Beyond GSE Rental

A variety of operators in Europe have opted to wipe expensive GSE from their balance sheets to concentrate precious funds on service enhancement instead. And, as Richard Rowe discovers, GSE rental is only the half of it.

March 2003

The need for cost-effective GSE management solutions has rarely been more acute and operators around the world are busy pursuing smarter ways to manage some of their most expensive assets. One key issue is that a successful ground service business relies on readily available, proficient and reliable GSE - the problem is that the full-time management of such equipment involves a significant financial undertaking at a time when money is tight for operators.

Take ground handlers, for instance. Figures vary, but GSE can account for 70 to 80 percent of total capital expenditure. It is, perhaps, no surprise that some have chosen to remove such costly items from their balance sheets altogether, preferring rental or leasing arrangements to outright purchase.

Of course, the concept of GSE rental or leasing is nothing new. Rental, in particular, is an ideal solution for sourcing seasonal equipment, such as deicers in winter, or for a quick fix while waiting on new equipment to arrive from manufacturers. Meanwhile, the capital expenditure crunch in some markets, the U.S. included, has precipitated a rise in 'rent-to-buy' agreements.

But in Europe, several operators have embraced an alternative that goes above and beyond traditional rental or leasing. European ground handling managers are listening intently to the message that they have neither the time or the expertise to manage their equipment efficiently.

Unions and GSE managers might not like it, but the argument has proved persuasive; several handlers in the UK and the Netherlands have entered long-term partnerships with GSE management companies offering flexible equipment rental or leasing, backed up with a variety of additional fleet management, repair and maintenance services.

And it's not just handlers. British Airways (BA) has outsourced GSE management since 1997. Working with Ryder Ground Fleet Services, the process began at London Heathrow before being rolled out to the airline's regional bases around the UK.

With the Ryder contract almost at an end, BA is now inking a new contract with Lex Transfleet, the carrier's new preferred bidder. "We have gone through an extensive tender process for this piece of business as the contract with Ryder reaches its natural expiry on March 31 after a period of six years," explains David Norfolk, BA's Ground Transportation Contract Manager.

Norfolk was unable to comment further given ongoing negotiations, but it is clear that a large airline like BA looks set to continue trusting its GSE management to a third-party.

Entry Barrier
In the current financial climate, many ground handlers are faced with a difficult decision should they win a major new contract. While most would jump at the business, not all can afford the new GSE often expected by airlines to serve their aircraft. In some cases, lack of available funds can be a genuine barrier to entry.