Last week, Airside visited ITW GSE’s Denmark production facility to interview the company’s vice president general manager, Poul Elvstrøm. In this interview, Elvstrøm gave insights on ITW GSE’s strategic expansion plans, post-Covid growth and new products. On sustainability, the ITW GSE boss emphasised the company’s commitment to providing environmentally friendly airport gate operations.
How do you assess the growth of the global GSE market today, particularly in this post-pandemic era as aviation has returned to some form of normality?
It’s probably not even a normality. But if we first look at the market, what we are facing today is an unusually high activity level which is, of course, good for the business to be in that environment.
Then we also have accelerated opportunity for replacement sales. Replacement sales [were] paused in 2020 and 2021. Around the world, and particularly in the more mature markets like North America, in these markets they are a little bit behind in those replacement programmes.
That is also picking up [at] a higher scale to what we saw in 2018 and 2019. In addition to this, I would say we’re now in an industry where both airports and airlines are again profitable, which also is good for the business environment we are in. And I would say the interest … in electrification has never been higher than what we are definitely facing today.
In addition to this, these are already factors that are quite powerful … Us being in this niche market of ground power and pre-conditioned air [PCA] for aircraft, we are further supported by new regulation coming in the EU where, by 2030, airports with more than 4 million annual passengers will be forced to provide fixed ground power and air conditioning systems to contact gates.
That will be booming the market. You could say the market dynamics, the macrodynamics, have never seen anything like it from what we see right now. If we look at our division at ITW GSE, in terms of growth, we look at three elements: with growth in the markets, and hopefully a little bit above the market, then we have some market expansion, and thirdly, we can add new products.
That is the way we look at it [and] this is coming from a very low level of activity, now to a very high level of activity. It means that companies, or manufacturers, in the GSE industry are able to really meet this higher demand if they can provide short lead times to the market. They can truly take advantage.
But those that are less geared for this, they will be able to take less advantage. We are very fortunate that with the operating model we have in ITW GSE, we are capable [of meeting] the demand that will be there and if we look at 2023, we just exited a year where I believe that many manufacturers are talking about a 10 per cent growth. We actually delivered a 30 per cent growth in 2023.
On that basis, which markets do you believe are excelling and stagnating in growth in the GSE industry post-Covid?
There are geographical differences as we look at the different markets. If we look at the most mature market in the world for aviation it is still North America. And in North America, a lot of this growth is not coming from greenfield airport projects or heavy expansion. The main driver is currently the replacement market of old equipment, and it is further supported by government grants that are another, let’s say, fuel on this.
That is really driver number one if we look at the business we are in. If we look at the region that is maybe the last to reach its full recovery [post-pandemic], it is Asia-Pacific. The Asia-Pacific [GSE] market is not yet back in terms of passenger numbers and aircraft turnarounds. But what we must not forget is, looking at it a little longer-term, that is where the growth rates are significantly higher.
It’s becoming an interesting region to follow but it is not what will be driving [the global market] this year, next year or the year after. We do see now in our orderbooks sizeable projects for the coming years – we right now are doing a greenfield airport project in India.
We will next year have several major projects in Taiwan, Hong Kong and a couple of other locations that are already in the books. What we can see, which is not regional, is this trend towards interest [in] a cleaner and greener airport operation. That trend is a global trend, that is not regional.
How has ITW GSE adapted to the changes in the GSE market post-pandemic?
I would say first and foremost, what we have learned is that our business model is super strong. Of course, it helps to be part of a financially rock solid enterprise and corporation when you go through both downturns and upturns in the industry.
But what we have learned [since] Covid is that our scalable model and our business model is super strong and basically that the world can throw whatever challenge at us … and we will overcome it.
If we just talk about Covid, what was the difference? Because there have been crises over the years. There have been oil crises, there have been wars, there have been financial crises. But these crises in the past [were] regional.
When we are a global player, typically when some regions have been a little bit down and other regions have been up. What was unique about the pandemic was [that] it was global and therefore took a much bigger hit.
But I would say the strength we have is that we make standardised, well-proven products. They are not customised, we can upscale easily by adding a little bit more manpower in our production lines.
And then I would say in this division of ITW GSE, we are in a unique situation because we have two manufacturing facilities, one in North America and one in Denmark, producing exactly the same product lines. [This gives] us the benefit that, should we reach an upper part of our capacity level, we do have the opportunity to support each other from the other manufacturing facility.
