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Boxing clever

Jettainer and CHEP, the two key providers of unit load device management, say the success stories of the first few airlines that committed to outsourcing will encourage more to take the plunge – with cost savings of as much as 20%. Kerry Reals reports

Providers of outsourced unit load device (ULD) management services are billing their solutions as the last of the low-hanging fruit when it comes to cost-saving opportunities for airlines. To date, this is one crop that airlines have been slow – reluctant even – to harvest, with 75% of carriers continuing to manage their ULDs in-house.


However, the two key players in the outsourced ULD management sector – Jettainer and CHEP Aerospace Solutions – are expecting a domino effect when the previously reticent airlines witness the benefits reaped by their first-mover peers and jump on board.


“ULD management is one of the very few fields left over to deal with when it comes to cost savings. Why? Because it’s a niche of a niche of a niche,” says Martin Kraemer, Head of Marketing and Public Relations at Jettainer. “Airlines see that it works and nobody makes the effort to check if it could be improved.”


For those airlines that do make the effort and outsource this function, Jettainer offers average savings of about 20%. What’s more, there is no initial financial outlay for the carrier.


“We will buy the entire fleet of loading devices from an airline; 100%, always. So the airline doesn’t pay money first, it gets it. We take the equipment off their balance sheet,” says Kraemer. Then, using calculations based on fleet size, flight plan, cargo/passenger mix and “the Coca-Cola recipe of Jettainer”, the outsourcer comes up with the number of ULDs the airline will need to lease back.


“Normally, out of 100 units bought, you actually only need to lease back 80. The rule of thumb is a 20% saving,” says Kraemer, adding that the airline is only obligated to pay for the calculated number of units, “even if Jettainer’s calculation needs adjustment”.


Jettainer’s competitor, CHEP Aerospace, makes the same promise of at least a 20% saving per airline when ULD management is outsourced. Despite dangling this carrot, however, the company’s President, Ludwig Bertsch, says that only a quarter of airlines have bitten. But this number has risen steadily over the last two years, a trend which CHEP expects to continue.


“Two years ago it was 15%, so we have now seen both [CHEP and Jettainer] capture another 10% market share in the last two years,” says Bertsch. “Within the next two to three years this should come close to 40%.” Pointing out that 75-80% of airlines outsource their ground-handling services, Bertsch says that “longer-term, I don’t see why ULD outsourcing won’t reach that level”.


“I really believe that, sooner or later, airlines will realise that ULD management is not a core competence. No airline enjoys doing ULD management,” adds Bertsch. However, he acknowledges that there are still hurdles to overcome in terms of reassuring airlines and combating their concerns over losing control of this function.


“One fear airlines have is that bags will get left behind. This fear is unfounded – we have never had a case where a payload had to be left behind. And we have clauses to compensate the airline if there is a service failure,” says Bertsch. “This is a growing market, but it needs a lot of confidence from airlines – they will watch to see how successful it is with first-movers.”


In September 2014, CHEP signed a five-year contract with Cathay Pacific Airways to supply and manage ULDs and pallet accessories. Bertsch believes that such deals with large airlines will act as a catalyst for other carriers to consider outsourcing.


“Those big airlines have a lot of traction in the market,” he says, adding that “several” large carriers are tendering or preparing to tender for ULD outsourcing contracts. “We expect a couple of airlines to make the decision this year.” The process from tender to going live can “easily” be done within 12 months, although Bertsch describes it as an “intense process”.


Jettainer markets as one of its key differentiators the fact that it provides customers with a dedicated ULD fleet emblazoned with the airline’s own logo. The company says this ensures the unit receives better treatment from ground handlers, an advantage it believes eclipses the benefits associated with pooling generically-branded ULDs.  >>

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