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SUMMER/AUTUMN 2015
AGS
AIRLINE
GROUND
SERVICES
www.ags-airlinegroundservices.com
MERGERS AND SAFE GROUND CONSIDERING WORLDWIDE DIRECTORY
ACQUISITIONS HANDLING: AVIATION OF GROUND SERVICE
ROUND-UP BEST PRACTICE INSURANCE PROVIDERS
From XS to XXL. Fraport provides the perfect service tailored to every plane. Every airline customer is unique – and should expect customized service. A ground handling partner with years of experience and expertise, Fraport AG knows exactly what each airline needs. Together, we develop the right solutions designed to meet your specific requirements. Flexibility is a major advantage, especially when we have to get late arriving planes out even faster. We know the processes on the ground and can move into action with speed, precision and efficiency. We put performance first, not size. Let us be your flexible ground handling partner. Contact the Fraport ground services: phone +49 (0) 69 690-71101 / handling@fraport.de / www.fraport.com Fraport. The Airport Managers.
EDITOR’S LETTER | SUMMER/AUTUMN 2015
LETTER FROM AGS
AIRLINE
GROUND
SERVICES
SUMMER/AUTUMN 2015
THE EDITOR
www.ags-airlinegroundservices.com
MERGERS AND SAFE GROUND CONSIDERING WORLDWIDE DIRECTORY
ACQUISITIONS HANDLING: AVIATION OF GROUND SERVICE
ROUND-UP BEST PRACTICE INSURANCE PROVIDERS
W
elcome to the Summer/Autumn 2015 edition of AGS
magazine. In this issue, we look at consolidation PARVEEN RAJA
among both airlines and handlers, as mergers and Publisher
parveen@evaint.com
acquisitions continue to shape the aviation industry.
Meanwhile, carriers are thinking creatively, using
partnerships to build better networks and expand their reach into new IAN TALBOT
Sales Executive
markets around the world. ian@evaint.com
We hear from underwriting executive Simon Abbott on the
subject of ground damage – and who pays for it. The consequences
BHAVI PATEL
of ground damage are far from insignificant, and Abbott suggests Events Coordinator
bhavi@evaint.com
greater regulation of GSPs could be the way to improve safety on the
ramp. This theme is picked up again as AGS examines developments
relating to IATA’s Ground Operations Manual – and looks ahead to the SHOBHANA PATEL
Head of Finance
imminent 28th IGHC. finance@evaint.com
Two articles look at IT in this edition: James Graham considers how
IT-based services benefit numerous sectors of the aviation world, while
CHARLOTTE WILLIS
David Smith examines the role of IT and logistics in airline catering. Events and Circulation
We also take an overview of developments in the Asia Pacific charlotte@evaint.com
handling market, and we hear from TCR, which recently expanded its
presence in Scandinavia. SHELDON PINK
Finally, having reintroduced our directory of ground service Creative Director
mrpinktoo@gmail.com
providers in the last edition, we welcome any updates to that section.
Please advise us of any changes or omissions.
AGS welcomes your feedback and any interest in contributing an Address changes and subscription orders to:
circulation@evaint.com
article or interview. I hope you enjoy this issue of the magazine. Q ISSN 2040-476X
EDITORIAL CONTRIBUTORS
Simon Abbott, Bernard Fitzsimons,
James Graham, Megan Ramsay
and David Smith
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www.ags-airlinegroundservices.com SUMMER/AUTUMN 2015 Airline Ground Services 1
CONTENTS | SUMMER/AUTUMN 2015
4
CONTENTS
1 Editor’s letter
4 Working together
The aviation sector has gone through numerous changes in the past, not least of which
has been a trend for consolidation among carriers. Looking at Europe in particular, how
have mergers and acquisitions among airlines filtered down to affect the handlers that
serve them?
6 Carriers think smart
Tough times call for more creative approaches to developing route networks. Airlines
are increasingly exploiting partnerships and using each others’ hubs to penetrate into
new territory.
12 Handlers start to get it together
Once highly fragmented, the airline handling industry is showing strong merger and
acquisition activity as companies strive to offer their customers a truly global service.
18 Ground damage – who pays?
Simon Abbott, underwriting executive for worldwide aviation insurance provider Global
Aerospace, looks at who bears the cost of ground damage to aircraft.
20 The fusion of catering and logistics
Airline catering is a huge undertaking. David Smith looks at how airlines and catering
companies are employing logistical and IT solutions to support the operation.
