TransDigm Group Incorporated (NYSE:TDG) Q4 2019 Earnings Conference Call - Final Transcript
Nov 19, 2019 • 11:00 am ET
airplane and one product or another, if it meets that criteria and we see a clear path to our private equity like return, we're a very interested buyer. And we really don't hem it down any more than that.
Got you, got you. And then maybe just kind of peeling back the onion a little bit, when you think about the return of the 737 Max into service, is it going to be a headwind or a tailwind? Meaning there'll be fewer older airplanes flying around, which would suggest a headwind. But if it's a new airplane going into service you'll have provisioning, which would be a possible tailwind. Right. So on balance, how would you expect the return to service the airplane impact you guys?
Yeah. Ron, we look at it as somewhat neutral. Of course, the aftermarket is good, the OEM, we do well with the OEM as a whole on the 737. But as a whole, it's de minimis to the business. 737 Max is small enough that the noise of its actual ramp rates or if anything else difficult happens there, would not have any impact -- noticeable impact on the business. So I think its de minimis and that's how we model this. Certainly more older planes flying is good for us. But we have OEM content as well. So it's kind of a push.
Got you, got you. And then one follow-on to that if I may. As you mentioned in the prepared remarks, air traffic has slowed a bit this year, right, so we're maybe a smidge below kind of the long-term mean, but maybe reverting to remain. But we really haven't seen much impact on aftermarket demand because of that. Are you expecting that the change as we go to next year? I mean, is there some conservative in your outlook for next year, because of whatever traffic has been doing. I mean, how can we think about that? I mean, be it that air traffic has slowed pretty much across the industry, everybody has had a booming aftermarket performance.
Yeah, I think the RPM growth has been impacted by the lack of availability of the 737. So I don't want to overblow that to the industry and how it may impact us. So I look at RPM, it's close to the 50-year average. I don't see a looming problem in the industry. So I'm still optimistic about the future for this market as a whole, whether its aftermarket or OEM. I think aftermarket orders can be lumpy at times, and we certainly see that. Last year, the POS, which is a nice forward-looking indicator, that was up high-single digits. So that kind of reinforces how we feel about this year and why we guided to mid to high single-digit growth in the aftermarket. But certainly we've put necessary conservatism into our forecast and hence the mid to high comes into play.
Great. Thank you so much. Thank you.
Thank you. Our