Stephen Vaughan examines the ground handling market and provides a topical overview of an industry that has been deeply affected by the recession.
Everyone reading this will already know how hard the worldwide recession has hit the aviation industry: passenger numbers have plummeted, cargo has dropped by 25%, schedules have been reduced and a number of airlines have gone into receivership.
In the ground handling sector, where margins are exceptionally tight, companies across the world are struggling to make ends meet. “We’re being squeezed on both sides,” says one insider, “by both the airlines and the airport.” For most ground handlers the effects of the recession dominate their current landscape.
James Meek is Director of Operations for Swissport Ground Handling America: “The ground handling business has always been a nervous one due to the heavy capital investment required, plus the fact that an airline contract can be terminated with only 60 days notice. When you add in market turmoil, it becomes very difficult. The fixed asset base of ground handling works best when there are regular flights. If there are five flights per day I can hire X number of people to service those flights over an eight-hour period. If those flights come down from five to three I have to hire those people for 60% of the work they were doing before. When a decrease in volume occurs it affects our industry more than it does the airlines. For us it’s difficult to adjust to rapidly changing airline schedules.”
as quickly as possible. We have been using agency staff here at Heathrow. You need to be flexible the moment any signs of recovery appear," – Plane Handling's Paul Williams.”] Paul Williams is Commercial Director for Plane Handling Limited, ramp handlers at London Heathrow T3 and cargo handlers for Heathrow, Manchester and Glasgow. Cargo handling is more capital-intensive than ground handling and fixed costs, such as shed rental, add an extra dimension when tonnage falls away.
“A big part of our business is cargo handling,” says Williams. “Towards the end of 2008 things really dried up and the whole industry went off a cliff. Our cargo levels dropped by about 25%. For first time we had to make some headcount reductions.”
Williams also echoes Meek’s scheduling experience. “If a carrier flies to a destination as little as two or three times a day, typically they have reduced their schedule. They might remove a lunchtime flight and that makes it very difficult to find cost savings. You need almost as many resources to handle three flights as you do two. You’ve still got equipment sitting there and you still need to hire crew rooms. It’s difficult: when flights drop out you can never take out the costs.”
Such stories are typical. Yet what doesn’t kill you makes you stronger. Hard times can lead to ingenuity, creativity and a leaner organization. This has become a necessary and recent trend within a segment that has always sought maximisation. A good example is Menzies Aviation. Over the last two years the Scottish multinational has shed 2,100 staff, or 13% of its organization. This includes management cuts to a value of £4 million (US$6.4m). The company has also rationalized 13% of it cargo shed capacity. By the admission of its President Craig Smyth, Menzies is now a: “much leaner and fitter organization than it was 18 months ago.”
Traditionally ground handling has been neither an especially sophisticated operation nor one that was quick to pick up new ideas. As Meek remarks: “It’s not as complicated as getting a 747 to take off and land, and has perhaps suffered by comparison.” Yet the introduction of new technology, already apparent before the recession hit, has been accelerated as more and more ground handlers seek to hold onto their margins and create competitive advantage.
“What we have been doing is really leverage IT,” says Meek. “This way we can increase our efficiency and productivity during these downtimes – as well as uptimes – and keep prices stable for our customers. We have invested a lot of time and money in purchasing new software for automated billing and centralized planning. Now we are trying to advance best practice from companies like FedEx and other top-of-the-line logistics organisations to make sure we are operating high levels of sophistication to help keep our costs down and help our customers handle things better.”
Iberia Airport Services in Spain has put a great deal of resources into ensuring high-quality service to passengers and customer airlines through the improvement of its system that provides unified management and centralised monitoring of the airport operation at Madrid-Barajas Airport. The software, known in Spain as Gaudi, embraces all planning and management of Iberia’s ground handling activities. It provides planners with the requisite tools to create staff shift models and match them to available staff. Rosters are created and maintained, taking account of work-and-rest regulations, staff qualifications and skills, and any preferences or planned absences such as vacation, training or sick leave. Time management tools control staff workload, absences, overtime and other factors. All staff can access this information online as well as being able to enter preferences or perform automatic shift trades, thus relieving the planner of extra work. A total of 4,500 handling staff are planned and rostered using Gaudi.
Times may be tough but there is a feeling that, whilst touching wood, the worst could be behind us. Plane Handling’s Paul Williams has observed the first signs of green shoots of recovery in the industry. “From July this year we began seeing a small return in volumes,” he says. “We certainly have some good numbers going through in the run-up to Christmas. The key is to react as quickly as possible. We have been using agency staff here at Heathrow. You need to be flexible the moment any signs of recovery appear.”
With the aviation industry showing early signs of improvement it is hardly surprising that ground handlers are now having to call upon the resources of agency staff. Since many of them downsized earlier in the year they are not equipped to handle new additions to the schedule. Deploying agency staff can bring its own problems. However in the current climate there is a happy coincidence. Many of those who have been laid off are on agency books. This means that throughout the world there are highly skilled airline handlers just waiting to be picked up. What is more, many will already be ‘badged up’ and approved by the necessary authorities. Airside security clearance usually takes weeks to come through but since so many agency workers are already approved, the process is almost immediate. With such strength in depth and agility comes a quality and flexibility that can only aid the industry as it slowly gets back on its feet.