26 "TJB1BDJlDSPVOEVQ
Bernard Fitzsimons reviews recent activity in the world’s most dynamic
18 air transport region.
32 IT connects aviation
32 Whether an organisation is an airport, air navigation service provider (ANSP), ground
handler or airline, IT-based services deliver tangible benefits to the organisation, discovers
James Graham
37 Scandinavian expansion
Brussels-headquartered GSE provider TCR began operations in Norway in 2011 – and it is
continuing to grow its footprint in the surrounding region.
39 Sharing best practice
Efficient, safe airline ground handling services are the bedrock of the modern aviation
system. To ensure continued improvement, the industry is focusing on safety, quality,
transparency and sustainability across all its operations.
43 Worldwide Directory of Ground Service Providers
2 Airline Ground Services Summer/Autumn 2015 www.ags-airlinegroundservices.com
Your trusted partner Available at 27 airports in the kingdom of Saudi Arabia, Saudi Ground Services Company is determined to provide its client airlines the best services for a smooth & efficient operation with safety and on-Time performance sgsaviation.com.sa
FEATURE | CARRIERS & HANDLERS
WORKING TOGETHER:
MERGERS AND ACQUISITIONS
The aviation sector has gone through numerous changes in the past, not least of which has
been a trend for consolidation among carriers. Looking at Europe in particular, how have
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here are four large, pri- as well as at Malabo and Bata airports in
marily full-service airline Equatorial Guinea. Customers include
groups in Europe. Air IAG airlines BA, Iberia and Vueling.
France-KLM, Internation-
al Airlines Group (IAG), MUTUAL STRENGTHS
Lufthansa Group and SAS Group Air France-KLM came into being in
have all grown over the years through 2004, with the merger of Air France and
mergers and/or acquisitions. KLM Royal Dutch Airlines. The group
IAG is the most recently formed air- also includes Martinair, which provides
line grouping in Europe, having started cargo-carrying services in addition to
trading in early 2011. It comprises the the freighter flights offered by the two
UK’s British Airways (BA), Spanish car- other airlines. Air France and KLM each
rier Iberia and low-cost carrier Vueling, run their own operations from their
plus short and medium-haul subsidiary respective hubs in Paris and Amsterdam
Iberia Express, the cargo-carrying arms Peter Schelvis, group chief procurement
but their procurement divisions –
of BA and Iberia, and UK domestic and officer at Air France-KLM including the procurement of handling
short-haul carrier British Midland In- services – have been merged.
ternational (bmi) – the latter formerly 2014, adding a new station to the han- According to Peter Schelvis, group
part of the Lufthansa Group. dler’s network. chief procurement officer at Air France-
In the months following the creation BA itself provides ground handling KLM, the procurement organisations of
of IAG, while handling costs rose, joint services both for its own flights and for Air France and KLM “were combined in
airport handling procurement offset these external clients. In September last year September 2008, taking full advantage
increases to some extent, as the Group it was selected to provide technical han- of their mutual strengths”. Air France-
synergy programme took effect. dling services for Qatar Airways B787 KLM Procurement is responsible for the
BA flights at Heathrow, Glasgow, flights at Edinburgh; BA also began acquisition of goods and services for the
Manchester and Edinburgh are handled providing maintenance services for the whole Group.
by UK-based Menzies Aviation, which Middle Eastern carrier’s A380 flights at Schelvis explains: “The procurement
began passenger services, ramp han- Heathrow in October 2014. (Qatar Air- organisation generates added value
dling and lounge and ticketing services ways bought a 10 percent stake in IAG through cost-effective solutions direct-
for BA and BA CityFlyer at these loca- earlier this year.) ed at connecting internal departments
tions in 2012 – adding an extra 19,500 Iberia Airport Services, meanwhile, and external suppliers. Our mission is
flights per year to its portfolio. is the handling arm of BA’s sister carrier. to secure a sustainable competitive ad-
Menzies was already well established It provides ramp, passenger, operations vantage for the group, derived from cost
with other carriers at all four stations, and cargo handling services for over leadership and procurement profession-
and had in fact been providing ground 200 clients at 41 airports across Spain, alism. Our suppliers play a vital role in
handling services for bmi at Heathrow
since 2010 – but once bmi was converted
to the BA AOC (air operator certificate)
it was by no means guaranteed that the
existing contract there would be re-
tained. Andy Boyd, senior vice president
UK and Ireland at the handler, said after
the award of the contract: “It’s a testa-
ment to our operations department, and
the talent of the LHR (London Heath-
row) ramp team, that has consistently
delivered great service to bmi, that BA
has had the confidence to award us its
business in T1.”
