Penny Pinching

The copper market has been erratic the past year and the current spike has ground support equipment manufactures, suppliers and buyers digging deeper into their pockets. But it's a necessity, not a luxury and as a result, penny-pinching is not an option. Everything from ground power cables to the wires shooting juice into GSE maintenance shops, it's impossible for the industry to separate itself from that brilliant copper color.

GSEFFECTS

As a result of the current fuel price crisis, ground power has been elevated to the top of the list in terms of importance for the airlines. The area specifically affected is 400 Hz ground power. According to Eckhard Konkel, vice president, Power Interconnect Products, ITT - BIW Connector Systems, "the savings are now astronomical in terms of what happens when a company runs and burns fuel in the APU, because as the fuel prices have gone up, ground power (remains) less expensive."

400Hz cables have been the predominant product affected; however, transformers that are used inside the 400 Hz units, gate boxes and other items have been as well. "When we're doing a complete 400 Hz central system, it's not just one product," says Regional Sales Manager Brian Piety of J&B Aviation. "It's multiple products because copper is in the vast majority of large electrical pieces of equipment."

NOT THE USUAL SUSPECT

Up until October 2003, the price of copper had always hovered around 80 cents per pound. The seven years leading up to October had been steady other than a small spike in the 90's when it hit a dollar per pound, but in the past 30 months the price has skyrocketed to four dollars per pound.

"(The price) had gone up a little bit and down a little bit, but for the last seven or eight years we pretty well forgot about copper prices, because it had been 80 cents for so long," Konkel states.

If a company needed 80 pounds of copper in a cable, even at the lowest listed price, what once was a $67 line in the budget, became a $350 expense, nearly a factor of five. "It really has been astronomical," Konkel says, "and it is something that the ground support industry has just not been accustomed to seeing at all." The average 400 Hz cable length is 60 feet long with 80 to 100 pounds of copper in it.

The price increase contributes to the disruption of the industry. According to Konkel, the whole ground support business, while it hasn't been bad since 2001, hasn't been great. "In my opinion, it's still a little bit subdued because the airlines, by and large, are all in trouble and even though they're out of bankruptcy, they're not out of the woods. So they'll postpone purchases as long as they possibly can on maintenance items."

In an industry desperately trying to manage its costs, everyone's job becomes more difficult as a result of the instability. Airlines try to control costs to be certain not to exceed budgets, but then they're caught between a 50-percent cable price increase and increasingly expensive fuel. What's the right answer?

"It makes everybody's job very hard," Konkel states. "It makes our job harder, because we have to go ask for more money in an industry that we know is struggling." Copper and fuel aren't the only hikes shaking up the bottom line, but rubber compound used on the cables' connectors has also seen a 10 to 15-percent increase as a result of raising oil prices.

IF ONLY WE KNEW

No one cause is to blame for the price increase. "If only we knew then we'd all be rich," Konkel insists, but three primary forces have been behind the spike. According to Konkel, the most common explanation is the rapid industrial growth happening in China and the primary building construction. "I was thunderstruck," Konkel said of his most recent trip to Beijing. "Everything was under construction except roads. The cities are booming with new apartment buildings. The country is becoming more modernized."

Hurricane Katrina had an impact on the industry leaving massive parts of the south without electricity. Many areas still need to be rewired and copper suppliers can't get their hands on copper fast enough. Labor unrest and strikes within the Chilean copper mines have both factored into the scarcity. While it may seem to be prime entrepreneurial real estate throughout the U.S. and all of North America as copper remains in high demand, it simply hasn't been cost effective for companies to open new mining sites.

THE ALTERNATIVES

Reduce. Reuse. Recycle. Refurbish? Other than APUs, there is not a comparable copper alternative. ITT-BIW experimented with aluminum, because, at about a third of the weight Aluminum maintained half the conductivity of copper, but the metal was impossible to anneal.

"When carrying power from one point to another it has to be a copper cable," asserts Brian Piety of J&B Aviation.

The alternative some companies offer is to refurbish an old or damaged cable. After they receive the damaged cable they cut off the old connector and mold a new one on along with a new nose. By doing so, they are salvaging approximately 60 feet of cable and only charging for the new connector, the manpower and the electrical testing to make sure the refurbished cable works properly. According to Piety, a customer can do this for less than half the price of a new cable.

To refurbish or not to refurbish really depends on the extent of the damage to the cable. If a cable is kinked in the middle and 30 feet has to be scrapped, it's not going to do much good for a lot of airlines. If three feet has to be clipped off the end, it should be fine, but whether or not refurbishing is the way to go is dependant on the airlines' need.

"It's not something brand new or directly being done because of the price of copper going up," Piety says, "but more and more customers are looking at it and a few have even started to try the refurbishment over buying new." Structurally, the refurbished cables are as good as new, Piety testifi es. "We put a really durable rubber cover over the cable so the cable part will last 10-to-20 years and not wear through to the wires. It's not the cable part that normally gets damaged, if anything it's the connector ... (that) is run over by tractors on the ramp."

Human error remains the major cause of the damaged cables. "A ramp is a busy place and the most important thing is that the flight gets out on time. Everybody is trying to accommodate that primary function. People are in a hurry, they have to get things done, they unplug a cable, leave it on the ground intending to come back later and have the hoist pull it up, (but) then something else comes up and they forget about it momentarily," Konkel says.

Both airlines and manufacturers are caught in the crosshairs as a result of increased copper pricing. Airlines are forced to bite the bullet and take a chunk out of the budget with a major GSE purchase or repair. Manufacturers are left working double-time to produce a competitive product for the marketplace. In an industry where instability has become a constant, copper has just become another variable.

Copper prices reached an all-time high in May '06 and have subsequently fallen 25 percent in recent months. Even with the drop, the price remains 75-percent higher than it was a year ago.

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