21st Century Hamburg

The City of Hamburg owns a 51% stake in the airport with Hochtief AirPort GmbH and Hochtief AirPort Capital holding the remaining 49%. (FHG)

Having recently completed its 21st Century re-vamp, Hamburg looks set for today, and tomorrow.  Tom Allett reports.

The City of Hamburg owns a 51% stake in the airport with Hochtief AirPort GmbH and Hochtief AirPort Capital holding the remaining 49%. (FHG)

Hamburg Airport’s management team found 2008 to be an eventful year.  Passenger figures were up and its long-running and ambitious HAM21 21st Century redevelopment programme was near to completion.
During the first half of the year the airport achieved strong growth, but that flattened out for the remaining months.  Hamburg handled 12.84 million passengers in 2008, a record number (+0.5%), putting it at 98th place in the league table of the largest international airports (2007: 101st place).  Turnover fell slightly, by 1.5%, to €230.7 million (US$322.3m).  Total earnings of €39.3 million (US$54.9m) were 18.5% down on the previous year.  Aircraft load factors were higher in 2008, so that the number of aircraft movements declined by 0.8% to 172,064, despite the growth in passenger numbers.  The load factor rose from 71.7% to 72.2%.  Airfreight also felt the effects of the weak economy, with air cargo trans-shipped at Hamburg Airport, excluding airmail and transit, dropping by 7.6% to 78,018 tonnes.  Flown air cargo rose by 3.7%, whilst truck trans-shipment declined by 9.6%.
“The effects of the weak economy have affected us, too,” said Michael Eggenschwiler, CEO of Hamburg Airport.  “In the present financial environment, flexibility and strict cost management are just as important as optimal resource planning.  At the same time, we are continuing to invest in our customers’ comfort.  Around €40 million (US$56m) of investments are planned for 2009 alone.  To date, the airlines have reacted to the weak economic situation with consistency and dependability.  It is our goal to maintain the variety of Hamburg’s route network.”
 

The terminals’ impressive high curved ceiling design gives travellers an almost cathedral-like sense of space. (KEY-Tom Allett)

High investment

In 2008, Hamburg Airport invested €76 million (US$106m) in new infrastructure, an increase of 106% over the previous year and an all-time record for the facility.  At the same time it reduced security charges for its customers.
However, as the global economy slowed, rental income – which includes that from retail space, food & beverage outlets and advertising space – began to fall.  In December 2008, Hamburg Airport opened its Airport Plaza (HAP), expanding its capacity to earn non-aviation revenue.  According to Michael Eggenschwiler: “Hamburg Airport has invested a total of €350 million (US$490m) in the site in recent years; €76 million (US$106m) in 2008 alone.  This has enabled us to secure jobs throughout the site and even to create new jobs.  Hamburg Airport is an important employer and a mainstay of the economy for the whole of northern Germany.”
 
Airport Plaza and Metro Rail Service
From an operational point of view Hamburg Airport effectively completed its HAM21 redevelopment in December 2008 with the opening of HAP and the introduction of an S-Bahn (metro rail network) service to the city’s central station.
Its four previous terminals have been replaced by two more modern structures linked by the HAP, which sits between them.  The Plaza is both a shopping centre and the centralised security-screening zone, housing 16 security channels.  However half of them are not currently in use and peak-time travellers – especially in the early morning rush – can expect lengthy queues for screening.
The architect designed an impressive high curved ceiling for the terminals giving travellers an almost cathedral-like sense of space and grandeur upon entry.  But in contrast Hochtief opted to have a comparatively low roof over the central screening area.
As you would expect for a mid-size facility, Hamburg’s Airport Plaza contains a wide range of shops as well as food and beverage outlets.  The airport’s operating company FHG describes it as: “a veritable market square for passengers.”  Personally, I found strolling around the Plaza to be a much more pleasant experience than most market squares I’ve visited, though admittedly I was there during an off-peak period.  However, despite the smart and attractive new facilities provided here, not everyone is happy.  Some retailers are disappointed that the majority of the shops are now located airside – ie after security – so the ‘meet & greet’ market is partially lost.
Because the terminal buildings were designed to ultimately handle a far great capacity of passengers, there is currently a considerable amount of wide open floor space.  This combined with the arching ceilings adds to the cavernous appearance.
The various airline check-in desks take centre stage, while their ticket/reservation kiosks are spread around the back and side walls.  Travel agents, restaurants and administration offices are all located on the upper balcony level.
Eventually the ‘wide open spaces’ on the ground floor are intended to be filled by more check-in desks as demand increases.  But who knows… if other carriers follow Ryanair’s example of doing away with check-in desks at the airports it serves, perhaps the terminals of tomorrow will resemble what we see at Hamburg today?  This particular facility certainly appears to have almost everything it needs to prosper in the years ahead.  Perhaps the only other item on the management’s ‘wish list’ would be a flourishing international economy…
In the autumn of 2009, the largest investment programme in Hamburg Airport’s history will be completed with the opening of the new parking deck between the P2 and P4 multi-storey car parks.  This will create 1,600 additional vehicle spaces directly opposite the terminals, increasing the number of adjacent parking spaces to 8,400, with a total 12,500 spaces available overall.  A 266-room, eight-floor, 4-star Radisson Blu hotel, will also be opened opposite the HAP this autumn, thereby guaranteeing guests a short walk to and from the terminals.
The new S-Bahn connection has got off to a good start, carrying up to 13,500 people per day, a mixture of passengers, meeters & greeters, visitors and staff.  There is a strong desire to get more visitors out of their cars and on to public transport as part of the airport’s long-running environmental programme.
“We are a fair partner for the airlines, thereby securing the diversity and quality of the route network. Hamburg Airport remains a reliable employer and makes an important contribution to northern Germany’s economy.” - Michael Eggenschwiler, CEO. (FHG)