One of the benefits of regular and inexpensive flying is that the diversity of the international working population is increasing, particularly amongst service workers at airports. This is reflected in differing nationalities, cultures and languages. There are also more women in the industry. Whilst this multiplicity has created much opportunity for the industry, it also means greater risk. At a time when many handlers are looking to cut costs, it is vital that they maintain or even increase training and supervision, and improve management standards to prevent accidents, discrimination and sexual harassment, all of which have shown an upward trend over the last two years (see sidebar: Safety on the Ground).
Airports and handlers are under increasing pressure to minimise their carbon footprint. While aircraft emissions are far more sizable than anything emitted at the airport, fleets of ground equipment operating day after day do make a difference. These initial measures constitute a show of good will as part of a more general move towards a greener airport is all part of the process. This revolution is already underway. Earlier in the year the California Air Resources Board introduced regulations that will make owners of more than four vehicles accountable for their use and emissions. Tony Caruso is Assistant Airport Director at Bangor International Airport in the American state of Maine. His attitude towards environment issues is in keeping with many of his colleagues: “We have an aggressive energy conservation programme and are in the process of converting our old diesel gas engine tugs and belt loaders to electric driven,” he says. “It saves on fuels, helps with recurring maintenance costs and is better for the environment. It’s all part of trying to stay environmentally friendly.”
Around the world almost all ground handlers have their own environmental policies.
- This year Swissport Lima/Peru converted all of its petrol-driven ground support equipment to liquid gas.
- Menzies recently converted to electric equipment only, and all vehicles are under five years old.
- Groundforce has concentrated its efforts on the reduction of water consumption during the washing of equipment and has to date achieved a total reduction of 10%.
- Servisair is currently trialling an electric support vehicle in Minneapolis-St Paul International as well as a closed sumping system which should help reduce the amount of sump fuel that has to be disposed of.
Every aircraft needs an even foil in order to operate optimally. If anything breaks up the smoothness of this profile it can create an excessive amount of drag, in some cases becoming dangerous enough for the aircraft to crash. Every winter, airports across the world spray millions of gallons of the de-icing chemical glycol onto airliners and allow the excess to trickle away. When the chemicals end up in nearby waterways, the glycol can turn streams bright orange and create dead zones for aquatic life. For a long time the United States’ Environmental Project Agency has been concerned about this. Now they have come forward with a series of stringent regulations. Airports that have less than 10,000 flights a day need to recover 20% of all glycol sprayed, whilst six of the nation’s 14 biggest users of glycol including JFK and Chicago O’Hare are now required to install de-icing ‘pads’ or other collection systems to contain 60% of fluid sprayed. It is quite likely that Europe will follow suit.
“This is a huge stress, especially for older airports which are constrained by geography and piping,” says Swissport’s Meek. “Without having a centralized piping and filtration system it will be very difficult for these airport to meet the EPA requirements. This is a new responsibility for ground handlers. Once the message is out, there will be a great need for solutions to clean up the glycol. Airports construct new facilities or they can look to the ground handlers to help provide solutions. This is the biggest issue in US. It will be interesting to see how the industry responds to some of these macro aviation issues.”
Whilst many airports are struggling to respond to these new regulations, Bangor International had the foresight to incorporate the issue of glycol into its forward planning.
“We’ve taken a proactive approach with the de-icing,” says Caruso. “We’ve constructed two dedicated de-icing paths at Bangor. All aircraft requiring de-icing go there. All the fluid residue is collected on the ramp which is sloped so it goes into dedicated drains and is held in holding tanks and finally piped to Bangor’s waste water treatment.”
The use of glycol is disastrous to the local environment. In the longer term the introduction of specially developed hangars with roof-mounted heaters may prove to be the solution. Such technology has been available for years but like many innovations within the ground handling industry, its uptake has been slow.
“The margins in our industry are extraordinarily tight,” says Swissport’s Meek. “You have to put an extraordinary effort into this industry in order to get a couple of pennies out but that is what’s exciting about it. We’re in a constant state of improvement and always looking for productivity increases. Because our margins are so thin there’s no room for error.”
Ground handling is facing a tough future. “Next year won’t be any better to my mind,” says Menzies Aviation’s Craig Smyth. “I think we are 12 months away from any improvement in underlying volumes and it’ll be slow when it comes back.” With difficult times still ahead it is vital, whilst continuing to reduce costs, the industry focuses on the basics of safety, security and service.
“Many people appreciate the customer service component of ground handling because it is customer facing,” says Meek. “We always have our agents in, for example, Lufthansa uniform in order to serve the passengers. People remember a good customer service experience. We do our utmost to make sure there are no delays on a flight because a loader ran into an engine or baggage gets mislaid. Some carriers are very focused on cost cutting and will do so at all costs. Others have realized that the number of flights may go down but the number of airlines will remain pretty static so the way to preserve market share is to increase brand loyalty. I think it’s important to make sure your customer service isn’t sacrificed during difficult times.”
Safety on the Ground
IATA’s Safety Audit for Ground Operations (ISAGO) aims to improve safety and cut airline costs by drastically reducing ground accidents and injuries. Using internationally recognized auditing principles, IATA has devised a framework of fundamental standards that are applicable to all ground handlers, from multinationals to the smallest companies providing services at a single location. The introduction of the ISAGO standard is gaining in popularity and recently reached the milestone of 100 audits. The growth in audit numbers is impressive but more important still is the number of handlers actively applying these standards.