermarket is where the steady cash lives. An engine in service for 25 years will be overhauled many times, and every overhaul pulls parts through these companies’ order books. The demand is regulation-locked: a certified part cannot be swapped for an uncertified copy, which is precisely why HEICO’s PMA approvals are valuable and why TransDigm can price to value.
That certification barrier is the moat itself. Getting a new part approved for a commercial aircraft is a years-long process that requires reams of testing and regulator sign-off. Once a part is approved and embedded in a fleet, the switching cost for an airline is enormous, so the incumbent supplier keeps the revenue for as long as the fleet flies. This is why these businesses can sustain margins that would invite competitors in almost any other industry.
There is also a built-in growth driver underneath the cycle. The global installed base of jet engines keeps expanding as new aircraft are delivered, and every engine added to the fleet becomes a decades-long stream of mandated replacement parts. The companies that own the certified parts for those engines see their addressable market grow along with the fleet, which is the quiet engine behind the whole flight royalty pitch.
The valuations show the market already understands this. TransDigm trades near 25 to 26 times forward earnings, which is actually its cheapest level since 2018 or 2019. Howmet and HEICO both trade above 50 times forward earnings. These are not hidden bargains, they are quality businesses at full prices. For a closer look at the anchor name, see our TransDigm stock breakdown, and for the forging story, our Howmet explainer.
What a New Reader Should Know
The “up 109%,” “up 79%,” and “up 33%” figures attached to these three are portfolio marks measured from Jovine’s own entry dates, which the promo does not disclose. They describe what his open positions have done, not what a new buyer will capture starting today. The underlying businesses are real and durable, but the entry price is the reader’s to manage.
That distinction matters more here than in most promos, because two of the three names trade at premium multiples. The thesis, commercial travel plus rising defense budgets pushing old planes to fly longer, is sound. But a sound thesis and a cheap price are different things, and our HEICO stock guide walks through the numbers on the most expensive of the three. That is the honest framing here: a durable business model with a premium price tag attached to it.
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