FROM MAGAZINE: Cargo airlines ride high on GSAs

Gone are the days when airlines used to appoint GSAs to mainly sell their cargo space where they had no presence. Today, the traditional role of agents has undergone a significant change, as airlines are looking at total cargo management, which includes a commitment on sales, pricing strategy, management of capacity and revenue guarantee.
Vidyut Kumar Ta

Functioning as a back-office for various cargo airlines, general sales agents (GSA) today play a pivotal role in the growth and development of the global airfreight industry.

According to WorldACD, a leading data provider of air cargo markets, around 23 percent of air cargo volume is sold by GSAs, and the proportion has remained fairly constant since last couple of years. On the other hand, the share of the world's top-100 country-level origin-and-destination (O&D) stands at 13 percent, compared to the smaller markets, at 27 percent.

“Now more than ever, airlines see outsourcing of cargo as a sensible option in terms of cost saving and incremental revenue. Hence, they prefer partners who are reputable, financially sound, and have the ability to deliver in terms of revenue, network coverage and manpower,” said Stephen Dawkins, chief operating officer, Air Logistics Group, a leading GSSA in the UK.

“In the last couple of years, airlines have realised the value a large, well-financed and resourced organisation can bring. We are a highly professional group, and have a solid grasp of the airfreight market. This helps in selling the capacity at the right rate for every airline. A GSSA has to listen to the client’s needs and invest in what it wants. Airlines expect a long-term partnership, and hence we aim to secure enduring relationship with our airline partners,” said Dawkins.

According to Dawkins, the size of the worldwide cargo airline market in 2017 stood at 55 million tonnes, of which the GSSAs controlled 20 percent. This underscores a huge opportunity for GSSAs to invest in the future, and compound the market share.

“The GSSA industry has definitely changed a lot, because earlier there were few GSA players, and mostly controlled by local players. But after big airlines became stronger, contracts became global. Now, same airlines have started appointing common GSAs in different countries. Hence, we also decided to go global in order to give our airline customers a better and comprehensive service in multiple locations, so that they can hold one partner accountable, with single point of contact for sales at all locations,” said Prithviraj Chug, director, Group Concorde, which is a leading GSSA in India, and represents about 20 IATA-affiliated carriers across 11 countries..

“If we look at India, the majority of the turnover is controlled by online carriers. In terms of percentage, it’s a 60/40 split. If we look at Europe, this percentage split favour GSSAs. We are however, noticing a global rise in airlines, online or not, outsourcing their cargo operations,” said Joe Lawrence, president, Airline Services International (ASI), which is a Canada-based company that provides general sales and marketing services for 10 airlines across United States, Canada, Asia, and the Indian subcontinent.

“For our Indian operations, pharma is the single largest export commodity to Africa and Latin America, which is over 60 percent of our total exports. Perishables exports stands second. As far as e-commerce is concerned, it’s primarily controlled by integrators, as they are equipped to provide required services. Airlines still continue to focus on the airport-to-airport service as against the door-to-door service, as cost continues to be a major factor,” said Lawrence.

“Airline needs and expectations have evolved at the station level due to the progressive outsourcing of handling and sales functions, thereby leaving them with little or no physical presence in many locations. The term general sales and service agent (GSSA) has now virtually supplanted the old GSA term, due to the extended responsibilities of GSAs,” said Derek Jones, managing director, 1GSA, which is a newly-launched independent GSSA network based in the UK. Its members collectively represent over 80 major carriers, globally.

“We see various estimates, but there is no universally-accepted figure on the overall global air cargo turnover controlled by GSSAs. Some say it’s 30 percent of the overall airfreight market, but 1GSA believes it’s probably higher. But we are quite certain that the proportion of GSSA-controlled market is rising, and will continue to do so, because the GSSA concept aligns with the airline trend of outsourcing non-core activity, and represents the opportunity to exchange a fixed sales overhead (the airline operating its own office and sales team) for a flexible one, which is directly pegged to turnover,” said Jones.