More recently, Menzies began a
three-year passenger handling contract
for IAG’s Vueling in Madrid on 5 August
4 Airline Ground Services Summer/Autumn 2015 www.ags-airlinegroundservices.com
FEATURE | CARRIERS & HANDLERS
achieving our corporate goals. Forging
PARALLEL DEVELOPMENTS
beneficial supplier relations, contribut-
ing innovative solutions and reducing The trend for consolidation, of course, has been just as noticeable in the
overall costs serve as a solid foundation handling sector as among airlines in recent years, and Swissport’s stake in
to optimise benefits for the group.” SAS Ground Handling is just one example of this tendency for handlers to
In July 2014, Air France awarded a buy into each other, if not take each other over outright.
five-year cargo and mail handling con- 0UIFSEFBMTUIBUBSFQFSIBQTNPSFTJHOJlDBOUJODMVEFUIFBDRVJTJUJPOPG#SVT
tract to Paris-headquartered Worldwide TFMTIFBERVBSUFSFE IBOEMFS "WJBQBSUOFS CZ 8'4 JO XJUI FBDI DPNQBOZ
Flight Services (WFS) at the French capi- DPOUJOVJOHUPPQFSBUFVOEFSJUTPXOFTUBCMJTIFEBOEXFMMSFDPHOJTFECSBOE
tal’s Orly airport, adding to a further four .PSF SFDFOUMZ TBX 4XJTTQPSU BDRVJSF .BODIFTUFST 4FSWJTBJS FY
contracts gained with the airline over the QBOEJOHJUTOFUXPSLUPDPWFSTUBUJPOTJODPVOUSJFT*OUIJTDBTF JU
preceding 12-month period (Nice, Bor- appears that Servisair is being rebranded under the Swissport identity.
deaux, Strasbourg and Marseille). WFS
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began cargo handling for Air France at
vides aviation market intelligence, analysis and data services: “we aren’t
EuroAirport Basel-Mulhouse-Freiburg
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in October last year as well.
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neither has there been a similar degree of consolidation in the ground
NEW OPPORTUNITIES
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Lufthansa Group includes the
segment was predicted.
German flag-carrier, Lufthansa, as
well as Swiss International Airlines h1BSU PG UIF SFBTPO GPS UIBU BDDPSEJOH UP 5JN 0SOFMMBT
FEATURE | ROUTE DEVELOPMENT
Tough times call for more creative approaches to
developing route networks. Airlines are increasingly
exploiting partnerships and using each others’ hubs
to penetrate into new territory
CARRIERS THINK SMART
T
his is the age of the alli- to feed its own network. It will also use From Bishkek, Pegasus Asia already
ance. A handful of Mid- current special pro-rate agreements operates four direct scheduled routes to
dle Eastern carriers apart, (SPAs) to expand its network reach. Osh in Kyrgyzstan, Moscow and Kras-
most airlines in the world It adds that the upgrade of Brunei In- noyarsk in Russia and Delhi in India.
don’t have unlimited budg- ternational Airport has come at a good There are connections to 18 destina-
ets and fleets of spare aircraft with time, with the ASEAN Open Skies 2015 tions in Turkey plus 39 other interna-
which to pursue their route develop- on the horizon – which is expected to tional destinations in Europe and else-
ment plans. It’s no longer a matter of generate greater competition between where, making a total of 57 points in
putting planes onto a route, and hop- airports in the region. The government the network.
