GSAs look set to increase their already substantial share of air cargo’s $50bn annual revenue base and further broaden their services, writes Tom Willis
Air cargo, a sector worth around $50 billion annually according to IATA, relies like most industries on the outsourcing of some operations in order to generate efficiencies – and this looks set to increase further. It is estimated that around 25% of the air cargo industry’s US$50 billion annual revenue is raised via outsourced sales operations, which means third-party, so-called ‘general sales agents’ (GSAs), are responsible for generating around $12.5 billion of the industry’s annual income.
While some GSAs may still act purely as an outsourced sales agent for airlines, over the last two decades the role for many has evolved far beyond just sales to the point where the GSA acts as the main cargo representative for the airline in a particular market, country, or region. The move towards GSAs offering additional services such as handling supervision led some years ago to the expansion of the term to GSSA or general sales and services agent, although some of the bigger international firms have taken the role even further.
Air Logistics Group (ALG), founded in 1994 by its now chief operating officer (COO) Stephen Dawkins, has expanded to become a truly global operation, and the company now regards itself as an “international cargo management” company – with GSA services comprising just one aspect of a “full range of cargo services”.
Dawkins highlights several important elements that have helped to build ALG into a US$500 million business, such as strong knowledge of the market, an “ardent commitment” for training, and a team of highly skilled and experienced professionals that are able to locate business for the airlines that they work with. He says all airlines strive to control costs and promote efficiency, while retaining a good standard in safety, compliance, management and growth, and it is up to GSAs to deliver this. For Dawkins, this requires significant investment in the infrastructure needed to keep the airlines’ operations efficient and growing; for example, ALG has invested US$8 million into IT over the last few years, he notes.
Strong market
Alongside the continuing trend for airlines to outsource elements of their operations, Dawkins says business is currently “booming” thanks to two external factors: the devaluation of sterling against the US dollar following the UK’s decision to leave the EU has boosted export cargo to the US and Asia from the UK, a key market for ALG and the airlines it represents; and air freight demand has spiked since the container line Hanjin Shipping ceased operations last August, disrupting global supply chains and driving modal shift to air freight.
Longer-term, Dawkins expects airlines’ outsourcing of services to continue, predicting that in ten years’ time, there will be a 10 percentage-point increase in the level of cargo operations managed by third-party companies – from 25% to 35%.
Complete cargo outsourcing
Business is also going well for another major global player with more than 20 years as an air cargo GSA, ECS Group. Its COO Adrien Thominet says the company has seen a 10% increase in business, year to year. Like ALG, ECS Group offers a “complete cargo outsourcing solution”, potentially across multiple stations. And with demand for air freight now expanding rapidly again for the first time since the global financial crisis in 2008, Thominet is optimistic about the industry.
While business in Europe has been relatively subdued over the past months, the group has seen a lot of activity in Asia, a region where the company been building its network of customers. Thominet also highlights South America as a great opportunity for GSAs, although the economies there can be relatively volatile.
Thominet says ECS is also committed to investing in new technology, into an infrastructure of IT and, in “transparency.” This means being a “fair partner to airlines”, by being a “facility for airlines to keep themselves informed at every stage in the cargo process”. Thominet says the group wants to increase its communication with the airlines ? in general, but also in order to perform further important functions for the airlines too, strategically if not necessarily physically. He says ECS aims to be a “full management” service that can “think for the airlines”; but as an external party, an intelligent GSA can also “think differently” from the airlines, which can lead to better solutions.
Thinking for airlines
ECS also aims to be “innovative and smart”, and one way to do this is to “think outside the box” for the airlines they work for. Thominet notes that even big airlines have limited cargo budgets, and so having an intelligent GSA that does some of its thinking for them “reduces risk”. But making sure the airlines “understand the market; the issues and needs” is equally important.
Thominet highlights ECS Group’s significant investment into building an integrated IT system, using CargoSpot, a system that “runs on the airline industry standard SITA communications network” and provides “secure high-speed communications with airlines, handlers and forwarders”. He says the IT system delivers “quality automated reporting, on-line secure access to bookings, handler interfaces, on-line and on-time confirmations between handlers and forwarders, and automated pre-billing for airlines for advanced computing of cargo revenues”. It is also a “tracking and tracing tool for both airlines and forwarders”.
