Aircraft ground handling, and with it the supply of ground support equipment (GSE), is a significantly growing market in China. Airports are growing in size pretty much everywhere. As the market is huge, there is also a lot of equipment being procured by ground handling service providers (GHSP) operating at Chinese airports.
Overall, while the Chinese market represents a great opportunity for GSE manufacturers, relatively high import duties can, at times, make it testing to penetrate.
“There is a challenge for international GSE manufacturers in that there is not a tradition for buying imported equipment, namely because of relatively high import duties on GSE,” says Lars Barsoe, vice president of sales and marketing at Vestergaard. “From the one end, the Chinese market represents a huge opportunity, yet it can be difficult to penetrate, also because Chinese companies are not fully accustomed to paying the types of prices that leading high end international GSE manufacturers normally charge.”
Compared with locally built equipment, there are duties on imported equipment ranging from 8 percent to 12 percent, in addition to overseas shipping costs that must be added.
“Obviously GHSPs at small airports with less than 10 million annual passengers may not be able to afford such costs. However, major GHSPs, such as local airlines, are actually willing to pay such costs plus a small premium for international brands with high quality and features that meet their operational requirements,” says Chris Tam, executive director of sales and service at TLD Asia.
“It is up to international GSE manufacturers to justify the premiums GHSPs need to pay by accepting the values that we are able bring while the locals are not,” he continues. “TLD’s business in China has been growing at 29 percent CAGR (compound annual growth rate) in the last nine years with over 60 percent of revenue on imported equipment. On the other hand, there must be a good supporting structure established to service the equipment on the ground. GHSPs would not tolerate a piece of imported equipment to be grounded for months due to lack of parts or service.”
Equipment Requirements
Nevertheless, aircraft ground handling remains a significantly expanding industry and Chinese GHSPs also have increasingly sophisticated requirements in terms of GSE forward-fit and retro-fit. According to TLD’s Tam, areas of particular interest for Chinese GHSPs are safety features, emission standards enabling equipment to generate lower emissions and user friendliness, i.e. the equipment must be simple to use and account of ergonomic considerations for drivers.
“Typically, Chinese ground handlers require their equipment to be outfitted from the start (forward-fit), but there are instances when a new option becomes available, and then retro-fits become desirable,” adds Vestergaard’s Barsoe. “However, it is a difficult budget process to get anything retro-fitted and, therefore, they prefer forward-fit.”
GSE safety features, like sensors, are now required on all equipment coming anywhere near the aircraft, as the Civil Aviation Authority of China (CAAC) has taken the approach that since these features are available, then all equipment should be fitted with them.
“With regard to equipping GSE with sensors, Chinese GHSPs are further ahead than in many other parts of the world. They are actually expecting sensors to be installed as part of the standard equipment configuration; essentially, all new pieces of equipment being delivered or next to deliver are by default equipped with sensors,” says Barsoe. “From the other hand, when dealing with Chinese buyers it can be difficult to make the case for the premium on price that necessarily comes with more sophisticated equipment.”
Tam points out, however, that only a few Chinese GHSPs are really looking into GSE equipped with highly sophisticated features such as TLD’s aircraft safe docking (ASD) system, which is equipped with diesel engines meeting the latest emission standards or electrically powered GSE.
“Nevertheless, awareness on the future of GSE is surely increasing by means of promotion by suppliers like ourselves,” he says.
Operational Challenges
Like in many other parts of the world, aircraft ground handling in China faces some operational challenges which GSE manufacturers can help to address. The challenges include the safe docking of GSE; increasingly stringent emission standards at Chinese airports; battery charging infrastructure which are not installed and prevent GHSPs from using electric GSE; the hiring and training of qualified drivers for GSE due to explosive growth; and implementing IATA ground handling standards, according to TLD’s Tam.
“The challenges are more or less the same as in the rest of the world,” agrees Vestergaard’s Barsoe. “One important consideration is that most operators speak Chinese only, so equipment has to be developed so that it can be understood by the operators. Moreover, GHSPs are not keen to deal with the inconvenience of service, so there has to be a service back-up.”
Unlike in Europe, North America and Japan where there have been several exchanges of views and best practices across borders and across multiple GHSPs, airlines, airframe manufacturers, and authorities for defining international standards like SAE, Chinese authorities insist on creating their own standards – albeit with a consideration to IATA’ standards. But it creates a challenge for international manufacturers in that there are different standards.
“There would be a benefit to derive from common international industry standards, but in China the situation is not fully mature to adopt internationally accepted GSE standards,” notes Barsoe.
After-Sale Services
The after-sale network in China, according to TLD’s Tam, is loosely organized in terms of maintenance support infrastructure.
Most airports have one or two small players set up to do the service jobs.
One key local GSE manufacturer sets up a maintenance company focussed on providing after-sale service to various airports in China and trying to leverage this for future sales on new equipment. Service becomes a key factor for GHSP’s to select suppliers, Tam notes.
For overseas GSE manufacturers doing business in China, it is an absolute must to have some degree of local after-sale support that is at easy reach of the Chinese customers.
“Our anti-icing and deicing equipment, for example, is rather crucial or critical to operational continuity and requires 24/7 support. As a foreign manufacturer, we have setup a facility with a local partner that enables us to support our customers with very short response times. Warranty periods are long, and GHSPs expect 24/7 service in the entire warranty period,” says Barsoe of Vestergaard.
While the aircraft ground handling industry is booming in China and it offers good opportunities for international GSE manufacturers, it is also difficult to penetrate for international GSE manufacturers.
Key to conducting successful business in China is the provision of equipment that includes safety features, considers the operational challenges in China and can rely on solid local after-sale support.
