ISSUE 3 2010 continued from previous page are directly related to revenue


production; the more he creates for the airline, the more he earns for himself.” IAM’s McCool suggested


market changes such as commissions for all-inclusive revenue or a fixed fee GSA contract might be short-term and in reaction to unsustainable low yields or high levels of fuel surcharge. “The business model remains


the same; your sales team ensure they know the market like the back of their hands and have the relationships established to secure the most possible air cargo from the market on behalf of their principal,” he said. “IT developments and commission structures have an influence on how we do business or are remunerated for doing the job but in general very little has changed. I feel that as yields go back up to levels that enable the carriers to continue flying profitably, and if more large carriers start to incorporate surcharges into the rates, we will see a bit more stability.”


Highlighting another aspect of the airline/GSA business relationship, Air Logistics Group’s Steve Dawkins was cautious about agents becoming GSSAs and offering a wider range of services. “As an organisation, we have always been great believers in focussing on our network and our core business – and our core business is selling. We are not an organisation which wants to be a handling company or a trucker,” he stated. “So, yes, if we are asked


by airlines to manage the trucking and handling of their cargo then we will do it, but in a transparent way so they can see what our costs are and potentially any margin we make on that. As an organisation, we bring a lot of volume across the world so sometimes airlines benefit from handling rates or trucking rates that we have already. But as for setting up a trucking company or handling company, that is not a field we want to get into. We are not expert in those fields and they


are not our core business.” Similar views were voiced


by Jari Aaltonen, managing director of Finnish agent Airline Services GSA, which is also the parent company of subsidiaries in Norway and Sweden. “We are ready to provide GSSA services but our basic function is to sell the services of our principals, the airlines, to freight forwarders and then take care of operational matters such as booking and tracing and in some cases also collecting freight charges. Some GSAs in the Nordic region, especially in Denmark, have an obligation to arrange some kind of supervision concerning the loading of the aircraft but here in Finland we basically don’t have such a demand from any of our principals.” Coinciding with the trends


for GSAs to become GSSAs – and to some extent encouraged by that development – the sector is continuing to see further consolidation, with major global players like ECS, Air Logistics Group and Netherlands-based Kales Airlines Services steadily


expanding their geographical coverage as well as the scope of their services. Air Logistics Group, for example, recently boosted its coverage to 28 countries with the opening of an office in Albania (Tirana) in July, just a month after it brought on line a new office in Japan (Tokyo Narita). Future plans include opening eight new offices in Asia (Beijing, Shanghai, Seoul, Ho Chi Minh City, Bangkok, Manila, Kuala Lumpur, Singapore) within the next six months. In addition to the recently-opened Tokyo office, the group has also had a presence in Hong Kong for the last two years. “I think it is natural that


the GSA/GSSA business will continue to consolidate,” suggested Air Logistics Group’s Dawkins. “Airlines will demand a certain level of expertise in this specialised field and as a result there has to be continued consolidation. If there continues to be pressure on rates as well, then that will additionally drive more consolidation.”


Dawkins added that he


thought the GSA/GSSA sector would also see more private equity coming in. “If you look at the three or four major players in the GSA sector at the moment, they are supported by private equity organisations who can see the opportunities in that market.” Ton Smulders of Dutch agent


Active Airline Representatives confirmed that the last couple of years had seen more independent GSAs taken over by larger groups, both in the Netherlands and elsewhere. “The recession helped to increase that trend but it was already there, fuelled by demands from the airlines for GSAs to provide a broader range of services beyond the scope of some of the smaller GSAs. Apparently these larger groups want to expand and have more than one GSA in a country.” However, added Smulders,


the GSA industry would also still continue to see small local agents being set up. “That trend has also been there for a number


of years. This business does tend to attract entrepreneurs.” Jari Aaltonen of Finnish


agent Airline Services GSA made similar points. He agreed that competition from multinational GSSA groups was getting stronger but said his company, whose bedrock business is selling Singapore Airlines Cargo B747- 400 freighter and passenger aircraft bellyhold cargo capacity out of Copenhagen, Denmark, was managing to survive by providing regional representation in the Nordic countries rather than just national coverage. However, he also argued


that there was a role for independent local GSAs with local people. “Local knowledge and personal relationships with forwarding agents still play a big part in this business. This is a people business and if you don’t show your face for a couple of years you will definitely not get any bookings. One problem in that context, though, is that the number of freight forwarders is getting smaller and smaller.”


GSA


21


ECS pursues twin-pronged strategy


European Cargo Services (ECS), one of the largest air cargo GSSA (general sales and service agent) organisations in the world with a total throughput of 450,000 tonnes in 2009, is focussing on two particular strategies to help continue the development of its business. The first of those, explains the Paris-headquartered group,


which advertises itself as “a one-stop shop for sales and service representation for airlines, warehouse handling or goods supervision and charter provision for both scheduled and ad hoc operations”, involves seeking to develop large Europe-wide or worldwide contracts. The second centres on developing its own routes and solutions.


Expanding on the first of those strategies, Adrien Thominet, ECS’s Adrien Thominet


vice president sales and marketing, said one existing example of that was the work the group did for Belgian carrier Brussels Airlines, which primarily operates passenger/ bellyhold cargo services intra-Europe and to nearly 20 points in Africa. “For Brussels Airlines, we are working on a kind of full cargo management basis – we take


care of all their cargo sales and operational activities worldwide. That is our major contract today but we also do the same for Aeromexico all over Europe, Garuda all over Europe and Ukraine International Airlines,” he stated. The second activity ESC has been trying to develop, continued Thominet, involves establishing


its own routes and solutions. “We acquired some shares in all-cargo airline Africa West where we have full control over one B747 freighter from Europe into Africa (Lome, Togo) and from there to 14 other destinations in Central and West Africa. That is a different activity but when you combine the two strategies, it means we can provide interlining solutions with the airlines that we represent and with the airline that we control.” Asked how ECS avoided any potential conflicts of interest associated with effectively providing its own air cargo service through Africa West, Thominet said that by coincidence, the group’s other airline customers were not generally flying to the same African destinations. “Brussels Airlines does fly to Africa but there are only four destinations which are also served by


Africa West and for those points we have developed strong synergies between the two,” he said. “Specifically, we have created interlines between the two carriers, which means we can put an Africa West air waybill on Brussels Airlines or vice versa. That means we can offer customers a wider range of solutions.” However, Thominet said ECS was not planning any further developments along the lines of the


Africa West operation “at this stage”. “With all that happened in the air cargo industry last year, at the moment we are more focussed on trying to consolidate and develop our existing business,” he stated.


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