Hamburg’s Airport puts great emphasis on ‘green’ issues and its environment team’s extensive efforts will be the focus of a separate article in a later issue.
One particularly neighbour-friendly initiative, that was introduced more than a year ago, resulted in the withdrawal of night-time postal flights between Hamburg and Frankfurt after more than 25 years of operation.  This reduced night flying (between midnight and 06:00) by 48% last year, while movements between 23:00 and midnight were down by around a third.
 

Ground Handling
Ground handling activities play a key role of every airport’s success.  To understand the politics of this sector in Germany, you have to look back to just after World War Two and the rules introduced by the government to determine the ownership and management of ground handling companies.  Back then German law stipulated that such services could only be provided by the airports themselves and that’s how things stayed until the introduction of a European Commission (EC) Directive in 1996, which forced all EU countries to offer their ground handling services to the open market.  The directive was adopted throughout the EC, but with caveats for the German segment.  In short, the German version required that new companies entering the market must employ staff from the existing airport company when they took responsibility for the work.  The German regulations were eventually successfully challenged by the EC lawmakers, but the bottom line was that the largest airports – Frankfurt and Munich – rather than opening things up to all comers, just added a second ground handling company, and that’s the way it remains today.  While the airlines’ handling costs have slightly reduced because of increased competition, the reality is that those two German giants are unable to make cost savings through staff salaries.  Airport operators, and more importantly, the airlines are of the opinion that this renders them uncompetitive in the wider market.
However, putting the history lesson to one side, things are very different here at Hamburg, which was the first German airport to outsource its ground handling activities.  The pain suffered by everyone involved in that process 12 years ago paved the way for the much leaner organisations working there today.
Christian Noack, who started his career with Ogden Aviation, is now Hamburg’s Director of Ground Handling.  He oversees three separate subsidiary handling companies.  The first of these, CATS, (Cleaning and Aircraft Technical Services GmbH & Co KG) employs around 60 people and provides various aircraft cleaning and cabin engineering services.  Then there is STARS, with 100 employees, (Special Transport and Ramp Service GmbH & Co KG), which takes care of crew and passenger bus services, aircraft pushbacks and de-icing duties during the winter.  It also offers First Class limousine/chauffeur services, and will collect passengers at their front door from any address in Northern Germany.  STARS is the only one of the three that isn’t wholly-owned by Hamburg Airport as the Lufthansa subsidiary, LEOS GmbH, has a 49% stake.
Last but not least is GroundSTARS GmbH & Co KG – its 450 staff provide GSE and carry out loading/unloading duties , handling around 60,000 aircraft turnarounds.
The three companies account for about 77% of the airport’s handling activities, and are all independent of the airport.
Besides those airlines which choose to do their own passenger and operations handling, two other ground handling providers offer ramp services here.  AHS (Aviation Handling Services) Hamburg (49% owned by Hamburg Airport) and the independent Acciona.
 
Efficiency
To my mind, because just about everything in the ground handling world is cut to the bone in terms of costs, there is no such thing as a low-cost handling agent: they are all ‘budget’ operations.  So, I asked Mr Noack, if there was anything his organisations could do for airlines during the current recession.  He replied: “Around six months ago we had some very tough talks with Lufthansa about a new three-year ramp handling contract.  Together we looked at what was available all over Germany and then set the benchmarks for quality and costs.  As a result we have the same level of charges as any other independent ground handling company operating in Germany, Aviapartner, Acciona, etc, etc, so to be honest we have a very good cost/price situation here and over the last three years we have continually improved our quality.
“We don’t just want the right number of people; we want them to deliver the best quality performance,” - Christian Noack, Director of Ground Handling. (FHG)

