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12 GROUND SUPPORT WORLDWIDE MARCH 2016 COVER STORY As the aviation industry continues to grow and change, several trends have emerged that are impacting how ground support equipment (GSE) is being acquired and fnanced. Increased Profts Equals Increased Pressure Airlines are back to record proft margins. With this success comes much needed, sig- nifcant capital expenditures into new equip- ment and technology to continue to maintain safety and effciency due to previously deferred equipment upgrades. "Cash is a big issue right now as the air- lines continue to generate signifcant revenue," says Bill Banfeld, national fnance manager for the airport ground support equipment division at TCF Equipment Finance. "An all cash approach limits a customer's fexibility in the future. This 'feast or famine' approach has failed in the past and forces companies to keep GSE well beyond its economic useful life. Operational parameters, government regula- tions, technology and a company's fnancial situation can change. Incorporating fexibil- ity into a feet replacement strategy mitigates the unpredictable economic cycles that have plagued the airline industry in the past." As both airline travel increases and aircraft upgrades come to market, there is an increasing expectation for service providers to operate and add the newest and most innovative equipment to their feet. To do this, many ground support providers are looking to equipment leasing, rather than purchasing, as a fnancial solution to support their requirements. "I think defnitely for handling companies, leasing is almost an absolute," Neil Bennett, managing director at Somerset Aviation Capital, says. "You have to do it and I think there's defnitely a trend in that direction. It's sort of the business model in Europe, but I think they're learning the benefts here in North America." The fact is, ground handling equipment typically lasts 10 to 20 years and holds its value quite well. Because this equipment has such a long lifespan, longer fnancing terms can be arranged, which in turn means low monthly payments that can deliver consistency and peace of mind to ground services providers. For example, Ohio -based Summit Funding Group recently worked with one of the world's largest ground handling pro- viders to provide $20 million in fnancing for various types of ground handling equipment, including cargo loaders, deicers, push-back tractors, lavatory trucks, cargo dollies, elec- tric belt loaders and re-fuelers, among others. Summit's client was bidding for new con- tracts, and needed to ensure that the most updated equipment was on hand. This strategy differentiated them from the competition, and put them in a position to service their potential contracts safely, reliably, and proftably. "It all seems to come down to money, and what the monthly payment is, and I feel there's a trend," Bennett says. "It's becoming more important to have use of the equipment at the lowest cost. That's the key, and not ownership." While preparing their new contract bids, the client worked with Summit Funding to obtain quotes for leasing new equipment they needed over the next seven to ten years. Summit pro- vided a monthly payment on various types of equipment, and the client was able to take that payment, add their target proft margin, and send their client a total fxed cost while bidding. Through this strategy, Summit's client is ensuring that they have access to the most updated equipment to service the contract, they're preserving capital upfront, while also T he ground support industry, like the aviation industry as a whole, runs on tight margins. To ensure success and proftabilit y, airlines, airpor ts, and ground service support providers must be at the top of their respective games and look at all costs intently.