We believe that Melrose, with its wide economic moat, is an attractive investment opportunity as it currently trades at approximately a 65% discount to our fair value estimate of GBX 800. Melrose Industries, through its subsidiary GKN Aerospace, is a prominent supplier of engine and structural components, with 70% of its revenue derived from long-term contracts where it serves as the sole-source provider. In the engine segment, the company boasts a well-diversified portfolio across both narrow-body and wide-body aircraft, functioning as a Tier 1 supplier with established positions on 90% of active engines, and engaging in risk and revenue-sharing partnerships for 74% of these engines.
The company maintains long-term partnerships with all major engine original equipment manufacturers, including Pratt & Whitney, GE, Safran, and Rolls-Royce. With its RRSP contracts, Melrose is well-positioned to capitalize on the recovery of the civil aerospace sector post-pandemic and the substantial growth anticipated in the engine aftermarket. Despite the pandemic's challenges, air travel has demonstrated resilience, particularly in the leisure segment, alongside a rising demand for narrow-body aircraft. By 2023, global flight hours had returned to 2019 levels and are projected to grow at an average rate of 8% throughout our forecast period.
Aerospace manufacturers have ramped up production efforts, and we expect this trend to persist in the long term to meet the soaring demand for aircraft and engines, a situation exacerbated by a shortfall of approximately 2,500 aircraft due to the pandemic and issues surrounding the Boeing 737 MAX. By 2029, we anticipate that 57% of the engine segment's future profits will be derived from the aftermarket, up from an estimated 53% in 2024. While the majority of GKN's portfolio consists of non-rotating parts that last the entire lifespan of an engine, the RRSP contracts entitle the company to aftermarket sales generated by its partners. Furthermore, profit growth in the engine division is expected to be bolstered by a doubling of repair service sales by 2026 and enhanced defense partnerships, particularly with the Swedish Gripen and F-35 jets. Lastly, we foresee the structures division also benefiting from positive trends in both civil and defense markets, along with improved profitability as GKN restructures its portfolio and exits unprofitable contracts.
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