Knock on effect for GSE
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Posted Date: 01/12/2007
Issue: Executive & VIP Aviation International December 2007
Publication: Executive & VIP Aviation International
One would hope that the repercussions of the booming private jet industry would have an impact all the way down the supply chain to those that supply the equipment on the ramp, but this is not something that can be taken for granted. After all, historically airports and FBOs have shown a reluctance to invest in a sector that has shown so much volatility. But today’s boom is so large and forecasts are so strong that there is a confidence amongst ground support equipment (GSE) manufacturers that we are not used to seeing. In fact, demand for GSE is such that we are hearing reports of shortages and backlogs. The Independent Fixed Base Operators Association (IFBOA) is a good place to start for an understanding of GSE market demand. John Wraga is the Executive Director of IFBOA and he says: “New equipment is hard to get with months of backlogged orders for many items.” He continues: “The future of GSE is ‘green’. Many suppliers have, or are developing, energy efficient products.” In addition, the quest to plug the gaps and to deliver an environmental agenda is encouraging the refurbishment of older products.” So the evidence is clear that the boom is creating a demand for GSE from FBOs but are the GSE manufacturers and suppliers reporting that they are already feeling the heat?
Drive towards internationalisation
Aero Specialties is a case in point. Matt Sheehan is the president and owner of the company and Bob McMichael is Vice President of Sales and Marketing. McMichael explains that Aero Specialties’ clients run the range of ground support equipment users from FBOs and corporate operators to airport authorities, maintenance and repair facilities and regional airlines as well as legacy airlines that operate regional aircraft. Historically, Aero Specialties has focused on the US market but over the last four or five years, the company has expanded dramatically internationally and now about 25% of its business is conducted outside North America. “This resulted from a growth in general aviation worldwide,” comments McMichael, “and our marketing effort.”
Sheehan comments that the right equipment for the job is now understood to be key. He remarks: “The equipment that we manufacture is focused largely on regional aircraft and smaller. We see the most significant damage through the wrong use of equipment where regional jets and smaller aircraft are ground handled by the same equipment that might handle a 757, 767 or larger aircraft. Generally, if you are using equipment that is right-sized for a 737 and smaller, with care that will cross over to regional jets; but as soon as you use equipment for aircraft larger than a 737, you are using the wrong class of vehicle.”
When asked whether there is an understanding amongst airports and FBOs that there is a need to invest in GSE if they are to attract private jets to their facilities, Sheehan responds: “This has become much more apparent. With the airlines having taken such a downturn and corporate aviation doing so well, there has been much more focus on the latter sector.”
Alternative financings
Despite the good times and the will to invest in GSE for the private aviation market, not all FBOs and airports are looking for outright purchase. “The vast majority of what we produce is outright purchased,” comments Sheehan. “But we are undertaking an increased quantity of leasing although we are not a leasing company and so we work through a leasing company. We do, however, undertake direct short-term rentals to the airlines for their regional jets.”
The last 20 years have seen all sorts of innovative tax-based asset finance regimes – especially for pools of assets – developed and offered as an alternative to outright purchase but the GSE market appears to be entrenched in a sales mentality. But Sheehan says the demand for innovative financing products comes in waves and Aero Specialties is only too happy to respond. Aero Specialties manufactures and distributes a wide variety of equipment. In fact there are 60 different products in its portfolio from potable water to oxygen provision to tow bars. In addition to the GSE it manufactures, the company also distributes on behalf of other manufacturers. “We have relationships with a wide variety of GSE manufacturers,” McMichael comments.
Situation on the ground
Any shifts in volumes or new trends that become apparent on the ground are going to be felt by the GSE suppliers pretty quickly. What is Aero Specialties’ experience? “The trend in the US is a move towards FBO chains,” comments McMichael. “There has been a lot of consolidation amongst the small independent FBOs.” The problem for FBOs is largely one of cohesion so that they can develop buying power but this, says McMichael, has not yet become apparent. FBOs aside, we are now seeing new types of operations who offer air taxis for hire. “The VLJs require very little equipment to operate. If they gain a significant foothold and take first class travel away from the airlines air taxi operators will have an effect on the supply of GSE,” says Sheehan, adding that he does not believe that is likely to happen. He says air taxi operations have there place but they will complement existing airline services and not take away from them.
