The strength of a guarantee
Cost-cutting airlines look to ever-evolving GSAs for a sense of security
Security. In this economy, with so much uncertainty still pervading the market, every person at every level of the aviation industry is searching for a guarantee — an assurance that business will be conducted in the agreed-upon manner, a pledge to create positive numbers in the middle of so many negative results. The relationship between a GSA and his carrier client is no different.
Recently, airlines have been asking more of their sales partners. When GSAs approach an airline about representation, carriers have started asking for revenue guarantees and detailed business models. These GSAs must pledge to their new customers a certain level of activity in order to secure business in this uncertain economic environment. This is slowly becoming the new normal.
“Airlines are very scared,” says Adrien Thominet of ECS, “so they ask for the largest possible guarantees; they ask for the largest possible financial support. Airlines need more and more to go to big GSAs who will give them the maximum comfort and guarantees.”
More airlines than ever have started turning to GSAs as a way to bleed costs out of their
business. Some of these airlines are entirely new to the GSA experience and have just moved toward outsourcing their sales department because it was the next thing to cut. Other carriers are accustomed to the GSA model and spend time shopping around among firms.
For most airlines, the obvious choice for cargo sales seems to be outsourcing to a GSA, but there are still a few holdouts. These carriers are convinced they can go it alone in a quickly changing landscape. “A few of them are still trying to get by on their own, but it’s a very, very limited number of airlines,” Thominet says. “I believe the CFOs are not giving any choice to the cargo managers. They are telling them to cut costs and increase revenue; with their resources, they can’t do it by themselves.”
At ECS, Thominet sees a broad range of airline clients. Many of the carriers who have traditionally used their own staff want to make sure that GSAs will cost less money than their staff while generating more money; due to a variety of factors including employee overhead, he says that this reasoning “is almost illogical.” Airlines who are familiar with GSAs and have worked with them before, want to be sure their new GSA can produce results that were just a little bit better than the last. “Whatever the strategy is,” he says, “they always want to have more and more guarantees.”
The quest for a sense of security may seem best provided by a GSA with a vast network around the world. While there are GSAs who focus on being the biggest and the best, Thominet says, there are only about three major players in the worldwide market. And while airlines may like a company’s broad reach, there is always room for smaller firms. Niche GSA organizations can offer a different perspective than larger organizations because of unique services that are tailored to an airline’s needs.
Airlines use the bigger GSAs when they need to concentrate on volume, among other things. Unfortunately, Thominet says, all the mid-sized GSAs have been pushed out of the market.
Sevde Ipek, business development manager at Turkey-based Airmark, counts among her client base large airlines such as UPS and Korean Air as well as smaller players like Ural Airlines and Moldavian Airlines. For Ipek, these airlines need the services of his team to create a good relationship with local freight forwarders. “In order to get a good and regular cargo market share and create a market existence for an airline, relationships with the local freight forwarders and customers are very important,” she says. “You should know the market conditions, competitors, and the target customers very well, which could only be achieved with a local sales force with a good reputation in the air cargo market.”