Pete Skibitski: Okay and just curious. Go ahead…
Eric Mendelson: I am sorry. And Pete, this is Eric to add, you had asked about pricing. Yes, there is no question that we’ve got pricing upside potential. However, it’s really been our philosophy to pass along our cost increases. And so that’s what we’ve been focused on doing to be able to maintain our margins and to continue to provide a lot of opportunities for our customers. So I think that there is a very large potential there. One of the things is as – if someone’s not buying a part and the OEM has raised the price on the part, then as new customers come in and start buying that part, they pay higher prices. So in a sense, we do get some pricing that way, but we are being very good to our existing customers, and we’re looking very much at our cost increases and cost increases have been significant in a number of areas.
I don’t need to tell you about labor and material. And we have been successful in passing along those cost increases because it’s something that we’ve got to do in order to maintain our margins. As far as the overall operating margin before intangible amortization, I think that we will continue to perform as we have in the past that I’m quite pleased with our performance in the past. And we’ve got a lot of very, very good things in the hopper, a lot of projects where HEICO and Wencor can work together on a number of things. So I’m very optimistic about the future.
Pete Skibitski: I appreciate it guys. And just overall, clear on the amortization, I think you called out $11.8 million in the fourth quarter. What’s kind of the run rate you’re expecting in ‘24 that flows through FSG?
Carlos Macau: That would be the quarterly run. Are you talking about for just one quarter or for the whole segment?
Pete Skibitski: Well, I think the $11.8 million you referred to was Wencor purchase intangibles amortization. So I’m just wondering that number, how that runs through ‘24.
Carlos Macau: So it should be about that much each quarter. I will caution you that we’re in the middle of purchase accounting and valuations and all that kind of stuff. So it could move a few ticks to the right or left, but that’s what we’re counting on for next year, each quarter about $11.8 million.
Pete Skibitski: Okay. Appreciate it. Thanks, guys.
Operator: We will take our next question from Bert Subin with Stifel. Please go ahead.
Bert Subin: Hey, good morning. And thanks for the question.
Eric Mendelson: Good morning.
Bert Subin: Maybe just to follow-up on that margin question. If we look at FSP margins being dilutive to HEICO, just given where ETG margins are, you noted last quarter, Wencor was in-line with FSG, excluding the amortization piece, which seems to be the case based on your prepared comments, Eric. When you put that together with the synergy opportunity and the broader parts pricing opportunity that we’ve seen on the OEM side, do you think there is a path to overall operating margins getting back to or above FY ‘22 levels in the next, let’s say, 3 years?
Eric Mendelson: Well, so when we look at this past year for the Flight Support Group, in ‘23, our operating margin even after the one-time expenses was about roughly 22%. So we are going to have some additional headwinds as a result of the intangible amortization. But I think that when you add back the intangible amortization, you get into around the 23% area within the Flight Support Group. So I do think that we yes, when you add back the intangible amortization and M&A expense, you get back to the 23%. So I do think that there is additional opportunity for us. But again, as I said, we want to be very protective and make sure we take care of our existing customers who have been buying the existing parts. But there is no question that there is a pricing opportunity.
I mean if somebody has not purchased a part from us, our list price would escalate and they would not be able to pay the same price for that part as somebody who had been buying it for a long time. So yes, I think that we do have pricing opportunity on the upside. I want to be careful not to get too far over my skis here because again, we are very customer-friendly, but I do think there is pricing opportunity.
Bert Subin: Okay. Great. And then just as, I guess, a higher-level follow-up, you’ve called out commercial aviation in that end market as being strong. Boeing and Airbus is clearly talking about driving towards target production rates, that are much higher than today’s rates over the next couple of years. Assuming that plays out based on sort of what you know today, how would you expect your Commercial Air end market to change? Do you think they remain fairly similar over that period?
Eric Mendelson: Yes. I think they remain fairly similar. One of the things that happened for us during the COVID crisis is we got rid of a lot of old aircraft at one-time. So instead of having those headwinds, those headwinds as those older aircraft would have been retired over time, we got rid of them all. So if you look at our sales today, there is been a significant upgrade in the improvement in our fleet age and distribution. So I think that the aircraft that we’re servicing today are going to be out there for a long time. They continue to age 1-year per year, and their price points are very positive for HEICO. So I think that we’re going to have the wind to our backs for many years.
Bert Subin: Thank, so much.
Eric Mendelson: Thank you.
Operator: We will take our next question from Ken Herbert with RBC. Please go ahead.
Ken Herbert: Yes. Hi, good morning, everybody.
Eric Mendelson: Good morning, Ken.
Ken Herbert: Maybe a question, Eric, for you to start off. If you look at HEICO now with Wencor in the combined business. Can you talk organically perhaps how much you’d expect your PMA portfolio, for instance, to grow into ‘24 or ‘25? I guess I’m just curious about what kind of share gain or opportunities you’re seeing in PMA in particular and how you’re investing to support that?
