20 LEASING AND RENTING
GROUND HANDLING INTERNATIONAL JUNE 2013 The 20% factor
The idea of GSE leasing isn’t new – and with every passing year, more and more handlers are waking up to its potential.
ack in the early days, all handling companies had their own airport support equipment. Over time, though, things changed, albeit slowly: and gradually, more and more players began to look at adopting the model of the operating lease because it fitted very well to the needs of the market.
A Belgian viewpoint…
“This trend,” avers Marc Delvaux, TCR’s CEO, “is accelerating. However, there are still many things to be done before the lease concept reaches a similar market share to that of other industries. Today, more than 20% of airport equipment is leased within Europe, whilst in other industries, nearly 50% of the installed equipment is rented. It should also be noted that 96% of the customers we have signed up since 2000 are still our customers. So it can be said that the concept is solid and growing. “TCR can be considered the pioneer
of renting airport equipment. This concept really took off in 1996 with equipment rental deals for KLM at Schiphol Amsterdam, much broader in scale than what had been done before. TCR became the leading independent supplier in terms of rental GSE. From there, the concept has developed with the help of some other customers who were pioneers in this area. After all, the ground handling sector is aware of the constraints that are directly related to the ownership of GSE.
“In essence, GSE is infrastructure equipment which must be adapted to various operational constraints and regulations that are currently in force and which are becoming more and more stringent. Good management therefore requires the application of a number of principles.
“The equipment must be technically sound, since any failure can cause flight delays. To ensure this, the GSE must undergo a preventive maintenance schedule as well as routine servicing, which must be performed by correctly trained maintenance personnel in workshops that are properly equipped and supplied with on-time spare parts. “Equipment must be readily available, to a greater or lesser extent, according to the varied timetable of the operation yet make the cost of the investment worthwhile.
“Further, the equipment must comply at all times with current legislation in terms of safety, the environment and ergonomics, all of which requires frequent adjustments and regular certification by accredited bodies. “Management of equipment and associated service operations require specific and detailed management systems, underscored by a precise cost management. Similarly, GSE on the ramp can become the source of much management information on operations and personnel and all this data can be collected and analysed. “To my mind, the GSE in question should have a good residual value to reduce its total cost and to obtain competitive funding. On the other hand, a dedicated organisation for the management of the equipment at the end of its initial life is a must. The implementation of these principles is complex and requires the mobilisation of both human and substantial financial resources. However, companies that have adopted this method of working have been able to reduce their costs of delivery. This has been achieved through a simplification of their support structure (things like workshops and maintenance personnel) as well as the simplification and standardisation of equipment specifications. Additionally, there is an improved visibility of the overall cost of their equipment. Furthermore, we can add to this a significant reduction in investment, which can be up to 50% of the total cost of ownership over the unit’s lifetime. There is, of course, the advantage of renting off-balance sheet and the immediate improvement in the cashflow position through operations like sale and lease back. Finally, there is the reliability of their operation through the improved delivery of equipment and the provision of equipment that is both younger and better.
“On the other hand, outsourcing of equipment operations and the maintenance personnel involved will have a much more limited social impact than, say, the outsourcing of more visible activities, such as ground handling.
“Pooling has also been proven in some airports such as Heathrow (in the cargo area) since 2004. The decrease in the number of units at an airport represents significant savings for handlers because
all costs are shared by several partners, including the parking spaces, which are often limited and becoming more and more difficult to find. However, the implementation of a pooling system requires certain conditions, the first being a flight plan schedule that is compatible for the different users of the equipment. “Despite the success of the model of operational leasing, TCR is constantly improving the service we provide to customers. In addition to the rental and maintenance of equipment, dynamic fleet management is a part of our growing commercial offer. This allows a more accurate traceability of equipment in order to optimise the operation, safety and cost. In this regard, all the economic and operational information related to the equipment and its use is recorded, processed and disseminated to the operator, who is enabled to integrate the management of the operation. To do this, TCR has developed high quality IT systems focussed on transactions and information. “Today, TCR monitors market developments and equipment and often will liaise with manufacturers over specifications. The growing importance of factors such as the carbon footprint, the need for increased safety and that of ergonomics for GSE users, regularly generates technological innovations within ramp handling equipment. It is, of course, important for a lessor to incorporate these improvements in its fleet and be at the forefront of the market.
“The social responsibility of the company, in general, is also a topic dear to the heart of the airline. TCR invests a lot to offer its customers a service that enables them to account for a range of important issues such as the environment, ethics, security and sustainable development.” Today, TCR, together with its subsidiaries, is present in Belgium, France, the Netherlands, the UK, Spain, Ireland, Germany and Norway. Leasing activities also take place in Italy, in Rome and Milan airports. In all, TCR is active at 50 airports, including seven of the ten largest airports in Europe.
… and comment from Singapore
Across the other side of the ocean Teo Lye Seng is General Manager at Aviation Equipment Leasing. “With the gloomy business outlook and highly competitive aviation market, ground handlers are constantly looking at options to finance their GSE, a highly capital-intensive component in their operation,” he admits. “Besides the financial lease, the operating
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