ing to fill them. Even if money was no of Brunei Darussalam has ratified all Lufthansa is another carrier that has
object, in many airports and countries the main multilateral agreements asso- found a partner with which to develop a
slot constraints and traffic right issues ciated with this, which opens up mar- remote hub and so open up a new region,
often prevent headlong expansion. kets in the ASEAN region. without having to go to the expense and
Instead, most of the world’s airlines Another example is Turkish low-cost difficulty of laying on new direct flights
have had to think smarter in order to ex- carrier Pegasus’s Pegasus Asia arm, born from its home territory. It will offer year-
tend their reach into new markets and out of its partnership with Kyrgyz airline round flights from Frankfurt to Panama
territories. This is particularly true of Air Manas. This deal has given Pegasus a City five days a week, from November 16,
some of the smaller carriers. useful second hub at Bishkek with which 2015. Part of the attraction is the Ger-
Take Royal Brunei, for example, to develop into Central Asia and connect man airline’s partnership with the Pana-
which resumed services to Denpasar and the region with Europe, the Middle East, manian airline Copa, which will allow its
Ho Chi Minh City in July and October Russia and the Far East. passengers to reach a further 50 destina-
2014 respectively and is now codeshar- The first new route for 2015 is a tions in Central and South America and
ing with Malaysian Airlines on selected twice-weekly service between Bishkek the Caribbean. Lufthansa service times
key domestic Malaysian cities, as well and Delhi. And, following the granting will be coordinated with Copa’s connect-
as having added a codeshare to Phnom of bilateral air transport agreements ing flights.
Penh. It also sees new market opportu- with Russia, other planned new routes Finding a partner with a ready-made
nities in Australia, India and North Asia, in 2015 include Yekaterinburg and No- network like this is a much quicker and,
and plans to add more flights to key cap- vosibirsk, respectively twice weekly and arguably, lower risk approach than try-
ital cities in the latter two areas. once a week. ing to do it all yourself.
In its route development strategy, Pegasus Asia has also submitted ap- For carriers with a limited home
Royal Brunei takes into account traf- plications for permission to further ex- market, a hub approach is essential if
fic flow from feeder markets with ad- tend its flight network to include routes there is to be any meaningful expansion.
ditional codeshare points, particularly to Urumqi (China), Dushanbe, Khujand Like many airlines, Air Canada’s strate-
into the Indian subcontinent, helping and Tashkent in 2015. gy is to look beyond the specific country
6 Airline Ground Services Summer/Autumn 2015 www.ags-airlinegroundservices.com
FEATURE | ROUTE DEVELOPMENT
market and consider the connectional
possibilities. For instance, the Toronto/
São Paulo service also offers some of the
quickest travel times from many north-
eastern US cities and is also timed for
convenient connections over Toronto
Pearson to many Asian cities, including
Tokyo-Haneda, Hong Kong, Beijing and
Shanghai, further expanding Air Cana-
da’s global reach.
Air Canada has meanwhile started
a three-days-a-week, year-round 767-
300ER service between Toronto Pear-
son and Rio de Janeiro-Galeão Inter-
national Airport. It complements the
carrier’s daily non-stop service from To-
ronto to São Paulo and, Air Canada says,
is evidence of its international expansion
strategy and also reinforces its position
as the only non-stop carrier between
Canada and South America.
DEEP POCKETS opportunity to adjust their schedules to wide-body aircraft on behalf of Alitalia
Of course, there are still a handful of improve connections with each other or Alitalia receiving aircraft from Eti-
airlines with deep pockets, most of and with their partners. As well as links had’s existing fleet order book. Alita-
them in the Middle East. While they with the Skyteam alliance, and in partic- lia, meanwhile, is relocating 14 Airbus
have been adding to their fleets and ular Air France–KLM and Delta, there A320s to airberlin.
launching new services from their home are new partnerships with airberlin and Etihad Aviation Group president
hubs, the troubles of Europe and the rest NIKI and plans to work more closely and chief executive officer and Alitalia
of the world have also thrown up new with Air Serbia and Etihad Regional. vice chairman James Hogan said that, in
opportunities. Both airlines will also increasingly an extremely tough southern European
The most prominent example is operate a common fleet, which could aviation market, “rapid, decisive change”
Abu Dhabi’s Etihad and its major cash include Etihad acquiring additional was needed. “We’ve invested in the new
injection into ailing Italian state car-
rier Alitalia.
Naturally, the alliance gives Etihad
a strong entry into Italy, but more im-
W E P R I D E O U R S E LV E S O N B E I N G D I F F E R E N T
portantly perhaps it helps reinforce the
Middle Eastern presence in the wider
European market.
