Some Teething Pains Come With Honeywell Aerospace's New Independence

Honeywell Aerospace is one of the largest aircraft component and systems suppliers. We think its substantial scale gives it negotiating leverage with aircraft manufacturers, as it provides many systems and can selectively bid on critical components. Given their long service life and the need for recurring overhauls, we see some of Honeywell Aerospace’s components as fitting the razor-and-blade business model, with original equipment sales (sometimes at low or no margins) as the razor and recurring service and parts revenue (often at high margins) as the blades.