GSSA firms eye acquisitions: Outsourcing firms look to broaden global reach
“There is a lot of competition, not only with GSSAs, but with airlines and freight forwarders,” Smulders says. “GSSAs handle capacity control, overview the supervision of the cargo handling company contracted by the airline and flight supervision if necessary. It’s a total service package and is becoming more and more important.”
Smulders says the challenge for GSSAs is to increase their portfolios, not an easy task. AAR’s clients include Aeroflot, Olympic Air, Coyne Airways and Leisure Cargo, one of the company’s major customers, which is owned by Air Berlin. Leisure Cargo is a total cargo management company that works with 18 airlines, primarily with belly cargo. AAR also works with Arkefly, a Dutch charter airline which is part of the German travel group TUI. Cargo includes Dutch perishables for the former island countries of the Netherlands Antilles in the Caribbean.
“Airlines have a lot of challenges and because of the downturn at the moment, we have to be careful in pricing,” Smulders says. “You also see that shippers are asking a rate for their shipment through various freight forwarders. We recently had a request for Kabul and got a request from 12 different agents. Does it make sense? Yes, maybe if you are going for the lowest rate, but no, if the destination doesn’t have that many options to fly.”
Smulders describes his company as a small firm that gives upmarket services.
“We have a high standard of service, therefore we can afford ourselves to be a little more expensive. We are proactive in this and give the freight forwarder constant updates of what is happening with their shipments. The most important thing is to keep our customers happy so they won’t go away,” he says. “If you are doing a good job and it’s still affordable for them to continue working with GSSAs, they will not leave you.”
Adrien Thominet, chief operating officer of Paris-based ECS, one of the largest GSSA organizations, says airlines need stronger partners these days. He says airlines and GSSAs walk a complex tightrope of managing costs and providing increased services.
“It’s a little tricky for us. On the one side, airlines need more commitments from GSSA. They expect us to do everything for them. They want a commitment, and at the same time there is pressure on their costs. They are trying to minimize the cost of the outsourcing.”
ECS hopes to enlarge its network during 2013. Thominet says ECS believes acquisitions are more beneficial than organic growth in terms of being able to quickly serve new markets. ECS is strong in Europe and Africa but is looking to expand in other regions.
“We anticipate acquisitions this year,” Thominet says. “Our network is not completed yet. We are not in South America and we still need to grow in the Far East.”
Thominet believes airlines have no choice but to outsource in certain regions. He says GSSAs must innovate and develop new services to bring added value.
“We must innovate with new business to develop new forms of revenue,” Thominet says. “We are facing overcapacity compared to demand, so revenue is decreasing.”