The value of convenience
Neville Karai, director of HAE Group, highlights his company’s focus on “as much customer interaction as possible, to give [the airlines] the greatest chance of placing their product with our customer. For us, this means high frequency of interaction, creative marketing, and investments in technology to make that interaction easier”, Karai notes.
“For our customers, who are busy serving their customers, we want them to have options we can offer them in a quick, easy format and make the buying process as seamless as possible. We try to give them as much information as they need to make the decision to buy from us a straightforward one – be that price, service, technical requirements – and create an expectation of what we can achieve for them.”
Karai adds: “The marketplace is highly competitive for both parties so we think convenience also has a value.”
He says HAE is “passionate” about technology and how this can best serve its customers. “We are one of the few GSA companies to have our own software development team, graphic designers, and even testers,” he notes. “We want to give our staff the tools to handle more business; want the customer to interact with us more, and want to integrate where possible with each of our airline partners’ systems,” emphasising the importance of using technology to achieve this on behalf of their airline principals.
“We have devised a bespoke automated spot pricing mechanism between our airlines and our customers,” Karai adds. “We are in the middle of the rollout at the moment. This allows our airlines to give its customers, who are our customers too, quicker responses to proving requests and the ability to report, audit and record the transaction automatically. We think this will help us sell more for our airline partners and secure a larger share of the SME business.”
Stressing again how important technology is in HAE Group’s business, Karai continues: “We think our investments in our own technology give us a significant edge as it even allows airlines that we do not represent in a territory to use our automated services to supplement what they do, without them losing control of the sale. For both parties, it’s the chance to achieve incremental business. This allows for less territory-driven sales and both carriers and forwarders have more options at no fixed costs.”
He says HAE is also able to understand, identify and keep up to date with trends in the industry, such as the emergence of new pharma and perishables markets, by “working with our network of colleagues overseas”.
Focus on staff
ATC Aviation also places a strong emphasis on the importance of technology in the GSA sector. Ingo Zimmer, CEO of ATC, also emphasises “the strong focus on our staff” alongside “state-of-the-art technology” as key factors in the company’s success. The company is currently concentrating on several fast-growing vertical products: pharma, express and valuables.
He notes that airlines are under ever-increasing pressure to make or keep their cargo business profitable. “Airlines have to know that they can rely on us as their GSSA,” he notes – also highlighting that a good communicative GSA will “speak the language of the airlines”. Zimmer adds: “ATC has always invested time and money in staff training and technology in order to meet these high demands.”
With 35 offices in 15 countries, ATC already sees itself as a global company, providing services worldwide. But the company is also looking at how it can increase its network of partnerships with other GSSAs, a trend Zimmer suggests is something ATC is already “ahead” of.
Mark Andrew, general manager for Europe at AIA Cargo, says the company’s core focus is the cargo GSA business, but it also has in-house departments that focus on other core business like pet relocation, e-commerce and transport by road. “As a package we can offer our airline’s client more than a basic GSA model,” he says. “Our group has companies who work in the passenger GSA side and also travel and tourism, so as a group we can offer an airline a complete package for cargo and passenger if required.”
He also stresses the importance of communication, noting: “It’s important to keep all levels of communication between all parties involved in the chain. We always are speaking to our airline clients and providing them with up-to-date market reports and trends that can affect them. Likewise, we communicate heavily to our forwarding clients via email, flyers, phone, portals, social media on our airlines’ current rates, promotions and any new services.”
Total cargo management
Andrew corroborates the trend towards GSA companies offering comprehensive services today in the industry. “A lot of GSAs are now turning to offer a ‘total cargo management’ solution, whereby they are now adding additional services like claims, audits, appointment of GHA contracts,” he says. “Basically the airline will ask the GSA to handle all aspects of their cargo department, not just sales, reservations and accounts. We are not averse to these type of contracts and have the set up and capability to offer this, if the airline requires it.”
With no sign of airlines reversing the trend to continue outsourcing cargo sales and increasingly other services, and with global air freight markets apparently picking up at last, the future looks relatively bright for GSAs – at least for those with the resources to invest in the information and communications technology that the business increasingly requires, and staff trained to effectively use it.
