Ludwig Bertsch, president of CHEP Aerospace Solutions, talks to Will Waters about the latest developments in ULD technology and outsourcing, and his quest to reduce container damage
Normally when a supplier to the air cargo sector, such as a ULD-pooling provider, is the subject of a takeover, it might pass almost unnoticed or be the topic of a brief conversation in an airline cargo warehouse or office. But the takeover of what was then called Unitpool in August 2010 by Australia’s Brambles Limited, owner of the world’s largest transport container and terrestrial pallet pooling business CHEP, may turn out to be a highly significant one for the air cargo sector.
Brambles has already launched several major initiatives to enable its new CHEP Aerospace Solutions division to take advantage of the wider group’s know-how and resources, including two acquisitions in order to create a worldwide capability to offer in-house ULD repairs, on top of its traditional ULD-management model, an additional function that has been welcomed by major customers including Cargolux and recently signed Air Canada.
Ludwig Bertsch, president of CHEP Aerospace Solutions and a former head of cargo at Swissair and Swissport, says the wider group’s resources have brought a whole list of benefits to the previously cash-restricted Unitpool.
One of the main benefits has been the financial backing of Brambles. The ULD pooling model offered by CHEP is a capital-intensive one, involving the purchase of a new airline client’s existing fleet of containers.
“With one of the big airlines, we are probably talking about a book value of $8-$10 million,” says Bertsch. “That’s before we can even start doing business with them, so when we were privately owned, that was not always so easy.”
This new financial capability to take on major customers is one of several factors that has attracted a significantly increased level of recent interest “from airlines that two or three years ago probably would not have considered outsourcing this function”, observes Bertsch. “I think it is a function of the continuous cost pressures on airlines, and in many cases they have been forced to downsize their ULD management team to a size where it is not really sustainable to keep it in-house”.
The cash contribution is always nice too, for an asset that has already been written off, he adds.
Another major factor is the capital restrictions that many airlines face during a period of economic uncertainty, which make it difficult to invest in new equipment. This has become a particularly strong factor since the availability of lightweight containers which, combined with the current high fuel prices, has made the investment in new ULDs an “economic no-brainer” for airlines that fly long-haul services.
The new composite materials reduce the weight of an LD3 from around 85kg to 65kg for a lightweight and 55kg for an ultra-lightweight unit, at a cost of between $1,500 and $2,500 each.
“That saving of 20kg or more for an airline flying long-haul might generate a fuel saving of around $2,500 a year for one container, so you would have a payback within one year from just the fuel saving alone,” Bertsch reveals.
“But even though the business case is very strong, there are still many airlines – including some very, very big ones – that have not made the switch, because they do not have the investment budgets available.”
There may be many benefits for airlines outsourcing their ULD management to CHEP or the only other player in the sector, Jettainer, including greater flexibility and less need for buffer stocks, elimination of fixed costs, improved ULD availability and visibility, plus better utilisation and efficiency. But Bertsch believes it is the fuel-saving potential of a switch to lightweight units that has really pushed the subject up the agenda in the last few years.
“Many senior personnel within airlines that probably would not have been very interested in ULD matters are suddenly talking about the potential fuel savings and reduced carbon footprint,” he observes.
“So, all of these factors together have created a trend that we – and Jettainer – have benefited from.”
Although the CHEP and Jettainer models are somewhat different, with CHEP taking ownership of the ULDs under its own name and pooling the assets, Bertsch says CHEP’s newfound ability to offer in-house maintenance is unique. But the use of the group’s Innovation Centre in Orlando, Florida, also promises further interesting potential. Among its various projects has been a pilot study this year using satellite technology to track container or pallet assets.
Besides locating the units themselves and helping prevent losses and misuse, Bertsch believes the technology could potentially help customers track their shipments. The unit prices of the devices needs to fall below a certain amount, some battery-life and size issues need to be resolved, as well as getting the devices certified, before the project can move beyond the pilot stage. “But the technology is all there, and you just need to bring it together,” Bertsch comments.
Another challenge that Bertsch is set to take on with the backing of the company’s new owners is reducing the level of damage to the industry’s ULD assets, estimated at around $200-$250 million a year. Bertsch points out that the damage to ULDs is not done while they are flying; it is done when they are unloaded or stored.
“Around 80% is either related to forklift damage or manual mishandling,” he observes. “The biggest problem that this part of the industry faces is that ground handlers don’t tend to care how they treat the ULDs. I have been on that side of the business, so I know how it works; they are under time pressure and it gets a bit rough in the warehouse, and taking care of the asset is not a focus, as they don’t fear any consequences.”
He contrasts this with the attention generated if a handler drives a high-loader into the door of an aircraft. “That is a big issue that may go right up to the CEO of the company,” he observes.
Contractually, the airline is entitled to claim damages from the handler if it damages a ULD through mistreatment, although Bertsch has never known any to do this systematically.
“I would say probably half of that $200-$250 million a year could be avoided and could be charged to the handlers, which would cause them to take more care, and damages to go down dramatically,” he says. “But because they have no incentive, they do not invest in the necessary training and checks.”
The same goes for pallet nets. “You would not believe how often the nets are just cut with a knife, simply because to the guy unloading it, that’s five minutes saved,” observes Bertsch.
He says some airlines are more strict than others, recalling from his Swissport days that there were airlines that still had auditors that would audit the ground handlers and damages, and would provide training packages.
As the new CHEP Aerospace Solutions branding is rolled out across the company’s fleet of containers and pallets, it will be accompanied by a warning to those handling the unit that the company will seek compensation for assets that are damaged through mishandling. Bertsch says CHEP has the legal resources needed to enforce that. But a big part of the problem is that the relationship that ULD-management companies have is with the airline, not with its handling agent, and that is something Bertsch is also looking to change – perhaps via IATA and a possible new annex or clause within the standard ground handling agreement.
“We need to find a solution to this ambiguous situation where the damage is caused to our asset, but the person that has caused the damage has no contractual arrangement with us,” he says.
But in general, things look bright for CHEP Aerospace Solutions, which is able to benefit from the uncertain economic environment. And Bertsch firmly believes that the more airlines that outsource to companies such as CHEP, the better it is for the whole industry. The challenges for individual airlines of managing and maintaining their own individual fleets of ULDs and dealing with imbalances and peaks means that the system is inefficient and leads to unnecessarily large ULD storage areas clogging up space-constrained airports – as well as adding to costs, he says.
Bertsch concludes: “What we do improves the utilisation of the units, and that is good for everyone.”