Margins and SLAs
The opening panel discussed the industry-wide issue of margin squeeze. In the Americas, this issue is exacerbated by a lack of regulations on prices by authorities, stressed Ruben Atehortua, Ground Operations Director, Avianca. When devising an SLA, collaboration between the procurement team and the local team is key to securing a financially viable deal, he continued. Long-sightedness is also essential, noted James Bernal, VP International Airport Affairs, Aeromexico, as prices that are lower initially often end up higher in the long run. Beyond cost, Olga Svirskaia, Senior Manager, Airport Purchasing - Hubs & Spokes for American Airlines, asserted that handlers can also curry favour by offering transparency and demonstrating a good track record.
SLAs need to be a two-way street, Bernal stressed, noting Aeromexico’s efforts to incorporate bonuses and incentives. Ricardo Barrero, General Manager of Balboa Logistics and Airport Services, asserted that, while the majority of SLAs include penalties, few offer bonuses, while Svirskaia boldly stated that, “SLAs and penalties really have no impact on the ground handler’s margins.” While she agreed that handlers should receive a bonus for helping airlines recover lost minutes, penalties for late turns should equally be enforced, she added. Bernal agreed, noting that care should be taken not to award bonuses for simply doing what is expected. “The bonus for that is just repeat business,” he said.
Regional performance
Atehortua provided a financial update, reporting that all currencies in Latin America, from Real to Peso, have been devaluing, while fuel prices have been consistently going up, to the detriment of profitability. GDP has been growing across LatAm, however, leading to an upward trend in the number of people flying, with passengers expected to double to around 650m a year by 2035. “Aviation grows at three or four times the growth of GDP,” Luis Felipe de Oliveira, Executive Director and CEO, ALTA, noted in his report. “2019 is heading towards being the sixteenth year of consecutive traffic growth for LAC carriers.” While 64 new services to/from LatAm and the Caribbean were added in 2018, flights per capita remain five times lower than in the US, he said, and last year the regional sector lost US$0.50 per passenger; however, this year, the industry is expected to profit by US$0.20. Positive trends include the continued growth of the LCC, encouraging more people to fly, and the deregulation of ramp services in Argentina, enabling carriers to self-handle as of last year, which will stimulate the market. Equipment maintenance presents a challenge, meanwhile, as does poor airport infrastructure, although expansion projects are planned or progressing in Chile, Panama and Peru.
Fair pay panel
Staff retention and a lack of skilled personnel remains one of the region’s biggest struggles. The results of a GHI survey found an average industry attrition rate of 39%, with ramp operative the most attrition-prone position and low pay the most common reason for leaving. With GHI’s Max Gosney announcing that it costs an average of US$28,000 to replace one employee, a panel assessed the issue of pay versus profits. Steve Tarbuck, Ground Operations Consultant, VivaAerobus, stressed the power of the brand and of total compensation over and above wages. “Money doesn’t breed loyalty,” he stated, while Xavier Rabell, CEO, Eulen America, added that employees have to feel connected to the company. American offers recognition for best station and other accolades, said Svirskaia, adding that increasing rates is no simple solution: “for us its not that big a deal to increase rates but that would impact the local carriers,” she explained. It’s not only an issue of loyalty, she continued, but also of attracting youth. On this note, Desiree Perez of UP Performance Coaching suggested the importance of career progression opportunities, however Svirskaia disagreed, highlighting that the disproportionate ratio of supervisors to ramp operatives precludes this. “Not everyone is manager material, but they still do an important job,” she added.
Employee engagement at a low cost
In an interactive session, Desiree Perez demonstrated that many factors that encourage staff loyalty cost the employer nothing, such as recognition, career progression and good leadership. While anyone can be a leader, it takes a few specific skills to be a good one – skills that can be learned. Describing the theory behind conversational intelligence, Perez explained that, of the three levels to conversation, a good leader will achieve level three: co-creation, which utilises open-ended questions.
“To give an employee immediate empowerment and engagement, all you have to do is ask open ended questions,” she asserted, citing the GROW model as a guide for these questions: Goals Reality Options and Willingness.
Improving infrastructure
Gary Ogden of Nextgen Business Brokers highlighted the need for improved GSE maintenance in the region, suggesting that training staff in basic GSE maintenance was the best way to reap benefits in safety, costs and staff turnover. Eric Hartmann, VP Aviation Services – Latin America, Agunsa, presented on new airport development in the region, highlighting the dangers of not communicating with end users when developing the master plan for expansion. Phase one of the US$1bn project to develop Santiago airport is due for completion in 2021, he relayed; however, already, avoidable problems have been exposed in the design. Gates, located a 15 minute walk from the terminal have been built without lounges, which are now being built retrospectively, and no electric infrastructure has been incorporated. Meanwhile, the budget has been increased, which has seen costs to the handler increase by 300%. “Operators are either the last invited to the show or we’re not invited to the show,” bemoaned Hartmann. “They’re not experts in what we do and that’s where we have conflict and things become inefficient.” Hartmann concluded that communication and engagement between governing bodies and airport operators are essential to achieving an airport that works for everyone.
Caribbean in crisis?
Not according to Rickey Mackey, Chairman of the Board for Nassau Flight Services in the Bahamas, who reported that growth in the Caribbean tourism sector is expected to increase air traffic to the region by 6% in 2019, following double-digit growth last year. Marva Richards, Operations Manager of Airport Services (Antigua) conveyed a slightly less rosy perspective. “The north is perhaps doing better than the south. One issue is that we have lower volume. We’ve seen the rise and fall of carriers as interconnectivity is not as good.” At only 108 square miles compared to the 28 inhabited islands of the Bahamas, Antigua is at a significant disadvantage, she highlighted.
Concerns currently being discussed by the Caribbean Aviation Handlers Association include how to stay afloat in spite of low income operations and inordinately high taxation. “Taxes are extremely high in the region. Much higher than the base fare, which is not a good thing if we want to increase tourism,” Richards highlighted. As a government member, Mackey sympathised with the taxes. “I understand a lot of the taxes and reasons for them. You’ve got to build the facilities in order for people to come.” He added that several carriers to the region are subsidised: “For Sunwing, we pay for every spare seat they have,” he noted.
Both agreed that staff shortages are an issue. Alongside salary, respect and appreciation, investment in training is key, Richards asserted, and there is a need to raise awareness of the industry in schools and colleges. Mackey observed instances of poaching, whereby NFS’ well-trained staff are lured away to other jobs by airlines or the airport, and offered his formula for success in the region: “collaboration, communication and compensation.”
Growth all round
Alongside new records for attendance, networking was at a high at the show, with 1,450 one-to-one meetings taking place and an additional 195 held in the space of just one hour, at GHI’s Meet the Ground Handler and Meet the Airline speed networking events. On a backdrop of reports of positive industry performance in most of the key LatAm markets, the event strove to tackle the problem areas, generating fruitful discussion on regionals issues from margin squeeze to staff shortages and necessary improvements to infrastructure.
Whether you missed out or can’t wait to return, join us at the 2020 event, in an exciting new location.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++Fast facts
- Excluding Brazil, all LatAm markets have experienced growth for the past five years
- Brazil and Mexico account for 50% of departures
- LATAM, Azul, GOL, Avianca and Aeromexico, the top five carriers in the region, represent half of total departures
- LCCs are expanding rapidly, but are yet to enter the Brazilian market
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