Industry economics and the influence of a new parent have seen the UK's CDG Systems diversify into cargo equipment service and maintenance, reports Richard Rowe
Better known as a niche supplier of bespoke cargo handling solutions, UK manufacturer
CDG Systems exhibited some fancy footwork earlier this year when it stepped
neatly, and perhaps unexpectedly, into the highly competitive world of equipment
service and maintenance.
While CDG suggests the move was very much a natural progression given its experience in the design and production of cargo handling systems, such diversification has more to do with prevailing industry economics and the desires of a new parent, the Highland Group.
Based in Manchester in the northwest of England, the Highland Group purchased CDG from previous owner Logan Fabricom in February 2003. CDG's new owner has built its business essentially around facilities management in aviation and other industries.
One pure aviation division, Highland Airline Services, provides fleet maintenance for customers such as British Airways (BA) and Lufthansa at major UK airports, including the supply of a full range of GSE and ramp handling equipment. Other divisions within the Group supply and service high-level access vehicles, as well as offering building maintenance programmes and health and safety related training.
Highland's acquisition of CDG was very much a strategic decision. It was based largely on a desire to step closer to the big London airports in the south of England and to diversify the Group's service scope into the fixed cargo systems side of aviation ground support. The acquisition is the first step in Highland's wider plan to establish itself as a genuine full service ground support provider.
Keith Damen, Managing Director, CDG Systems, believes the 'fit' between the two will result in a win-win situation for both parties. "We offer Highland the opportunity to widen its airline services to cargo as well as ramp handling equipment, while CDG benefits from Highland's experience in facilities management and customer support," he says.
Similarly, Highland's health and safety and equipment inspections experience is equally transferable in terms of offering training services to cargo handling operational staff, adds Damen.
Now with an extra string to its bow, CDG is focussing on offering planned and preventative maintenance rather than a more reactive 'call-out' service. "We recognise that our customers need to keep their systems rolling," explains Damen. "We hope to prevent problems before they arise rather than wait for them to happen."
This involves working closely with customers on planned improvements to their
air cargo systems - ideally with both partners sharing the rewards. "Such
an approach has an obvious benefit to us both," contends Damen. "For
the customer, it means an improvement in efficiency and reduction in downtime,
while for CDG it means business in system upgrades."
Importantly, CDG's new maintenance activity is not restricted to its own installations and, with the right familiarity training, can cover equipment supplied by any manufacturer.
Clearly, the cost constraints that continue to weigh heavy on the airline industry reinforce the importance of this new line of business to CDG and the reasons for entering it in the first place. "As airlines and ground handlers have fought for a share of a decreasing market, margins have become tighter and capital expenditure projects either cancelled, delayed, or at best cut back," explains Damen. "This is a way of cushioning the impact on our income stream, but also a recognition of the increasing importance now placed by our customers on prolonging the life of their cargo handling equipment."
Launching the business
So far, the market has responded warmly to CDG's new capability. The embryonic service and maintenance division got off to an impressive start in April when it signed BA as launch customer through the carrier's third-party facilities management provider, EMCOR Facilities. The contract covers BA's Premium Products facility at London Heathrow, which handles express cargo and livestock - clearly a facility that that has to be operational 24/7.
And the ramp up of activity has been dramatic ever since with a total of 12 contracts signed across the UK, including big name customers such as Servisair, Danzas, BAX Global, and Japan Airlines.
More recently still, CDG inked an agreement with TNT UK as its first nationwide customer. The agreement sees CDG providing service, preventative maintenance and one-to four-hour rapid response call-out cover for TNT's cargo handling equipment at eight key UK gateways: London Heathrow, Stansted, Cardiff, East Midlands, Liverpool, Teesside, Glasgow, and Edinburgh airports.
Specifically, this involves ensuring the smooth running of ULD handling equipment and control systems, including truck docks, ball mat and caster decks, dolly docks, powered shuttles and gravity and powered roller conveyors, at each of the eight air cargo gateways.
Damen says that TNT UK, which operates a fleet of BAE 146 and A300 freighters, is one of several cargo operators that he plans to reach out to, but adds that it is important for the company "to walk before it can run" as it develops the business.
Step one, then, is to firmly establish the service and maintenance division in the domestic UK market, with any major moves overseas likely to come later. That said, CDG already has a promising partnership with Manutech in Belgium and discussions continue with TNT about widening the service coverage to include continental Europe.
Not surprisingly, such significant business expansion has required the addition of extra staff at CDG - welcome news for an industry that has made headlines for shedding rather than adding staff in recent years. "We have been very careful to select only experienced engineers with specific knowledge of materials handling," explains Damen.
One competitive advantage that Damen is keen to maintain when hiring new people is the fact that, as a systems house, CDG is able to offer key systems engineering back up to its engineers out in the field. "This gives us the ability to solve not only hardware but also software problems," he says.
In the past, CDG's reach extended around the world. In 2001, for instance, and together with Japan's Murata Machinery and Canadian company Katlyn, CDG completed a complex new air cargo terminal for Air Canada at Toronto's Pearson International. The same team recently bid for a project at Dubai's Cargo Mega Terminal, part of a massive expansion being masterminded by the Dubai Department of Civil Aviation.
More recently, however, the company's projects have been closer to home, concentrating mainly on the UK and Western Europe. In January 2003, CDG completed a new installation in Liege for Cargo Service Center (CSC), now part of Swissport.
"Through our partner, Manutech, we provide maintenance support to CSC and hope to expand the operation to cover facilities for other operators in Liege and Brussels," explains Damen.
As the new service and maintenance side of the business continues to gather pace, CDG plans to actively seek partners to offer a full facilities management capability across the UK and wider Europe. "As always, our main thrust will be in the systems business, both new and upgrades," says Damen.
Now that there are signs of market recovery, and as confidence returns to the industry, Damen has certainly set his sights high. "By this time next year we would like to be firmly established as the UK's number one and definitely causing our European competition some headaches in overseas markets," he says.