Copenhagen’s Bella Center provided the spectacular backdrop at the end of November, and with delegates numbering around 800, coupled with over 60 exhibitors, the three-day event was busy. In terms of networking, in excess of 3,000 meetings were organised, making this event virtually unmissable for those within the sector.
Following an afternoon of interactive workshops, on the second day Roland Berger’s Didier Bréchemier launched into the financial side of the equation, looking at recent market trends and presenting the audience with much valuable data. Some impressive statistics were flagged up: for example, the top 20 airlines’ operating margin for 2014-2015 was up by an astonishing 137%. Perhaps that should not come as such a big surprise, given the low price of crude oil and burgeoning passenger numbers, although the oil price effects and fluctuating exchange rates did go some way towards cancelling each other out. Predictably, it has been the US that has driven this growth, with notable impetus from American Airlines, Delta and Southwest; Japan Airlines has also been a significant player.
Of interest was the low cost model that is now being applied to long haul flights within Europe; and the fact that legacy carrier and LCC business models were beginning to blur at the edges was noted. More definite was the huge population growth within Asia, which is undoubtedly going to affect air transportation requirements.
As for outsourced handling, that segment was continuing to post growth. Logged at around 40% in 2015, independents are expected to have acquired a market share of 43% by 2020. The ground handling market was growing by just under 3% per annum, and this has been down to the independents; in particular, liberalisation within the US marketplace has been, and will continue to be, key to this change. Consolidation, much talked about within this magazine, continues to be a prime driver and Bréchemier affirmed what many knew, that this is an area of activity. He also mentioned the fact that some handlers had been branching out, such as Swissport taking on refuelling and dnata exploring travel and catering. Challenges remained, though: technology was on the rise and needed to be understood and adopted, whilst asset acquisition via leasing and renting were areas of growing interest.
But was there a cloud on the horizon? Bréchemier cautioned that crises within the sector tend to occur every six to eight years, and showed a timeline graph to support this assertion. If that’s the case, this year could witness the start of a negative phase…
Joining up the dots
IoT is the acronym and Professor William Webb’s presentation, on the Internet of Things, doubtlessly clarified the significance and usefulness of this technology for many present. The ideal handling scenario, one that saw everything on the turn working in harmony, wasn’t reality – yet with the help of the IoT, this goal was achievable.
There was no escaping the IoT: an estimated 50 IP devices will be scattered over the planet by 2020, so the network potential is truly awesome. Webb was of the pinion that the handler could certainly join up all the dots in the ramp equation with IoT, although cost was a factor that had to be taken into consideration. Plug n’ play would be the ideal format but connectivity was a real problem here. Questions also had to be addressed: should a handler opt for self-deployment or join a network? How about system alignment with other airports? And most important of all, how did one ensure a guaranteed service in what was, essentially, an unlicensed environment? Adoption, stressed Webb, ideally should be undertaken so that the new system ran alongside the existing one: this would facilitate the ultimate cutover process.
Quality was the theme put forward by Swissport’s Group COO, Joe Phelan. Oft-awarded the title of Ground Handler of the Year, Swissport is no stranger to either accolades or sound procedures. Quality, he maintained, had to be embedded within a company’s culture and the Swissport Formula had been successfully standardising procedures across the company’s network for some time now. Safety, Phelan averred, was a Swissport priority and he emphasised the need for a tight training schedule in what is a high volume turnover business.
Leaving the silo
Real-time information was also considered vital to successful working practices. At the core of his philosophy were the components of quality, cost and customer experience, whilst the overarching framework was that of a constant focus on ground time reduction. In short it was, he stated, “time to get out of our silos and innovate.” Interesting to record, Phelan was firmly behind IATA’s ISAGO tool, despite the questionable overall benefits that it seems to have brought to most handlers who have gone through the certification procedures.
Recently heading up the Aviator Airport Alliance Europe operation, Paul Synnott has since taken a solo path and was in Copenhagen to ask a rhetorical question: was there anything wrong with the ground handling business? Margins continue to be eroded despite the good news of fuller aircraft and greater profitability on the part of the carriers, Synnott bemoaned, and the race to the bottom continues as GHAs lower their prices in a desperate bid to gain market share. Would this state of affairs ever change? Synnott suggested that competition needs to be carefully controlled rather than procurement issues driving costs, which sees smaller handlers consistently losing out. Ultimately, the ground handling business model is unstable and potentially flawed, Synnott stressed, adding that an alternative solution to GSE provision and a focus on the benefit to the organisation rather than price could see the business improve dramatically.
Amongst the questions for the speakers was a very pertinent query about staff retention: how exactly did Swissport maintain profitability within a sector known for its high staff turnover? The answer to that, explained Phelan, lay in staff conditions. Make them right, and make the staff feel appreciated, and the rest would follow.