What about at the other end of the market? Sheehan comments: “We’ve already seen mid-range aircraft – like 757s – going away. The 737 and smaller – which is our primary market – has increased in numbers dramatically. For us, the market is panning out well.”
Going forwards, competition amongst business aviation airports and FBOs is bound to become more visible, albeit that demand is growing across the board. We are already seeing business jet airports undertake total refurbishment programmes and that will have repercussions for GSE suppliers. These are good times for GSE suppliers to the private aviation industry. “Aero Specialties evolved from the corporate market. We are very fortunate because we have a very good understanding of the market. We do see challenges in terms of the increasing variety of aircraft that have to be handled but we are sticking with what we know.”
Ground power feels the heat
Unitron is a ground power equipment supplier to the business jet sector and its Chairman is Ray Beutel. He explains that the company makes available ground power units (GPU) and preconditioned air (PCA) systems for use in the ground support of business, commercial and military aircraft. The GPUs supply 400 Hz, 28 volt DC and combination AC-DC output power. PCA systems are available in 3, 20 and 45-ton ratings, and with an optional integrated GPU. Beutel comments that while fuel is the traditional power source for GPUs, electric GPUs have gained popularity as they are quiet, pollution-free and exhibit good economics. “But there are so many parts of the world where the local power is so uncertain that they have to rely on fuel power,” he says, adding, however, that GPU usage is a function of maintenance activity and when in the hangar, electric power is the only option because of diesel engine emissions. Having set the scene, Beutel turns to the demand Unitron is seeing in the market. “We are doing more business now than we’ve ever done,” he enthuses. He also comments that there is an increased number of business jets now being exported from the US (BBJs and Gulfstreams), Brazil (Embraers) and Canada (Bombardiers) in terms of the 400 Hz aircraft. Many of the 28 volt DC aircraft – like Beechcraft and Citations – are also leaving their own shores for overseas markets. This means the market for Unitron is becoming more internationalised.
Deicing equipment – across the board
While the gauge of GSE and that of the aircraft should marry, for some types of GSE, it is just not economic to be gauge led. Deicing trucks are a case in point. Jan Pojezny is a Technical Sales Manager of the Vestergaard Company which manufactures deicing trucks. Such vehicles are a common sight at airports in regions that face winter conditions but snow and ice does not discriminate between large airlines and business jets; if it is icy they all require spraying with a glycol solution to allow a safe take-off. So what are the repercussions of the boom in private jet ownership for the likes of Vestergaard?
Pojezny says: “Some of our customers serve both private jets and airlines. If they have an increase in private jet traffic we do feel it but not directly.” He explains that Vestergaard’s deicing trucks can typically be used across a range of aircraft types and sizes. “Our clients wouldn’t be very happy to acquire a deicer that could only work on one aircraft type but not on another; normally clients would buy equipment that will be appropriate for larger aircraft and also use it on smaller planes,” he says. Pojezny comments that the knock on effect of large orders of business jets will definitely be felt by GSE manufacturers but there is also a continuous effort to keep costs low. He is not expecting huge GSE spending sprees but is definitely experiencing positive repercussions of the boom.
Tug supplier sees large demand
Dave Williams is Vice President of Sales and Marketing at Lynco Tugger, a manufacturer of towing equipment that currently has 95% of its tugs with FBOs and corporate aviation clients. “Our biggest selling points are our low cost of ownership – our tug is virtually maintenance free – and manoeuvrability in tight spaces, especially moving aircraft in and out of hangars,” he comments. “This is because of our zero degree turning radius. Our towing capacity right now is up to 400,000lb – with technology in the makings to pull 800,000lb which equates to tugging a 747.”While Lynco Tugger is seeing plenty of demand, Williams comments that the market is very careful about where it will invest. “I am seeing a lot of people looking at tugs,” says Williams. “Those who wish to make an investment in their company are coming to us to buy our equipment.” But Williams adds that demand for Lynco Tugger’s products is in direct response to the company’s success in demonstrating product differentiation; it is not so much about what is happening in the market. For Williams, the boom in business aviation is creating satisfying market conditions but this alone does not sell GSE – it is all in the product.
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