Having snapped up the leading player in Italy, global GSA group ECS further expansion in Asia and South America, reports Peter Conway.
Traditionally the GSA business has always been seen as the ultimate local hero business – an experienced airfreight executive with a knowledge of the local market, setting up in an office with a phone and a computer.
The foundation of the ECS Group in 1998 changed all that, however. The French-based company set out to create a wholly-owned network, covering initially all of Europe and then spreading to other parts of the world. Though it has expanded by organic growth as well as acquisition, it has really built its success on buying up the local heroes in many markets, and marrying their local expertise to its global vision and synergies.
Italy was, until recently, a market in which ECS opted purely for organic growth, setting up its own subsidiary there under the Globe Air Cargo brand. This represented such carriers as Etihad, Jet Airways, China Cargo and Thai Airways, as well as operators such as SN Brussels Airlines and Ukraine International, which the ECS Group represents globally.
But at the end of July it completed a deal to buy the biggest GSA in the Italian market – ATC which also operated under the ADP and Airlog brands. The acquisition will give ECS a commanding position in the Italian GSA market. Sauro Martinelli, son of ATC’s founder Glauco Martinelli, and managing director of the company, also becomes one of four senior vice-presidents commercial development for the ECS Group, reporting to chief operating officer, Adrien Thominet.
For Martinelli joining ECS was the logical step, given trends among Italian shippers. “In the past Italy was somewhat outside of the global economy, with 75 per cent of manufacturers consisting of family-run small to medium companies. That is slowly starting to change, as multinational companies become more dominant,” he says.
“So if ATC is to continue to grow, it needs to participate in the global market. It is too late for us to open our own branches in other countries, and in the ECS Group we have a company that we know well, and which has both passion and reliability. ECS has lots to give us, and we have lots to give ECS. Italy is still the third or fourth most important market in Europe and there are plenty of mutual opportunities to develop our carriers’ business.”
Among the clients that ATC brings with it in Italy are Delta, China Airlines, Air Canada and DHL Aviation. As well as continuing to run the ATC business, Martinelli will have a new role as the overall account manager for some of these for the ECS group.
“For me it is very important to have Sauro working with us on the commercial development of the group,” says Thominet. “He is very well connected in the airline community, and he will become our key representative for some carriers at head office level, for example Delta, and he will also be working with us in other ways to develop the group’s business.”
ECS will continue to keep its original operation in Italy – the Globe Air Cargo one – separate from ATC, in order to avoid any conflict of interests between carriers. “The idea is not so much to have cost synergies, but to have synergies in new business development,” says Bertrand Schmoll, chairman and chief executive officer of the ECS Group.
Martinelli says the idea is not so much to have cross-selling between its client list and that of the rest of the ECS group, but “to further develop the business of the airlines we represent by having a global overview”.
As to whether the acquisition of ATC might perhaps make ECS too dominant in the Italian GSA carriers, persuading airlines to try another player, Thominet insists that will not be the case. “Airlines today are attracted by the image and position of the GSA in the market. They want a GSA that is strong and reliable,” he says. “All our existing customers that we have informed about the deal are very positive about it. They are impressed with the quality of ATC’s operations.”
The creation of the ECS Group was predicated on the idea that airlines would increasingly look for global GSA partners, rather than buying such services on a market-by-market basis. It has to be said that to-date this has not really occurred in any major way. ECS can point to one or two carriers – SN Brussels and Ukraine International – that it represents globally, but most account wins seem to be for specific markets.
Thominet insists that is changing, however, saying more and more airlines are looking to tender on a global level. “It varies from airline to airline, but there is a tendency to prefer one partnership, to a whole series of them that is complicated to put in place.” The fact that this has not led to more global or multinational deals he attributes to various other factors, such as the difficulty of getting rid of in-house staff, which makes the ambition of a global GSA deal complicated to put into effect.
A breakthrough may be in the office with Asian carriers, however. Thominet reports that with their traditional exports from their home markets suffering, more and more Far Eastern airlines are looking at ways to boost their business out of Europe. “It is too early to announce any names, but we have some interesting deals cooking,” he says.
In the reverse direction, ECS has been building its network in Asia, hoping to persuade European and Middle Eastern carriers who formerly regarded having their own sales staff in the region as essential that it is more cost-effective to use a GSA.
In 2011 the company opened offices in Hong Kong, Mumbai and Delhi, and it started a joint venture with a local company in Vietnam. Schmoll says South East Asia is proving of especial interest to carriers, and says further ECS offices are on the cards for Myanmar, Laos and Cambodia.
China is also on the target list for early next year – initially in Shanghai and Beijing, but with the ambition to expand into the west of the country also. Schmoll thinks the decrease in yields out of Asia make this an ideal time for such a move. “It is now difficult for airlines to be able to afford to have their own team and to find cargo across the region, and that is our big strength,” he says. As in Vietnam, the Chinese operation will be a joint venture, to enable ECS to combine local expertise with its knowledge of the global GSA business.
ECS also has ambitions in South America, where the initial move could be made through acquisition. “We are evaluating different possibilities, and this could be a priority for next year,” Schmoll says. “Step-by-step we are covering the world.”
Apart from creating networking opportunities, geographical diversity also has another advantage, in that it insulates ECS somewhat from the global stagnation in air cargo traffic. Thominet says that while Asian exports are down, those out of Europe have held up reasonably well in the last year, for example, and ECS’s business to Africa has also been stable, neither falling or growing.
Having sold its 60 per cent share in Togo-based cargo carrier Africa West in 2011, ECS started a new cargo airline in Niamey called Niger Air Cargo, and has been filling a weekly MD-11F leased from Avient out of Liège in Belgium. Feeder flights from Niamey to northern Niger and Nigeria may be started soon, and Thominet says the fact that ECS has this experience of managing freighter operations is a further advantage when working with other clients.