The European general sales agent (GSA) marketplace is challenging, but there are opportunities as airlines grow capacity through network expansion and continuing development of emerging markets.
The market is as competitive as ever, according to Air Logistics Group chief operating officer, Stephen Dawkins, but he tells Air Cargo Week (ACW) business is no different from how it has been for the last decade. “It has always been tough since the financial crisis, but there has been more pressure on yields,” he explains. Despite challenges, he says figures are up year-on-year (YOY) in 2015: “Things are bumping along and I am sure we are going to see things moving along in the second half of the year.” Dawkins says it is a changing market and carriers are moving to a regional focus, awarding contracts to GSAs for entire regions, which is further increasing competition.
His view is echoed by Global GSA Group chief executive officer, Ismail Durmaz, who explains to ACW it is a tough operating environment as margins are under pressure and rates are lower. This he says is especially evident from Europe to the Far East, although business is still there. “It was not what we expected in March and April, but May was better and hopefully it will be more stable,” Durmaz says. He says in Europe tonnages are good, but rates are dropping in and out of the continent. Durmaz adds margins are still just there on the continent and as some airlines struggle they are pushing for more cargo from Europe to the Far East and from China into Europe.
ECS Group chairman and chief executive officer, Bertrand Schmoll, tells ACW competition is fierce for GSAs, which he says is clear when it tenders for contracts, but on the ground it is a more positive picture and he feels the key is having a worldwide network. The first half of 2015 has been good for ECS, Schmoll explains, with an increase in capacities and he adds: “The euro has decreased against the dollar and the fuel rate is reasonable, which makes exporting easier.”
Business for the first half of the year at the HAE Group is up YOY, according to director, Neville Karai, but he describes the GSA marketplace as, “brutal”. He says as airline networks are changing it “offers opportunities” but at the same time makes like-for-like comparisons difficult due to “destination mix” when it comes to yields and revenues. Karai explains: “Once you think you are competitive on service and cost, another service provider will come into the picture and effectively buy the business to keep themselves in the market.”
Dutch firm Kales Airlines Services, explains in the first half of the year it has performed well, but volumes are similar to the same six months in 2014 and chief executive officer, Peter Kales, says it is, “remarkable,” after it lost Air China in Germany. It started its own sales activities, processing 2,500 tonnes a month. “We have again been able to find new clients and new businesses, whereby we recently opened up Kales in New York and Toronto, widening our playground, besides our presence already in South America, ” says Kales.
He adds that airlines it represents are opening up new routes and new contracts, which is helping it continue to grow. Kales explains that May was slow, and prices have been under pressure a lot, specially to China and to the US, which was busy in the first half of 2015 due to West coast port strikes.
The market is changing though. Karai says large GSAs are emerging by, “swallowing vibrant independent local heroes,” which is not good for airlines, as services become commoditised. “A number of independents, ourselves included, have started to collaborate and signs are positive that a mixture of brands can be a competitive solution to regional or sub-area opportunities,” Karai says.
Remaining an independent GSA is something Schmoll feels is becoming harder. “Our way to expend ourselves and becoming better is to remain worldwide and develop our network by acquisitions of new GSA or by opening new offices,” he explains.