GSSA firms eye acquisitions: Outsourcing firms look to broaden global reach
As the GSSA sector continues to consolidate, companies are facing increased service demands from their airline partners. Challenging economic times continue to place cost pressures on both. GSSAs are meeting this challenge through acquisitions to broaden service areas and by developing new services.
Frankfurt-based ATC Group has been growing through acquisitions and plans more deals during 2013. The company started off the year by acquiring Houston-based Platinum Air Cargo USA, giving ATC a much greater global reach.
Ingo Zimmer, CEO of the ATC Group, says over the past several years the company has changed from being primarily a European-centric company to a true international player. The company has been in acquisition mode and plans further expansions this year.
“We are now serving India and South Africa and Hong Kong. This year, we bought an American GSSA, Platinum. We are going to expand into the South American market as well,” Zimmer says.
Platinum will gradually drop its name and will be operating under the ATC brand by the end of the year.
Zimmer says business is good for ATC, which now works with more than 60 airlines. Business is especially healthy with Middle Eastern airlines, he says. The European market remains slow in general, but has been good for ATC.
“We are focusing on South America this year. In the U.S., we are very strong right now with eight stations. To complete everything, we are looking at South America for acquisitions,” he says.
Zimmer says during tough economic times, airlines put more pressure on GSSAs, and as a result GSSAs have to take more risks and commitments. He says while rates are decreasing, most GSSAs do not benefit from fuel surcharges.
The role of GSSAs has greatly expanded through the years, Zimmer says.
“In the past, our role was mainly on the sales side, but now we are more on the customer service side, acting in fact like a cargo department of the airlines we are representing,” he says.
Overcapacity has driven rates and yields down and remains the industry’s biggest challenge, says Jens Tubbesing, founder and CEO of New York-based Airline Network Services.
“Overcapacity creates suffering and pain for everybody,” Tubbesing says. “Rates are in a free-fall for everyone now, and we have situations where the main deck rates are on par with lower-deck rates, which was unthinkable for the longest time. Now, you see this more and more. It’s a huge problem.”
In addition to cost pressures on GSSAs, there are requirements to provide more services which require investment in technology, people and other resources, Tubbesing says. Another gradual change has been that airlines are keen to partner with one company compared to several years ago when they were prone to piecemeal their outsourcing.
On the other hand, Tubbesing observes that some airlines may be looking at bringing sales and service back in-house.
“Some carriers that have had long-time representation with GSSAs have now begun to insource again. Qatar Airways is one of the most notable,” Tubbesing says. “The question is if an airline reached a certain size, does insourcing become a viable alternative?”
Tubbessing says his business, which covers the U.S. and Canada, is growing. ANS works with a diverse group of airlines covering Southeast Asia, Latin America, Europe, the Middle East and Africa.
“We have a pretty nice diversification of airlines that allow us to drive or create revenue streams in all areas. When one is down, another is up. It’s a good mix for us. We are happy with our strategy,” he says.
Tubbesing believes consolidation will continue in the industry as companies seek to provide global service and airlines look for future partners around the world. He says he is optimistic about the industry’s outlook. He says GSSAs that provide a tangible value with a good business model will succeed.
“If you look at the general trends, airlines are starting and ending services much faster than ever. They enter a market and they leave a market because the business today is a much faster business,” he says. “Companies like ours are able to fulfill a need of representation and can help facilitate or execute a business plan.”
Ton Smulders, managing director of Active Airline Representatives in Amsterdam, says GSSAs have evolved into the role of total cargo management.