As far as Italy itself is concerned,
there will be a three-pronged strategy for
long-haul routes based on hubs at Milan
Malpensa, Milan Linate and Rome Fiu-
micino, all of which will see an increase
in flights. Long-haul services from Ven-
ice, Bologna and Catania on the island
of Sicily to Etihad’s main Abu Dhabi hub Premiere Handling is the only independent
will also be stepped up to daily. Handling company based at Manchester Airport
New routes available from Rome
now include Berlin, Dusseldorf, San Flight operations ō Passenger services
Francisco, Mexico City, Santiago (Chile), Ramp services ō Cargo handling ō Business aviation
Beijing and Seoul and there will also be
an increase in services to New York, Chi- We are there for you 24 hours a day 7 days a week.
cago, Rio de Janeiro and Abu Dhabi.
An extra 13 weekly flights from Mi-
lan Malpensa will include daily routes to
Abu Dhabi, four flights a week to Shang-
hai and increased flights to Tokyo.
But by strengthening links via Italy
into its home hub, Etihad can offer a
whole host of onward connections avail-
P R E M I E R E H A N D L I N G . C O M
able to other destinations in the Middle e : o p e r a t i o n s @ p r e m i e r e h a n d l i n g . c o m
East, Africa, the Indian subcontinent,
Southeast Asia, China and Australia. Members of the IATA Ground Handling Council
The two carriers have also taken the
www.ags-airlinegroundservices.com Summer/Autumn 2015 Airline Ground Services 7
FEATURE | ROUTE DEVELOPMENT
Æ
Alitalia because we believe it can flour-
ish again. The coming months and next
few years will not be easy, but if everyone
pulls together as one team, Alitalia can
grow again.”
Etihad expects Alitalia to be profit-
able again by 2017.
In addition, Etihad has announced
an increase in its Tehran service from
three times weekly to daily. The new
schedule will establish important con-
nections to key markets in the US, in-
cluding Los Angeles, which is home to
the world’s largest Iranian population
outside the country.
Qatar Airways, meanwhile, is using
its codeshare with Bangkok Airways to
reach 10 more destinations in Asia via
The Air France–KLM
Bangkok, together with Koh Samui to
Group has inched up its
Singapore, Phuket to Kuala Lumpur and
capacity for the 2014-15
Phuket to Chiang Mai. The Arabian car-
winter season
rier already has quite a network of code-
shares from Bangkok in Asia, including
Chiang Mai, Phuket, Mandalay, Yangon Route highlights include KLM’s in- Pointe Noire (Congo) with a sixth week-
and Phnom Penh. crease in capacity to Atlanta, from seven ly frequency.
European airlines don’t have the lux- to 12 weekly flights, in response to mar- In East Africa, KLM is reorganis-
ury of being able to take a major stake ket demand and to facilitate connections ing its network to adapt it to the market
in a rival carrier and with the Eurozone with partner Delta Air Lines. Services to with increased capacity to Dar es Salaam
financial woes set to continue most have Panama City will go up from three to (Tanzania) and Entebbe (Uganda) now
had to take a very cautious approach. five weekly frequencies by B777-200; served direct three times a week and on
The Air France–KLM Group has again, the attraction is that the airport other days via Kilimanjaro (Tanzania)
inched up its capacity for the 2014-15 is a main hub for Copa with which, as in and Kigali (Rwanda). KLM has sus-
winter season which runs from 26 Oc- the case of Lufthansa, Air France–KLM pended direct service to Harare (Zim-
tober 2014 to 28 March 2015. Total ca- has formed an alliance. babwe) and Lusaka (Zambia) but these
pacity is scheduled to increase by 0.7%, Like many carriers, Air France is cities are still served by partner Kenya
but with an increase of only 0.1% for showing increased willingness to flex Airways via Nairobi.
passenger operations (Air France, KLM services up and down, according to de- Air France, like most carriers, needs
and HOP!) but 13.3% for the Transavia mand. It is increasing capacity to take to keep costs under control, especially
low-cost leisure operation, with most of advantage of seasonal travel peaks, for on its medium-haul network. One way
the growth concentrated on the French instance offering one flight per day it is doing this is to maximise connect-
market (+56%). to Bangkok (Thailand) between mid- ing opportunities and, again, adjusting
Taking each region in turn, there December and mid-March, and adding capacity according to winter or summer
are capacity gains for North America a fourth frequency to Kuala Lumpur demand. So, for example one daily fre-
(+2.4%), Central and South America (Malaysia). Wuhan, China gains an ex- quency is being suspended to Munich,
(+1.1%) and Asia (+0.7%). tra weekly frequency while Guangzhou Bucharest, Moscow, Rome and Bremen.
