The Value Of A Close GSE Partnership

Aircraft are getting lighter, but are airlines flexing their GSE in response? At Virgin Atlantic Engineering a pioneering approach to managing its GSE fleet has achieved significant results in terms of greater flexibility, higher responsiveness and reduced complexity.

Commercial aviation is changing fast. Aircraft are becoming lighter, fabricated from new, efficient composite materials and are more likely to be powered by two rather than four engines – all in a drive for greater fuel efficiency and environmental performance.

However, as aircraft become lighter, questions arise as to whether airlines are being as agile as they could be in adapting to the changing needs of their ground support equipment (GSE)? How flexible and sympathetic to modification are their service contracts? Can the complexity of managing a diverse range of equipment be made simpler? And, in such a dynamic environment, is CAPEX or OPEX the best approach when it comes to procuring ground service equipment?

Andy Currey, Tooling & GSE Manager at Virgin Atlantic Engineering, offers an interesting perspective, having adopted a highly specialised and progressive approach to GSE fleet management in recent years.

Back in 2012 the airline was investing significant capital sums in ground service equipment, year-on-year, and was challenged by the huge complexity of managing the service, maintenance and emergency call out of engineers for a highly diverse fleet of vehicles supplied by a multitude of manufacturers. This was compounded by the need to support three sites – Heathrow, Gatwick and Manchester.

“Every three or four years I was having to create a significant capital expenditure budget across Heathrow, Gatwick and elsewhere in the world. There was always a need to replace a tug or a forklift, so I tried to blend that cost over a few years,” says Andy Currey, adding, “service and maintenance was not included – that was an additional cost.”

With high capital expenditure on equipment and upgrades, together with the complexity associated with managing and monitoring the servicing and uptime of a varied fleet of vehicles, it became clear that a new approach was needed.

“I had an epiphany,” he says. “I wanted a one-stop-shop; a company that would buy everything I had on my GSE asset base and then lease it back to me. Critically, they had to be prepared to buy everything, not just certain pieces of equipment, and we wanted to do things on our terms. The only problem was, at that time, such a company didn’t exist.”

A chance conversation with Rushlift, now a local division of Doosan Forklift Trucks, lead to a bold initiative where Rushlift GSE would undertake to acquire Virgin Atlantic’s fleet of 50 vehicles and then lease them back in a phased, full service contract that would free-up capital resources, cut complexity and reduce risk. Importantly, moving from a CAPEX to an OPEX model had significant financial benefits and defined a clear fixed-cost for the balance sheet.

Andy Currey explains: “one of the biggest things for any airline is cash. Part of the operating license is that you have to have a certain amount of money as cash, but if we push everything into an OPEX – so we know it’s a fixed cost every month – it preserves cash. Also, if we buy, costs are going up as asset values go down. There is a residual value at the end, but it’s low as the authorities will not allow vehicles to operate on the airport after a certain age.”
So now, seven years on, how has the relationship developed? And what are the advantages of a long-term partnership in terms of operational performance?

“Trust is very important and over the years we have built on that mutual trust. We have a contract that sets out SLAs and response times and, of course, these things need to be set out in a contract. However, we have never needed to look at it as we have a fantastic working relationship,” he says.
Tim Willett, Operations Director at Rushlift GSE, concurs: “We understand each other very well, which enables us to be really proactive in identifying where efficiencies can be made, whether that’s using a certain attachment on a forklift to allow it be more flexible or replacing a vehicle for a more reliable one.”

A significant aspect of the relationship is how new replacement pieces of kit are introduced, without impacting the fixed monthly figure. Andy Currey says: “When older vehicles need replacing we take a view on the additional cost of a new machine and we average out the cost across the whole length of the contract, so there isn’t a big leap, it’s a fixed cost to me – in a way, it’s like an insurance policy.

“Ultimately, Rushlift has to make money and we have to save money. That is the relationship we have to have and provided there is transparency, it works – importantly, it’s a long-term relationship,” he says.