For an industry often heard lamenting its low margins, and which has readily embraced outsourcing of services such as ground handling and catering, it is perhaps surprising that 80% of airlines still keep the supply and management of ULDs in-house. Although most aircraft containers and pallets are technically classed as aircraft parts, their maintenance and management can hardly be regarded as the core business of airlines. And with two third-party providers – Jettainer and Chep Aerospace Solutions – demonstrating that they can successfully manage this function more efficiently, and offering financial incentives to do so, one has to wonder: are airlines missing out?
One reason the outsourcing of this function may not be more widespread is that it has only been available for a relatively short time. The ULD pooling concept is now operated under the Chep brand developed in the late 1990s within SAirGroup, for members of the now-defunct Qualiflyer Alliance. After the demise of Swissair in 2002, it was launched to third parties as Unitpool and, following several ownership changes, was bought by Australia’s Brambles in 2010. Jettainer evolved from another European airline group, founded in 2003 as a subsidiary of Lufthansa Cargo, which remains its owner today.
Before Unitpool’s acquisition by Brambles, there was also a limit to the pace at which the organisation could take on new airline customers. The model offered is a capital-intensive one, involving the purchase of an airline client’s existing fleet of containers. For larger airlines, that can amount to a spend of $8 to $10 million before the company can even start doing business with the client.
Having the financial capability to take on major customers is one of several factors that have attracted significantly increased levels of interest from airlines that a few years ago probably would not have considered outsourcing this function, observes Chep Aerospace Solutions president, Ludwig Bertsch.
But it is also a function of the continuing cost pressures on airlines, which in many cases have been forced to downsize their ULD-management teams so considerably that it is not really sustainable to manage the function in-house.
Another major factor at play is the capital restrictions that many airlines face during a period of economic uncertainty, which make it difficult to invest in new equipment. This has become particularly important since the launch of lightweight containers which, combined with the current high fuel prices, makes an investment an “economic no-brainer” for airlines that fly long-haul services, believes Bertsch.
The new composite materials reduce the weight of an LD3 from around 85kg to 65kg for a lightweight container, and 55kg for an ultra-lightweight unit, at a cost of between $1,500 and $2,500 each. For an airline flying long-haul, that saving of 20kg or more might generate a fuel saving of around $2,500 a year for one container, providing a payback within one year from just the fuel saving alone, Bertsch points out.
Even though the business case is very strong, there are still many airlines – including some very large ones – that have not made the switch to lightweight because they do not have the investment budgets available, which is where the allure of outsourcing the function may now become particularly attractive, since the investment is then made by the third party on the airline’s behalf.
Turning these fixed-cost investments into a variable expense is one of several benefits that Chep and Jettainer claim are available for airlines outsourcing their ULD management.
Martin Kraemer, head of marketing at Jettainer, says: “What you basically get is a bill for the units that you actually use, and this total cost per unit includes everything from repositioning to replacing it, repairing it, or whatever you need. It is a one-price ticket and includes everything.”
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