In Africa, capacity is slightly down by will be served by four weekly flights. Domestic flights from Paris-Orly
-0.8% and the biggest fall, predictably And while Africa capacity is down to Bordeaux and to Toulouse have
perhaps, is in the Middle East (-5.2%). overall, services have been increased on been trimmed back, as have several
the most buoyant routes such as Abid- flights from the provincial airports of
jan (Ivory Coast), with the entry into Toulouse and Marseille to Europe and
service of the A380, and North Africa.
In contrast, the low-cost Transavia
arm will operate
8 Airline Ground Services Summer/Autumn 2015 www.ags-airlinegroundservices.comDelivering operational excellence below
the wing. Enhancing passenger
experience above.
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www.zafire.com/aviationFEATURE | ROUTE DEVELOPMENT
Æ
nine new routes in the winter season route at the end of the winter flight ers are Bordeaux, Porto, Stavanger and
from Paris-Orly to Istanbul, Tel Aviv, schedule in 2015. Liverpool – the latter marking the first
Budapest, Madrid, Malaga, Barcelona, Despite the grim headlines, Ukraine time the airline has served the UK since
Athens, Pisa and Prague and there is remains an important market for Aus- withdrawing five years ago. Czech Air-
also a new service from Lyon to Tel Aviv. trian, insists chief commercial officer lines has already announced other new
Andreas Otto. “Ukraine continues to be routes in the Autumn including Bilbao,
GEOPOLITICAL FACTORS one of the most important markets for Billund, Bologna, Cork and Oslo.
Politics and economics also continue Austrian Airlines in Eastern Europe, not Meanwhile Greek carriers, frustrat-
to shape the world’s air networks. to mention the fact that most of these ed by the lack of opportunity at home,
Occasionally, routes are curtailed or passengers transfer to other flights in are looking beyond their home territory
altered as a result of direct government our network to destinations in Western for new opportunities. Start-up carrier
intervention – for instance, Etihad Europe, the Middle East or on North At- SkyGreece Airlines is starting a twice-
suspended all flights to Baghdad until lantic routes. Although the crisis has led weekly service between Budapest and
further notice in late January to comply to weakened demand over the past year, Toronto from 21 May. This will comple-
with the UAE General Civil Aviation we continue to see considerable poten- ment Air Transat’s weekly service be-
Authority ban on operation to and from tial in this market.” tween the two cities set to begin later in
Baghdad on security grounds. Emirates This isn’t the carrier’s only (per- the summer.
also suspended its services to Baghdad haps apparently) unlikely destination.
ROOM TO GROW
There is still plenty of growth potential
in Asia and Africa and it is these regions
of the world that have seen some of
the most active route development
lately. Singapore Airlines has a network
planning team that looks after its new
routes, with decisions made based on
market assessment with a strategic and
long-term view and affected by factors
such as air traffic, routing rights and
airport capacity.
For example, Asia is a fast-grow-
ing market and this is reflected in the
changes to its network in recent years.
The carrier increased the frequency of
flights to Tokyo Haneda to 21 times
a week in March 2014, compared
with the previous 14 times a week. Its
wholly-owned subsidiary SilkAir also
launched daily services to Denpasar,
Bali’s capital, in December 2014 and
Another new service to Athens comes from CSA Czech Airlines, one of will launch services to Cairns in Aus-
a clutch of five additional European destinations for its 2015 summer tralia in May 2015.
schedule, in addition to another five which were announced last autumn But it also suspended flights to Ri-
yadh and Cairo in September 2014 as
due to “operational” reasons, along with In response to growing demand, it ex- a result of the sustained weak perfor-
those to Peshawar in Pakistan. Flights to panded its flights to the Moldavian capi- mance of both routes.
Sana’a in Yemen have been halted due to tal, Chisinau, from seven to 10 flights per Singapore is proving another mag-
increased security concerns. week in November 2014. net for foreign carriers. Qatar Airways
More usually, though, political trou- Austrian Airlines’ route network is announced in early February that it
bles lead to a fall-off in demand and it particularly dense in Central and East- would launch an additional daily flight
is this that prompts the carriers to cut ern Europe, with 39 destinations. The there, in addition to its existing twice-
back or curtail services. Reflecting the carrier sees its hub at Vienna Interna- daily service. All services will be operat-
troubles in Russia and its neighbours, tional Airport as a gateway between East ed by its new A350 XWB aircraft, now
easyJet initially cut its London/Mos- and West. coming into service with the Middle
cow services from 13 to 11 a week from 1 And another place it is willing to go Eastern carrier.