“India is the top market for our industry. Today, 30 percent of the cargo from India comprise e-commerce, perishables and temperature-controlled pharma goods. E-commerce is transforming the landscape of our industry, and hence we need to develop our capability to optimise new technologies. There will be a real advantage if we bring more specific additional services, especially transparency, visibility and promptness to our customers. India is a real Eldorado for all technologies development, hence our two brands — AVS and Globe Air Cargo — are connected to this fast increased trend,” said Adrien Thominet, CEO, ECS Group, the France-based leading integrated GSSA, with over 69 subsidiaries spread across 47 countries.

“We represent more than 130 airlines worldwide. From biggest to smallest. From everywhere in the world, with different type of contract from total cargo management (TCM) to back office support, from global to local network, we serve all with a fully devoted services provided by the best and leading local experts on the ground,” said Thominet.

“Air cargo is vital for the world. Everyone is using goods delivered by aircraft, from vaccinations to smartphones. In fact, every day, ECS Group transports 2,500 tonnes of cargo across the world. The air cargo industry is fast moving. As per IATA’s forecast, there has been a rise in cargo carried in 2018, which stands at 62.5 million tonnes, up by 4.5 percent to 59.9 million tonnes in 2017,” said Thominet.

“Business activity is increasing each year and as a matter of fact, there is a huge potential for growth. Moreover, e-commerce is transforming the landscape of our industry which push us to develop our capability of optimizing new technologies. There are a real advantage to bring more specific additional services, especially in terms of transparency, visibility and promptness, which our customers are asking for,” said Thominet.

“We have made significant investments into IT development over the last 10 years to strengthen our network, and offer a cost effective solution to airlines in a multitude of cargo fields such as sales, revenue accounting, trucking management and business intelligence. Understanding our airlines customers’ needs is vital and Air Logistics is the world’s first GSSA that runs its own compliance and ethics in-house training programme. This brings added value to many of our clients who are looking for assurances in the challenging and complex legal climate that we live in today,” said Dawkins.

Elaborating on its differentiation strategy, Chug said: “We always offer separate office to our airlines, and that’s the reason we charge a decent remuneration to offer good services. We also believe in encouraging our staff by giving a decent performance incentive. If the target is X, we always give our staff a good incentive to achieve 15-20 percent higher than the X, and hence, we are able to offer a better infrastructure, and quality experience to airlines. It’s also because at the end, if we only focus on a lower remuneration and not give airline a good service, it will lead to no good. Therefore it is for airlines to understand that if they don’t pay their GSAs well, they will eventually lose more than the gain from a lower cost.”

“One of the strategies we employ at ASI was to provide tailor-made GSSA services. Our experience in the industry has taught us that the adage ‘one size does not fit all’ is true. We provide fully customised GSSA solutions, designed specifically for the needs of each airline. By adapting our business to fit the airline and develop individual sales and operational strategies, we are able to fulfill the airline’s requirements expeditiously,” said Lawrence.

“We see some change in the trend in the airfreight industry, which is mainly driven by e-commerce, which is pushing the industry to offer more trust and efficiency in delivery. Digitisation will provide more transparency and access to information than before. For airlines, it will mainly help to drive more revenue and yield optimisation, pricing strategy, and capacity. It's a good step for the growth of the industry. It will help to attract new commodities by air,” said Thominet.

Elaborating on its value-additions in terms technology, Thominet said: New technologies and innovation are the lights to follow. There is no other way than making the future today. Feeling at home in the ‘cloud’ encourage us as a GSSA to bridge the future today. Honestly being born in the cloud really helps us to deliver our customers, not only with a much wider range of integrated services, but also with performance, and bring more transparency to our airlines. The expertise we gained over the years is clearly aimed to be developed, and exported all around the world. In North, Latin Americas and Asia, we have identified local specificities. When we enter in a new country, it is a precondition for our group to work on a solid basis, which has stood the test time in Europe, and implement local characteristics, which gives strong added value to our final product and services. We confirm our will to speed our process of acquisitions, mainly in Asia and Latin America.”