ISAGO: the great debate
The afternoon panel discussion centred on the value of ISAGO in a sector that on the one hand was being encouraged to adopt it yet on the other was reporting insignificant benefits once certification was granted. Chairman Tim Ornellas’ mini questionnaire shed some light on the problem: overall, it highlighted dissatisfaction (58% of respondents reported the same number of audits post-ISAGO) although 53% of airline respondents said that they would be happy to pay more for an ISAGO registered handling operation. Menzies’ Yogesh Parekh, together with Alexandre Bolay from Swissport and Steve Allen from dnata, discussed this thorny issue, with Swissport admitting that it had to date invested to the tune of US$800,000 in the programme. Allen felt that the element of trust had been lost on the part of the carriers but acknowledged that IATA wished the programme to be a success. IATA is in the process of revamping ISAGO, and it was agreed that this time it needed to be adopted by the whole community: critical mass was the only way to go. Stakeholder involvement was vital, as was more streamlining of the process; perhaps, too, there was a requirement for more investment in the procedure.
Bolay was of the opinion that safety on the ramp would benefit if the programme worked in the manner that it ought but he queried why the cost of certification was so high.
On a positive note, one carrier freely admitted that if consistency and safety on the ramp improved, then it would look at reduced audits. Against this, though, was the statement by another carrier, which explained that it was required by its national authority to ask for annual audits. Clearly, the dichotomy won’t go away, although those on the panel agreed that ISAGO was a useful tool to deploy.
The CAA’s view was all clarity: in admitting that safety and quality lay at the heart of the subject, why not have a sliding scale of audits according to the safety of the area in question? Parekh picked up on the subject of the ground damage database, admitting that not many were contributing. Were that data to be built up, then a risk-based model would be a possibility. IATA, he felt, was trying hard but was being hampered by a lukewarm industry – more GSPs needed to be involved in the debate. As for audits being performed by a competitor, he felt uncomfortable with the idea, pointing out the danger of a conflict of interest.
One of two special interest streams, which looked at aircraft damage, rounded off the day.
Day three
Divergent business models are not in the best interest of handler and airline if the relationship is to be a harmonious one. With that in mind, CAI ZHI’s CEO, Thomas Waintraub, set about investigating how the two models might run more closely together.
Having established the fact that more passengers does not translate into more revenue (more aircraft movements are required), Waintraub assessed airline expectations (operational efficiency, safety, price and quality) and compared them with handler desires, namely sustainable contract pricing and long term contracts.Disruption, he declared, was a facet of this sector, one with which the carriers were already familiar, but one which the handlers had yet to face. It was coming, he warned. Growing levels of automation (such as check-in and bag processing) were certain to affect the handler’s bottom line; thus it was essential that the GSP was prepared.
One of the biggest hurdles that needed to be overcome was that of pricing: could the model be changed? One possibility was that of moving from a price per turn to an equation that was based on price per unit or passenger.
Greater data exchange was essential to the survival of the handling sector and the GSP, in his opinion, needed to think more like a B2C entity, rather than follow the B2B model. However, new players, he noted, were seeking to change the existing handler/airline relationship.
Human factors are two words at the very heart of handling sector – and Barry Davies, of ERM-Global Risk, gave a paper that ran through a litany of errors and half-baked technology that ultimately served to confuse and even endanger the individual at large. “Human behaviour is absolutely predictable,” he emphasised, adding that 70-90% of failure was down to human or organisational failures.
Equipment, he felt, was the biggest area on the ramp that contributed to failure; people made mistakes not because they were stupid but because the system allowed them to fail. It was a state of affairs that could, however, be rectified.
Another speaker with a background in psychology, Dr Sarah Flaherty of IHP Solutions, discoursed on Just Culture. Her outlook on life was a simple one: it comprised people and stuff. There was lots of the latter in the aviation sector, which could be neatly boxed up. Boxing up people, though, presented a rather different challenge.
Acknowledging a greater interest today in human behaviour, Flaherty explained that employee engagement was critical in any workplace. Trust (a combination of competence, reliability and integrity) was the cornerstone of any business but trust was fragile – and could be impacted on a daily basis.
Sadly, she recounted, trust was today in decline. “Distrust doubles the cost of business and triples the time taken to get things done.” There was, she felt, usually a gap between what is said and what is done. For a healthier outlook there needed to be visible leadership, fair discipline, people who know their role and people who know what the company wants. Flaherty went on to assist later in the day with the special interest stream on Just Culture.
Another question on staff turnover was raised (the audience member citing a 35% ratio): perhaps the time was ripe for airports to entertain but a single handler? It was an interesting concept…
The day terminated after lunch with a panel debate on the role of the GSP in the bigger scenario that is Airport Collaborative Decision Making. A panel comprising Kris de Bolle from Brussels airport, Karin de Rademaeker (an A-CDM Co-ordinator), Atilla Korkmazoglu (Celebi) and Filip Verstocken of Thomas Cook Airlines explained and expanded on the subject, a subject, incidentally, that has been around since 2008. The panel was at pains to explain that A-CDM was not a system but rather a culture change – and that the handler had an important part to play in the process. The airport environment was a volatile one, full of uncertainty and ambiguity: this procedure could dispel that mist. The goals were worth achieving because properly implemented, A-CDM could transform TOBT. As one panellist freely admitted, it was indeed a New World concept and if the community wanted it to succeed, then it would have to change; the SLA would have to change also. Around 20 airports currently run this process and the number is expected to double within three to four years. Training would be required - up to three months’, in fact – but results would be tangible and the procedure was expected to extend outside of Europe.
Next year’s main event will be held in Barcelona: more details will be published in GHI in 2017.