February, eventually decreasing to once where many others still fear to tread is As might be expected, Asia/Africa
daily from 29 March. Athens. From 20 April it will offer four routes, linking two of the more dynamic
But other carriers managed to in- additional night flights per week from areas of the world, have seen some activ-
crease their services to this part of the Vienna, bringing the total to 11 services ity. China Southern is to launch a thrice-
world. Austrian Airlines actually added a week on this route. weekly service between Guangzhou and
a new destination in Ukraine, flying to Another new service to Athens Nairobi from 5 August using A330-200
Odessa from 30 March, although the comes from CSA Czech Airlines, one aircraft. Air China will meanwhile take
explanation is that Austrian Airlines of a clutch of five additional European over the Beijing – Johannesburg route
still has a codeshare on flights from and destinations for its 2015 summer sched- in June from South African Airways af-
to Odessa with Ukraine International, ule, in addition to another five which ter a two-and-a-half-month suspension.
which is terminating its service on this were announced last autumn. The oth- It will operate three times weekly using
10 Airline Ground Services Summer/Autumn 2015 www.ags-airlinegroundservices.comFEATURE | ROUTE DEVELOPMENT
a Boeing 777-300. Ethiopian Airlines, domestic and global network. Recent
however, has shelved its planned ser- initiatives include restructuring its Pa-
vice resumption to Singapore, due on 2 cific entity to favour long-haul service,
April. It had planned to operate three upgrading the short-haul network, and
times a week to Addis Ababa with a Boe- rebanking several hubs. United has a
ing 787-8. suite of industry-standard network
Qatar Airways is also planning a ma- planning and aircraft scheduling tools
jor expansion of its South African servic- that are tailored to its specific needs.
es with the launch of flights to Durban Recently launched or announced
in December and an increase in frequen- year-round long-haul routes include
cies to Johannesburg. There will be four San Francisco-Taiwan, San Francisco-
new weekly flights to Durban via Johan- Chengdu, Los Angeles-Melbourne,
nesburg bringing the total frequency to Houston-Santiago (Chile) – plus season-
Johannesburg up from 10 weekly flights al services connecting Newark-Venice,
to double-daily. From 1 October, Qatar Newark-Newcastle, Chicago-Rome and
Airways will also up its services to Cape Chicago-Dublin.
Town from five times a week to daily. All Nowadays, most airlines employ so-
three routes will be operated with a Boe- phisticated market analysis techniques
ing 787 Dreamliner. to try and gauge demand for new routes
It has also announced a clutch of before launch. There is, though, still
new services to Pakistan – starting in scope for a more direct approach. De-
July-August to fly four times weekly to rier can liven things up a bit. Branson veloping services from small regional
Sialkot, where it already operates dedi- AirExpress has introduced a clutch of airports can be a hit-and-miss affair but
cated freighter services three times a new routes including services to Cincin- pharmaceutical firm AstraZeneca has
week. This will be its first new passen- nati, New Orleans, Orlando Sanford and provided seat guarantees to get a new
ger route to Pakistan since 2004. From Cancun served three times a week each, scheduled air link between Cambridge
1 August 2015, it will offer three flights a with an Orange Air MD83 aircraft oper- International Airport in the UK and
week to Multan. ating on an Orlando Sanford – Cancun Sweden’s Gothenburg Landvetter off
In more mature markets, like North – New Orleans – Branson – Cincinnati the ground, operated by Scandinavian
America, it is more a matter of adjust- and vice-versa circuit. regional carrier Sun-Air. Sun-Air will
ment and infilling than major develop- In the US, United Airlines says it operate the route from the end of March
ment, though the occasionally new car- continues to maintain and grow its this year.
/Ground Services
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www.ags-airlinegroundservices.com Summer/Autumn 2015 Airline Ground Services 11FEATURE | HANDLERS
HANDLERS START
TO GET IT TOGETHER
The airline handling industry is showing strong merger and acquisition activity as companies
strive to offer their customers a truly global service
O
nce highly fragmented, The December 2011 proposal would
and in many respects have required airports to allow a larger
one of the hidden sec- number of providers to offer services
tors of aviation, the air- such as cargo and baggage handling.
port ground handling While the plan had the support of
industry has started to coalesce in airlines, the European Parliament
the last few years. A recent report by was very lukewarm and considerably
the CAPA Centre for Aviation sug- watered down the text which, moreover,
gests that globally it could be worth now applied only to a handful of major
US$80-100bn, which would make airports handling over 15 million
it a sizeable chunk of the estimated passengers a year.
