Chain of Events

Aviation has suffered much in recent years and GSE distributors are needing to adjust quickly to each new event. Michelle Garetson asked suppliers to offer their read on the year ahead

February 2003

A viation woes continue to dominate the news and the mind-numbing numbers of the losses pouring out of the airline coffers seem endless. What doesn't make the headlines is the effect the challenged carriers' suppliers are feeling. Budgets for ground support equipment are often the first to be cut in down markets and the last to be reinstated when things start looking up again. The GSE distributor must be ready for both scenarios. Several GSE suppliers offered to look ahead and share their insights as to how 2003 looks to shape up for them.

The year ahead
Responses varied on how each distributor viewed the year ahead. Michael Bloomfield, Executive Vice President of Sage Parts in New York, says, "We are growing at rapid rate and look for that growth to continue."

Matt Sheehan, Owner of the Idaho-based AERO Specialties Inc., enthusiastically responds, "2002 was our best year ever. We anticipate a steady increase in sales as we become even more focused on our customers requirements."

Alan Janis, President and CEO of J&B Aviation in California, is also optimistic about his operations, which in 2002, became part of the ITW GSE Group. "In regards to how the year looks for J&B," says Janis, "we see that the year will be profitable and barring any unforeseen difficulties, we should be on target for our 2003 plan."

Janis also offers his opinion that 2003 will be a "soft" year for the industry and gives the following reasons:

• Industry "down turn" started in July of 2001 (low fares and high costs).
• The 9-11 event dramatically reduced passenger demand, especially in North America.
• The congressionally-mandated security requirements are taking capital away from purchases of other (GSE) equipment.
• Diminished revenue/profit outlook for the airlines and ground handlers.
• The need for the airline industry to reduce its overall cost to remain competitive.
• Under capitalized companies will be at risk for survival. There will be a few of our associates in the industry that may not make it through the year without restructuring or consolidation.

Growing the business
AERO Specialties' Sheehan wants to continue on the success achieved in 2002 by offering customers more through new as well as enhanced product lines and services.

"We have redesigned and improved our complete line of new equipment including Multi-head Towbars , Lav-Water and Oxy-Nitrogen carts. Additionally, we have new lines of equipment to roll out first quarter 2003."

He adds, "We also have improved the quality of our refurbished and rental equipment by focusing on newer equipment including K-Loaders, GPUs, Pushbacks, Tugs and Belts."

J&B's Janis says, "In the area of growth, J&B will continue to do what we do best and that is to listen to our customers and to respond to their needs. We will continue to involve our customers in the R&D of all of our products, and deliver highly engineered solutions to the flight line."

Bloomfield credits Sage's strategy in buying better to allow for the savings to be passed on to the customer. "We built our company around providing cost savings for our customers. Everything we do takes cost reduction into consideration."

He also notes that it's important to meet face-to-face with customers and suppliers. "We travel continuously. It's something you need to do. Five years ago, when we bought the business, we spent a lot of time with suppliers - getting to know them and their products - to better serve our customers."

Both Bloomfield and Sheehan agree that Online Buying will help them to grow their businesses.

"Online (eSage) is becoming a very significant part of our business - could be approaching 50 percent of our business," claims Bloomfield. "eSage will change the approach to how we do business and will change the way people receive information. It's more than an ordering site. It's a management tool for our customers."

"AERO Specialties' new "On Line Store" is available 24 hours a day," says Sheehan. "Customers can preview our equipment, get specifications and pricing, and order most of the support parts required to keep their ramps at full productivity."

Challenges
Alan Janis offers up a history lesson in addressing challenges, "We have seen a variety of issues over the past 35 years that have impacted our business community from oil embargoes in the early 1970's to today's current situation. The challenge that we have today is in being patient and understanding that this industry is in the midst of a major change/restructuring that will affect us all. We need to continue to market products that add value and reduce the operating costs of our customers."

Sheehan stresses, "We need to be absolutely sure that our company is focused to build and supply the types of equipment that the changing industry really needs. Changing aircraft fleets bring new requirements to the ramp environment."

"Sometimes, there is a misunderstanding with our role as a distributor," explains Bloomfield. "Most people think that we just sell parts - that we are an extra link in the chain. The truth is, we provide cost reduction, whether in the form of the cost of the part, savings on the purchasing process, or reduction in the inventory the customer needs to keep on hand."

Trend Spotting
"The product mix for the ancillary parts and consumable/replacement parts continues to show stable demand requirements," says Janis. "The regional jets requirements are influencing the mix of the ground power and pre-conditioned air products we market."

Sheehan concurs in that the regional airline market is "hot" and feels his company's "extensive knowledge in this area" will prove beneficial.

Bloomfield anticipates a change with how airlines' mix maintenance with repair for GSE fleets. "Usually there is a correlation between maintenance and repair," he explains. "In a down market, there is a shift away from extensive preventative maintenance programs and as a result, there is an increase in repair. This will change the mix of parts we will supply."

Resources:

Sage Parts Plus Inc.
25 Dubon Court
Farmingdale, NY 11735
Toll Free 877-SAGE-877
Phone: 631-501-1300
Fax: 631-501-1619
www.sageparts.com