As in the crane business, the aerial work platforms (AWP) segment has long been wracked by the ongoing struggle between the competing interests of leasing and ownership.
In the Gulf today, however, I believe it is safe to claim that rental arrangements are ascendant and ownership is in decline.
The reasons for this are relatively simple: the double hammer blow of the global economic crash eight years ago, and more recently, the 2016 dip in oil prices has made contractors in the region rightly skittish.
The presence of projects today is no guarantee of projects tomorrow, and a lack of certainty undercuts the argument for intensive capital investment in equipment.
The unpredictable nature of cash flow in the region is also a hindrance to overzealous confidence. If the most sizeable source of income is revenue from government projects with payment delays of months or even years, then budgetary restraints can become severe.
Neither of these trends encourage owner-ship, but both of them incentivise leasing.
Seizing the day (carpe diem), rental firms have been intensively reinvesting their profits in the expansion of their fleets, regional facilities and training functions.
Today, major rental firms are not only service providers, but primary dealers and the main conduits of AWP safety programmes — and the larger and more consolidated these rental operations become, the lower their overheads, more competitive their price, and stronger the incentives for leasing.
This is particularly true from the perspective of small contractors, which are less likely to have their own trained operators and technicians capable of AWP maintenance.
By contrast, larger operations can make a more strategic calculation — spreading the cost of the investment across a portfolio of projects that share the equipment and by owning a large fleet that justifies acquiring technicians with dedicated experience.
In the current business climate it is perhaps the less common of the scenarios. An acquired asset must at some point be sold again and, in a buyer’s market, likely at a loss.
The market conditions are tricky and in this segment, rental firms hold the cards.
Rent supreme: Regional dynamics favour rental
Aerial work platforms appears to be one of a handful of segments where the economic realities and nature of the work have crowned rental king
As in the crane business, the aerial work platforms (AWP) segment has long been wracked by the ongoing struggle between the competing interests of leasing and ownership.
In the Gulf today, however, I believe it is safe to claim that rental arrangements are ascendant and ownership is in decline.
The reasons for this are relatively simple: the double hammer blow of the global economic crash eight years ago, and more recently, the 2016 dip in oil prices has made contractors in the region rightly skittish.
The presence of projects today is no guarantee of projects tomorrow, and a lack of certainty undercuts the argument for intensive capital investment in equipment.
The unpredictable nature of cash flow in the region is also a hindrance to overzealous confidence. If the most sizeable source of income is revenue from government projects with payment delays of months or even years, then budgetary restraints can become severe.
Neither of these trends encourage owner-ship, but both of them incentivise leasing.
Seizing the day (carpe diem), rental firms have been intensively reinvesting their profits in the expansion of their fleets, regional facilities and training functions.
Today, major rental firms are not only service providers, but primary dealers and the main conduits of AWP safety programmes — and the larger and more consolidated these rental operations become, the lower their overheads, more competitive their price, and stronger the incentives for leasing.
This is particularly true from the perspective of small contractors, which are less likely to have their own trained operators and technicians capable of AWP maintenance.
By contrast, larger operations can make a more strategic calculation — spreading the cost of the investment across a portfolio of projects that share the equipment and by owning a large fleet that justifies acquiring technicians with dedicated experience.
In the current business climate it is perhaps the less common of the scenarios. An acquired asset must at some point be sold again and, in a buyer’s market, likely at a loss.
The market conditions are tricky and in this segment, rental firms hold the cards.
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