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The future of GSE--rental over ownership: is buying the best option for GSE equipment, or should you rent? (Ground Equipment).

The growing complexity and scale of ground-based operations at most airports today means that the need for fast, safe, and efficient ramp handling operations has never been more acute. A crucial factor in this equation is the need for readily available, sophisticated and reliable ground service equipment (GSE). The full-time operation and management of GSE, however, requires significant financial commitment and logistical support if an effective and efficient service is to be run. With the recent and abrupt downturn experienced by the aviation industry, such a commitment is proving increasingly difficult for many operators. More and more companies are realising that it does not make economic sense to commit millions of dollars to purchasing sophisticated GSE when they cannot guarantee its optimal usage. With the drop in air traffic volume, orders for new equipment are being delayed or put on hold, and other companies are finding themselves with a surplus of redundant GSE on their books as contracts for ramp handling services are reassessed. In short, the market has been shaken up. As GSE users struggle to provide efficient ramp handling in these less-than-ideal conditions, what is the solution?

TCR International believes it has the answer--rental. As Europe's leading provider of total ground service equipment management, TCR offers a range of services, including fleet management, repair and maintenance and manufacturing of non-motorised GSE and fixed cargo installations. However, it is the commercial appeal of the company's GSE rental offering (both short and long-term) that has really taken the company from strength to strength. In little more than five years, TCR has created five European operations, all with a rental offering, starting with its headquarters in Belgium and quickly following this up with operations in France, Germany, the Netherlands and, most recently last year, in the UK.

Glyn Martin, Managing Director of TCR UK, a wholly-owned subsidiary of TCR International commented: "The future of successful GSE management is in rental. Companies requiring GSE do not get maximum value from ownership but from its optimal usage".

Despite being a relatively new concept in the aviation industry (compared to other industries), rental offers GSE users an attractive alternative to the costly business of ownership. The basic principle behind rental is that companies choosing to rent their GSE pay only for what they need at any one time--even if their needs differ considerably season by season, or even day by day.

Whilst there are many different styles and levels of rental available, an ideal rental service is based on a working partnership between the rental company and its customers. This partnership should take into consideration the diverse and evolving needs of that customer so that GSE rental packages are individually tailored to a company's specific needs. By using detailed analytical techniques, it is possible to ascertain the exact GSE needs of individual customers at any one time. One of the most accurate methods is by analysing the requirements from flight plans, commonly known as `Power by the Hour'. By analysing the flying programmes used by any one customer, a rental package can be developed to include a plethora of different types of equipment to meet the fluctuating needs of different seasons or to match the requirements of the different aircraft serviced. Such careful planning can mean that users of GSE can effectively download some of the high risks that come hand-in-hand with ownership. After all, there seems little point in owning high-cost items such as aircraft pushback tractors or cargo loaders if they are used only once a week in the low season.

"Companies are realising that there is a better solution to the costly ownership of GSE equipment that can lie redundant for a good part of the year because of seasonal activity lows. Increasingly, companies are opting for more cost-effective solutions for their GSE requirements. Our objective is to become a total service partner to our customers by offering GSE rental as a clear alternative to the costly business of GSE ownership," said Glyn Martin.

Inherent Flexibility

The inherent flexibility of rental is the secret of its appeal. GSE users can choose to pay a price per month, per hour, per turnaround or per GSE. They can choose the length of the contract (short or long term), the number of days, or even the number of hours they use the equipment each month. Such flexibility for the GSE user means that issues such as surplus or even depleted stocks are no longer a concern.

Today the rental industry is a highly sophisticated business based on sound economic sense. By renting, GSE users are better able to focus on providing the very best ramp handling services, secure in the knowledge that they are guaranteed a fleet in prime condition and one that meets EC standards. As most of the equipment rented is brand-new, users can also benefit from the latest GSE technical developments. Renters can be offered items of equipment that are fuel-efficient or equipped with Smart Key technology which ensures that only authorised personnel access the equipment.

Repair and Maintenance

An equally strong case for rental over ownership is that concerns about unforeseeable costs such as repair and maintenance are effectively made null and void. Whilst not all companies offer such services, a good rental company will not only take care of the supply of GSE, but also the repair and maintenance of any equipment required for a price set in advance, including sourcing and provision of spare parts. Users can even benefit from planned preventative maintenance checks on the safety and condition of their fleet.

It was precisely this service that convinced DHL, global market leader in the international air express industry, to investigate the benefits of rental over ownership. The catalyst for the company's decision to investigate rental options was the increasing time taken up with maintenance and repair of its existing fleet of electrical tractors, and the need to keep checks on the number of mechanics it employed. After discussions with TCR, DHL realised that it was more cost and time-effective to opt for a rental service that included a repair and maintenance service than to handle its own fleet. That was over five years ago and the company now rents around 60 electrical tractors from TCR in Belgium for its operations in Brussels, Cologne and Copenhagen. Kris Demol, DHL network equipment manager for Europe, Middle East and Africa commented: "DHL has been delighted with the flexibility inherent in rental. As soon as any piece of equipment is in need of repair or maintenance, we can reply on TCR to replace it immediately with a new item so that we can continue to provide a smooth and seamless operation. We will definitely be looking into further extending our rental agreements for other items of GSE".

The depth and scope of opportunities available through rental is perhaps most aptly demonstrated by one solution offered by TCR. Glyn Martin explained: "TCR will even buy their customers' entire GSE fleet and then rent it back to them as and when required. With such an option, users are freed from a myriad of issues associated with ownership, such as the upkeep of maintenance and repair workshops, parking areas and storage space. In short, companies renting their GSE are free to concentrate on their core competence--efficient ramp handling services".

The current economic climate has given rise to a change in the way all companies are operating and nowhere is this more evident than in the complex world of GSE management. Over the last ten years, the industry has experienced a definite shift in the established culture that dictates that in order to be successful, GSE users must own all their own equipment.

More and more airlines and ground handlers are outsourcing their ramp handling activities, so suppliers are now playing a greater role in the provision of services as well as equipment. As this outsourcing is not limited to maintenance alone, suppliers today are expected to offer financial expertise on costs per operating hour and availability. Equally, the continuing wave of mergers experienced by the ground handling industry has led many GSE companies to consolidate their supplies, not just to satisfy the demand from the larger customers for standardised fleets but also in order to provide optimum productivity. With the prevailing uncertainty over market conditions and the drive for cost-effective solutions affecting virtually everyone in the aviation industry, all pointers would seem to indicate that these market trends are likely to consolidate.
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Author:Morley, Marie-Louise
Publication:Airports International
Date:Aug 1, 2002
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