We were ready to upscale and we still are, and I would say this higher level of demand that we saw in 2023 and that we definitely see continuing into 2024 is something actually we also see in 2025 and 2026.
What are ITW GSE’s short and long-term global strategic expansion plans for 2024 and the end of the decade?
We are a global player today and we are more looking at it from [the point of view that] certain parts of our product portfolio have more expansion opportunity than other parts of the portfolio. For sure, our line of pre-conditioned air systems is growing tremendously in the North American market, and it will also be growing tremendously here in Europe.
Looking at the mobile fleet, we have taken some decisions on completely exiting three of our very famous and traditional product lines, being mobile, engine-driven ground power [units] that we have been producing in North America. We have decided to exit this business line and we completed [this] at the end of 2023.
That was our strategy and our target that we also have executed on. From today onwards, we are totally out of mobile, engine-driven ground support equipment. We have expectations that [growth] will be going towards battery-driven ground power equipment as another example to air conditioning. I would also add that growth to this for us also has to come from customer-driven, new product development.
ITW GSE was recently named a ‘key market player’ in a report that projects substantial growth in the Southeast Asian GSE market. Can you provide some insights into your expansion plans, and how you assess the demand for GSE, in this region?
Talking about Asia Pacific, like I mentioned, we still have some really solid orders in our books for 2024 and into 2025 – so the basis already is there. In terms of how we see [the market] long-term in that region, we definitely are of the belief at ITW GSE that we should be producing and manufacturing as close to our end market as we can justify.
But [this] requires a kind of critical mass and volume [of orders] before it can justify a manufacturing business. But we are thinking about options. We are seeing that we are not yet at that volume, but we are at the same time constantly keeping ourselves aware [of], when that time comes, what the direction is we would like to go [in].
And when we say direction, I’m thinking location and it is not necessarily that we will look for the location that is the largest market in Asia Pacific because if we produce in Asia Pacific, we will more be producing for the entire region.
What is of interest to us is more where we find the right supply chain setup. Where will it be easy, logistically, to export from? What areas have the best trade agreements to make sure we can – from an import duty perspective – compete with local manufacturers? And where do we have the skilled labour available to us?
This is some of the criteria we have on our list for awareness when we decide where to locate ourselves one day. But we are not there at this point in time, we have plenty capacity to deliver on this Asian growth.
Can you give insights into any new products that we might be hearing about soon from ITW GSE?
We have about 90,000 pieces of ground power or PCA equipment out in the field today and our equipment is the equipment at the gate that has the highest power input – and that means amps, or power available at the gate. And often, have a lot of excess power there.
We can do more with that, and therefore we have taken more responsibility in the sense that we are now introducing what we call intelligent power management and a product range that will solve the charging challenges that airports may experience as more GSE becomes electric.
This [means] using the equipment and power that is already available out there but making it available to feed other systems. It could be other systems by ourselves or it could be to charge other products out on the ramp …
We call this system thinking EcoGate, and it is our new journey where we go from being a box manufacturer to become more a gate system provider. Around intelligent power management is really where we think we can make the biggest difference.
You mentioned earlier that ITW GSE will no longer be producing or selling diesel-powered equipment and that going forward your GSE will be all-electric. In future could the company potentially expand its GSE product portfolio, or is the company’s focus solely on gate management?
We are a company in ITW where we do not have wide product portfolios [because] we are specialists more than generalists. We try to have a very narrow product line and try to make this the best version of that product we can ever come to.
That is our focus strategy. We will not diverge dramatically from that. When we talk about expanding, it is around the gate and power infrastructure where we are already playing, so to speak.
On your question on diesel, I think you asked whether there’s still a market for engine-driven or fossil fuel-driven ground power. Indeed there is a significant market out there. I would estimate that there are about 25,000 diesel GPUs in operation around the world – so diesel GPUs are the dominant ground power available in today’s operations.
Some [GSE operators] will need to buy these products and some [manufacturers] will have a market in producing those products, but just because we have … the capability [to produce them], it doesn’t mean we have an interest in producing [diesel-powered GSE]. Our value proposition to the market is very clear.
We want to provide the cleanest, the most reliable and cost-efficient ground support equipment to the global aviation industry – so diesel equipment just doesn’t fit to our core value proposition or strategic intent. Therefore, the exit of engine-powered GSE is just [about] making our communication a lot more clear on what market we are interested in playing on.