“Some might say that quality improvements aren’t the highest priority during these difficult times, but if your ‘quality’ is good then you are saving the airlines time and redundancy costs.
“Looking at the issue of on-time departures for example, Lufthansa estimates that every minute of delay costs it €70 (US$97), so naturally, like all the others, the airline is very anxious to keep to its punctuality targets.  From our side, we have managed to keep the average delays caused by ground handling down to just two and a half minutes while dealing with 100 turnarounds per day.
“We didn’t cut salaries to cut our costs, we were able to remove unwanted service levels to the airlines without compromising safety, security or passenger satisfaction.  Overall the price of ground handling here at Hamburg has gone down by about 30% over the last five years.”
The last major restructuring of the airport’s ground handling companies took place in 2005 and since Mr Noack took up his position on January 1, 2007, the overheads of the three companies have been reduced by 40%.  “We didn’t save costs on the apron, we cut back on our overheads,” he explained.
“For example we used to have a managing director for each of the three ground handling companies, but now we only have two.  This is a very good sign for the people working out on the ramp because it shows that when we look at saving costs, we look at saving them at every level,” he added.
When asked how his organisations had achieved an improvement in service quality, he explained: “Our companies looked very deeply into their work processes in order to find those little areas where it was possible to save that extra minute.  One of the major issues for any airport ground handler is staff rostering.  The flexibility we have in our staff contracts and the fact that our people are multi-functional allows us to move them between tasks as required.  It all depends on the day in question but, for example, we can have them working on ground handling duties for just one and a half hours, then maybe take their breaks during the quieter periods, then they move to our cleaning company, then perhaps it is time to hand over to the next shift.  Generally speaking, we have three main peaks; the night-stop aircraft which depart around 06:00 to 07:00, the second wave peaks at around 11:00 and the third at 19:00.
“We had discussions with our works council [an internal union/company liaison group] about flexible staff rostering and now we have agreements with both the union and the council that allows us to roster split-shifts of perhaps just one and a half hours and this is a very innovative move for airport ground handling companies.  In addition we are able to flex their working hours account by plus or minus 400 hours per year.  That means that we can ask them to work perhaps only three hours a day during the quieter periods and more when it is busy – more hours on cleaning or ground handling during the summer, but then switching those hours to maybe de-icing during the winter.  That way it helps us to keep experienced and multi-functional staff all year round.  In the past we would have taken on temporary staff for the winter and had no work for them in the summer, so we would end up taking on new staff every winter.  It was the same situation for loading and unloading  work during the peak summer season
Overall, the cost of ground handling at Hamburg has gone down by about 30% over the last five years. (KEY-Tom Allett)

“We do also employ temporary staff when required.  What’s different here is that our own External Employee Management department employs the people – their contracts are with the EEM, not with us.  Within our department we then provide the individual training and work patterns for a pool of around 100 to 150 employees, so when we need temporary staff we don’t go to the EEM and say ‘we need ten people’ – because we know these individuals and their qualifications/abilities, we are asking for ten specific named individuals.
“The temporary staff are fully integrated into the whole ground handling team.  They spend all of their working time here at the airport rather than changing from one workplace to another like temporary staff normally would. That way, even though they are temporary staff they know they are an important part of our team so their motivation and dedication to the task is high.  We don’t just want the right number of people; we want them to deliver the best quality performance.”
So do the airport’s independent handling companies have any ambitions to expand beyond their home base?  Mr Noack explained: “Originally the idea was that our independent companies would expand with time; first Hamburg, then across Germany and then the whole world, just like lots of other ground handling companies did during the 1990s.  Now, the strategy has changed and we want to be a local hero – we want to concentrate on our best cost performance ratio for our customers at HAM and be profitable here.”
 
Steady on course
Hamburg Airport’s strength can be largely attributed its route network.  Last year, 60 airlines offered direct flights to 125 destinations.  The long-haul routes from Hamburg Airport are developing steadily, with Continental providing a daily service to New York/Newark and Emirates flying to Dubai and beyond.  In comparison to 2004, before the non-stop long-haul services were introduced, 2008 saw 128% more passengers flying to New York, 230% more to Dubai and 69% more to Toronto.  Despite the downturn, the 2009 summer timetable included two new routes; Helsinki with Air Berlin while Condor launched flights to Egypt’s Sharm el-Sheikh.  This coming winter, Germanwings is due to expand its presence in Hamburg, basing another aircraft in the city with the intention of initially serving Cologne/Bonn, Klagenfurt and Salzburg.
Hamburg handled 12.84 million passengers in 2008, a record result in passenger numbers (+0.5%), bringing the airport up to 98th place in the league table of the largest international airports. (FHG)

Summing up the outlook for the current business year, Michael Eggenschwiler said: “Our goal is to hold our course.  This year we will invest €40 million (US$56m) in passenger comfort and convenience and continue to work on enhancing customer satisfaction.  We are a fair partner for the airlines, securing the diversity and quality of the route network.  Hamburg Airport remains a reliable employer and makes an important contribution to northern Germany’s economy.”
 
 
 
FACTS AND FIGURES
2007 versus 2008 + / –
 
Passengers (+0.5%)
2007 12.78 million
2008 12.84 million
 
Take-offs and landings (-0.8%)
2007 173,499
2008 172,064
 
Air cargo excluding airmail (t) (-7.6%)
2007 84,400
2008 78,018
 
Turnover in Euros (-1.5%)
2007 234.2 million
2008 230.7 million
 
Earnings in Euros (-18.5%)
2007 48.2 million
2008 39.3 million
 
Investment in Euros (+106.0%)
2007 36.9 million
2008 76.0 million