On the desk today · TransDigm Group
The only approved part on the plane — and they know it.
| NYSE · TDG |
The Toll Booth Bolted
To The Fuselage
Nick Howley was working at an industrial conglomerate called IMO Industries in the early 1990s. His boss asked him to prepare four struggling aerospace parts divisions for sale. Howley studied the businesses. He noticed something the market missed — each division made small, unglamorous parts that happened to be the only approved source for their specific aircraft application. A cable tension regulator. A cockpit latch. A fuel system connector. Tiny parts. Irreplaceable ones.
Instead of finding a buyer, Howley became the buyer. In 1993, he and partner Doug Peacock teamed up with private equity firm Kelso & Company, put up $25 million in equity, and acquired all four divisions in a leveraged buyout. They called the new company TransDigm.
I thought of this story last week at the airport. I was standing at the gate when the agent announced a two-hour mechanical delay — a sensor replacement. I watched 200 passengers groan, check phones, and wait. No one asked what the sensor cost. No one ever does. The plane doesn't fly without it. That's the business.
Most people hear "aerospace parts" and picture jet engines or fuselage panels. TransDigm doesn't make any of that. It makes the small, specific components nobody thinks about — actuators, igniters, latches, pumps, connectors, seatbelt mechanisms. Parts so specialized that roughly 90% of the company's revenue comes from proprietary products. About 80% comes from positions where TransDigm is the sole approved supplier.
Howley built the company in Cleveland with a simple thesis. Find niche aerospace parts makers with approved positions on aircraft platforms. Acquire them. Then apply what he called the three value drivers — generating profitable new business, productivity and cost improvements, and value-based pricing. That last one is the key.
The math is hard to argue with. In fiscal 2025, which ended September 30, TransDigm reported $8.8 billion in net sales — up 11% from the year before. Net income hit $2.1 billion. The company posted adjusted operating profit of $4.76 billion, a margin of 53.9%. For an industrial manufacturer. Making metal parts. I have looked at hundreds of industrials over the years. I have never seen a margin like that.
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That margin holds because of a design called lock-in. When one of TransDigm's parts gets certified on a Boeing 737 or a Lockheed Martin F-35, it stays there for the life of the platform — 25 to 30 years of production, then decades more of aftermarket replacements. A single part approval can generate revenue for over 50 years. The commercial aftermarket and defense segments together account for roughly 72% of revenue. The initial sale is the foot in the door. The aftermarket is the annuity.
Pricing power is the engine. TransDigm raises prices on its sole-source parts regularly — and customers pay. The cost of switching is prohibitive. Recertifying a replacement part through the FAA can take years and cost more than the part itself. In 2019, the Pentagon's Inspector General found that TransDigm had earned $16.1 million in excess profits on 46 of 47 parts reviewed. Congress held hearings. TransDigm refunded the money. A later review alleged the company charged $119 million for parts that should have cost $28 million. The stock barely flinched. Customers kept paying anyway.
As Howley once explained it: "Our goal was to price the product not to the cost, but to what we thought the value we provided to the customer was." That sentence sounds polite. What it means in practice is this — if you are the only FAA-approved maker of a cockpit latch on a plane that carries 180 passengers, you can name your price. And you do. The Pentagon knows it. Airlines know it. They pay because the alternative is grounding an aircraft.
Here is the flywheel. TransDigm acquires a new niche parts maker every few months. Since 1993, the company has completed over 90 acquisitions. Each one adds proprietary parts on new aircraft platforms. More platforms mean more aftermarket revenue. More aftermarket revenue funds more acquisitions. In October 2025, TransDigm bought Simmonds Precision Products from RTX. In December 2025, it announced the acquisition of Stellant Systems for $960 million. The machine keeps running.
And instead of sitting on the cash, TransDigm sends it back in massive special dividends — run like a private equity fund inside a public shell. In 2023, it paid $35 per share. In 2024, $75 per share. In 2025, $90 per share. The stock went public in March 2006 at $21. It traded near $1,300 in early July 2026 — before counting the hundreds of dollars per share already returned in cash.
WHY THIS WORKS
Sole-source lock-in. Once a part is certified on an aircraft platform, switching requires years of FAA re-approval. Customers don't leave — they can't.
Aftermarket annuity. Each new platform creates decades of mandatory replacement revenue. The installed base only grows as more planes fly.
Acquisition flywheel. Over 90 deals since 1993, each adding proprietary parts on new platforms. More platforms feed more aftermarket, which funds more deals.
Private equity discipline in a public wrapper. No bloated corporate center. Decentralized operations. Cash returned to shareholders through special dividends, not empire-building.
What most people miss: TransDigm doesn't pay a regular quarterly dividend. It pays nothing for months — then drops a special dividend so large it shocks the market. The $90-per-share payout in September 2025 was larger than most stocks' entire share price. The company treats shareholders like limited partners in a buyout fund.
*Disclaimer: Energy Exploration Technologies, Inc. (“EnergyX”) has engaged [Cashflow Currents] to publish this communication in connection with EnergyX’s ongoing Regulation A offering. [Cashflow Currents] has been paid $250 per lead___ in cash and may receive additional compensation. [Cashflow Currents] and/or its affiliates do not currently hold securities of EnergyX.
This compensation and any current or future ownership interest could create a conflict of interest. Please consider this disclosure alongside EnergyX’s offering materials. EnergyX’s Regulation A offering has been qualified by the SEC. Offers and sales may be made only by means of the qualified offering circular. Before investing, carefully review the offering circular, including the risk factors. The offering circular is available at invest.energyx.com. Comparisons to other companies are for informational purposes only and should not imply similar results.
