The GSA landscape is taking on new contours as COVID-19 disrupts traditional business models that were successful until now. At risk are those sales agents whose mandate airlines only operate passenger aircraft; particularly leisure carriers that contracted GSAs to market their lower deck compartments. Conversely, agents selling freighter main deck space are much better off and reaping the fruits of the current boom in air freight.
Acutely threatened in their existence, are those agents who only deal with tourist airlines’ belly hold capacities. Those fleets are largely grounded due to the global spread of the Covid-19 pandemic. The equation therefore reads: no or very few flights + poor capacity to market = sharp decline in sales. The data documenting this: TUI airlines, belonging to the world’s largest tourism group, reports a 60% decline in flight activity since April. Similarly, Zurich, Switzerland-based leisure carrier Edelweiss, and Turkish Pegasus Airlines also speak of sharp drops in bookings, resulting in flight cancellations and a thinning out of air services. Some leisure carriers even stopped flying altogether for a period of time. Others, like Norwegian, are at risk of biting the dust.
Darwin sends his regards
For Stan Wraight, President and CEO of Canadian consultancy SASI World, the general trend is noticeably clear. The analyst speaks of a struggle for survival from which only the fittest agents may emerge.
“It is only logical that some GSSAs that are totally dependent on all-passenger belly operators, and unable to convince airlines to fly just for cargo (including on seats, the so called Preighters), will be hard pressed to survive. These regional heroes however, if they do succumb, will be a great loss to our industry if they are not able to join one of the globals to survive. That local and regional expertise is hard to come by, and it's still a people-business, although that is about to change radically in the years to come.”
He reminds that global GSSAs can add a lot of value to airlines. They understand that e-commerce and digital transformation which are coming in air logistics will require investments that perhaps they would never have been able to handle by themselves anyway. Increasingly, airlines will request end-to-end products, and those that depend on a GSSA will need them to step up in airports at both ends of the flights.
Given this scenario, will global GSSAs take over smaller ones? “Yes, it will happen and perhaps Covid-19 will be the catalyst. If not, it will happen anyway due to technological and service demands from airlines. Therefore, my recommendation would be to start thinking now how to best protect your future and investment, in this new world that we are about to find ourselves in,” states Mr. Wraight.
Being best beats being big
Liana Coyne, Director Coyne Airways takes a rather relaxed approach regarding the future of the sector. Although she also expects changes taking place caused by the pandemic, nevertheless, she attests most GSAs a high level of adaptability coupled with innovativeness:
“I do think it is likely that we will see movement on the GSA landscape, with the best but not necessarily the biggest, most able to weather the storm.
Many GSAs have been impacted by the reduction in belly capacity and consequently revenues. However, I do not think that there is reason for complete doom and gloom. Many airlines will be looking to reduce the costs of sales and there is an opportunity for GSAs to present themselves as the most cost-effective alternative to airlines having their own offices.
Some airlines may seek to gain greater margins by disintermediating and moving to digital booking platforms. However, the air cargo industry is a people industry and good GSAs with local knowledge, strong relationships and excellent service levels should always be able to tip the balance where rates and schedules are comparable.”
Back to the (freighter) roots
CEO Klaus Lederer of Aircargonet recalls that in pre-pandemic times, the trend among GSAs was to move away from marketing pure freighter capacities and instead win as many belly carriers as possible as customers. Meanwhile, this tendency has been completely reversed, he says.
The air cargo veteran does not believe in a large consolidation wave, although not all agents will survive the current crisis, he admits. On the other hand, the industry is highly creative and able to develop new business areas in a relatively short time. As an example, he mentions the trucking of quality products from Europe to Uzbekistan and on to Kyrgyzstan in central Asia, respectively, operated under special safety precautions and managed by his company, this way substituting former air transports. For agile GSAs, the field for offering the market innovative, value-added services is wide open, he argues.
Freighters are Aircargonet’s solid foundation
Although the belly business is important to Aircargonet, marketing freighter capacity comes first. This is explained by the company’s customer structure, which includes Miami-based Amerijet International (B767F), Antonov Airlines of the Ukraine (AN-120F), Royal Jordanian (A310F), and Uzbekistan Airways (B767F) headquartered in Tashkent.
“Compared to the global players in our industry, we are much smaller, but thanks to the many freighters operated by our mandate airlines, our business stands on a very solid foundation,” Mr. Lederer concludes.
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