In the past, airlines were reluctant to outsource this function partly because they considered ULD management to be mission-critical to their operation and hesitated to allow others to handle it.
According to Ludwig Bertsch, chairman of the board of directors of Unitpool AG, a company that supplies and manages a global fleet of ULDs, airlines did not outsource ULD management partly because the actual cost of managing the ULD inventory was not transparent within most airlines and hence it was not necessarily perceived as a ‘big ticket’ savings item that could have a signifi cant immediate impact on the bottom line.
“This is also because ULD management is often spread across various functions and cost centres, so many costs are often forgotten or not considered,” he adds. Peter Ahnert, director business development at Jettainer, another ULD management company, says that ULD outsourcing is becoming established as a true alternative to the traditional in-house model. He estimates that there are close to 90,000 ULDs which are already being managedby ULD outsourcing specialists.
While costs are a very important issue, qualitative and strategic advantages of outsourcing must be considered too when deciding about the future of airlines’ ULD management, he says.
Two players, two approaches
While Jettainer and Unitpool are the two main players in the market which currently off er ULD management service to airlines, both businesses have fundamentally different business models.
Jettainer, a unit of Lufthansa Cargo, owns and manages the fleets on behalf of the airline, whereas Unitpool, as the only airline-independent ULD-outsourcing company, operates a joint ULD pool for its customers.
Bertsch explains that Unitpool’s expertise and benefit to its customers lies in the synergies that the company can generate by overlapping the airlines’ networks to optimise the number of units required at common stations. By doing so, airlines which would normally keep a high buff er stock to off set delays in unit turnaround, repair downtime, and equipment going out to third parties, could keep their buff er stock at a minimal level and also cut the unit numbers an airline needs to operate.
Expanding fleets = more ULDs
As many airlines are investing in larger and more economical aircraft, this means there will be a need to replenish ULD fleet and in some cases, major changes are required with additional capital expenditure. “Before more money is spent on assets (especially one that is so difficult to manage), the airlines are starting to take a closer look at the possibility to outsource ULD management,” Ahnert says.
Th e International Air Transport Association (IATA), estimates that there is a global fleet of some 800,000 ULDs in operation today. Based on the ageing fleet and given that the majority of aircraft today use LD3 containers, and 88″/ 86″ pallets with an average market value of €500-600 per unit, the global fleet would be worth somewhere in the area of €500 million.
Bertsch says considering an average 10-year life span and minimum average replacement value of US$1,000, airlines spend about US$80 million on ULD purchases per year, and an additional US$150 per ULD for repairs.
As to where ULD growThis coming from, Bertsch says it is primarily where airlines add wide-body aircraft, like China, India and the Middle East, for instance. Growth also comes from airlines increasing their aircraft utilisation and expanding their networks, as well as in the more mature airline markets, like Europe and North America.
Evolving requirements
Regarding the impact of the US security requirements on their business, both Jettainer and Unitpool say the US security regulations do not directly affect ULDs for the majority of carriers. But, Bertsch adds, there are some exceptions which require the use of solid door ULDs, and if this should become a requirement for all carriers, it would have a huge impact as most operators flying into the US do so with baggage bins that have curtains.
“If this happened, this would, in turn, create an opportunity for Unitpool as it would force carriers to evaluate their stock and alternatives,” he says. Both Jettainer and Unitpool agree that there is a definite move toward “light” and composite ULDs due to the constant pressure on fuel cost and a desire to be perceived as environmentally friendly by lowering their carbon footprint. However, less obvious is the rising cost in aluminium which is pushing-up the price of new ULDsand the cost of repairs, Bertsch says.
He says there are three models on the market which Unitpool was considering as “light” alternatives and expected a decision to be made on one of them before the year end as a preferred product, but declined to elaborate further.
When asked how the rising fuel price impacted the ULD industry, Ahnert says that for ULD manufacturers, it has led to a run on lightweight containers. “In general, we expect airlines to demand a gradual switch to lighter ULDs, especially for fuel-intensive long-haul services,” he adds.