Editor's Note
He’s in the room ... and practically sitting on us.
In one of the first issues of the Ground Support Worldwide Directory nearly 12 years ago, Editorial Director George Prill commented “It is not safe to predict the future by extrapolation of current trends.” I spoke with him recently; he has since had a change of heart. “You can extrapolate,” he said. “In fact we have been through this before … chaos kills some and benefits others.”
George is of course referring to the “state of the industry” … for which it is currently difficult to paint anything but a bleak picture. In the early part of June, IATA predicted the airline industry will lose $2.3 billion this year because of hikes in oil prices — not much of a surprise given what we pay at the pump. Not only is this the second time IATA lowered their forecast, this is entirely an “about face” since March when they projected a collective industry profit of $4.5 billion (the figure was based on a consensus oil price of $86.) The current prediction: If oil prices remain as high as they are, the forecast increases to a loss of $6.5 billion. Ouch!
I had the opportunity to meet with several GSE suppliers and manufacturers in Europe this summer to discuss the current state of affairs.
According to Ian French, managing director, Falcon Aviation, the OEM’s can expect lean times for at least another two years as a consequence. The effect will be greatest in North and South America, Europe and Africa. The Middle East and Asia will be the markets to be in because that’s where the major new aircraft orders will be delivered. However, he is quick to point out that spending on GSE began there in 2007 and will not ‘come again in bulk’ until the new aircraft fleets that were ordered are delivered, which will not be until 2010. French speculates airports that handle may be better prospects. Most airlines will ‘not buy cause it don’t fly’ and handlers will just generally suffer both the ups and downs depending on their location and their customer aircraft fleet age problems.
Opines French, “I would love to be optimistic but it’s a post 9/11 situation again without a war to help the American OEM’s out. It’s time for the airlines to rethink their business models because high fuel prices are here to stay and you can’t keep cutting costs to get the margin back again. The GSE world will have to take their lead from the airlines and change as well, because that’s where the market starts from.”
Thomas Günther, CEO, Ceotronics AG, expressed that one of the major problems for European manufacturers is the weak US dollar. “A strong American economy and a finance system every one can trust would be much better — for Americans and Europeans,” says Gunther. But when asked if he thinks the Middle East is the next big market, Günther states it’s an “interesting” market and Ceotronics is working together with distributors in the Middle East, but they are not interested in business with what he labels the “bad boy states.” And with respect to higher costs for heating, energy, gas and travel costs, he points out that as a result, the cost of living increased approximately 2.8 percent in Germany since January and his company has increased salaries accordingly.
Looking at the US market, I asked Tim Wix of Averest to weigh in. “The perfect storm is brewing for the GSE industry in the US,” Tim says. “Environmental regulations will drastically reduce emissions from GSE. Most airlines have cut the purchase of new equipment and have fallen into a mode of maintaining. Many have not begun to develop a strategy on how to address the new mandates. Most airlines are in a day-to-day battle for survival. In the coming years, the industry will be forced to spend hundreds of millions of dollars in order to meet these mandates. This will forever change the GSE business from what to purchase to new maintenance programs and all the way to the operator. It’s like an 800-pound gorilla sitting in the corner of the room that no one wants to admit is there, much less deal with.”
As always, thanks for reading!