US$700bn world aviation industry On the other hand, mergers and
as a whole. It would also appear to be acquisitions have swallowed up some
a growing sector. Not only is ground players. Ground handling was in many
handling benefiting from the general respects quite a fragmented, localised
global increase in flying, but it’s also industry, with many small or family-
an activity that many of the world’s owned players competing with the big
airlines are increasingly outsourc- international groups. Now the latter
ing – particularly outside their home have started to acquire the former, al-
markets, though in some cases even in though there is still plenty of scope for
their home countries. more M&A activity. And there has also
Lately, the industry has been pulled Olivier Bijaoui, executive chairman, been one major merger at the top lev-
president and chief executive, WFS
in a number of directions. On the one el with the sale of UK-headquartered
hand there has been an increase in the each other. Some airports that were Servisair to Swissport in December
level of competition in many airports previously monopolies have become 2013 to create the world’s largest han-
as governments – notably the Euro- competitive free-for-alls. dling company. The industry hasn’t yet
pean Union (EU) – have opened up However, the European Commission quite reached the point where there are
hitherto closed handling markets to (EC) has since drawn in its horns, very large, globally spread companies
competition; the EU now insists that withdrawing on 17 December a proposed able to handle airlines in any corner of
airports above a certain size have at directive to further liberalise ground the world, but it is a goal that many of
least two handlers in competition with handling services at European airports. the larger firms are working towards
through a combination of acquisi-
tion and organic growth. Swissport is
currently the nearest to a global han-
dler, with 260 stations in 45 countries
around the world.
Other countries in other parts of
the world have watched the EU liber-
alisation process with interest. There is
a feeling that, in some markets at least,
the EU went too far too fast and the
number of competing handlers in some
airports has become unsustainable.
There is evidence that Brussels is having
second thoughts on forcing airports too
quickly towards liberalisation and it has
since introduced a ‘social’ dimension to
the process.
There is evidence, too, that many
ground handlers are becoming increas-
ingly dissatisfied with the low margins
available in many instances.
12 Airline Ground Services Summer/Autumn 2015 www.ags-airlinegroundservices.comFEATURE | HANDLERS
WFS CHIEF IS OPTIMISTIC
Olivier Bijaoui, executive chairman, president and chief
executive at global handler WFS, is confident that the
market will see at least some growth in 2015. “Last year,
2014, was much better than 2013, when we saw some nice
growth,” he told AGS in an interview. “Confidence is there.”
The UK and Northern Europe in particular saw good
growth, as did cargo handling, which accounts for 60% of
WFS’s global business.
Bijaoui also predicts that the rest of Europe – including
recession-hit Spain and Italy – will get back on track. Busi-
ness in WFS’s home country, France, is also progressing nice-
ly especially with new contracts from the Air France-KLM
group’s Transavia subsidiary in Paris.
Globally, WFS is following the trend of buying up local
players. In October last year, for instance, it acquired Brazil’s
Orbital, “a well-run, family-owned company”, which gives
WFS an entry into 19 airports in the country. Bijaoui sees
South America as particularly fertile ground, along with Af-
rica, where the handler has started out on a contract man-
agement basis in Tanzania and Kenya but is looking for more
business there, as well as in South Africa.
In the Middle East, WFS recently opened a VIP passen-
ger terminal in Amman in partnership with Royal Jordanian.
Asia – specifically, Thailand, Singapore and Hong Kong
– is also a good market but in the latter WFS has gone in an
interesting new direction, having become the manager of the
new Hong Kong Cruise Terminal in a joint venture with Roy-
al Caribbean. This might seem surprising for an airline han-
dler but, as Bijaoui points out: “There are a lot of similarities,
particularly in areas such as check-in and baggage handling
– it’s just that the numbers, in terms of the passengers on any
one arrival or departure, are much bigger.”
WFS’s involvement in the Hong Kong cruise market was
partly a response to limited opportunities in the local airline
industry, but Bijaoui would welcome the chance to set up
other cruise (or ferry) related businesses in other parts of
the world. “When you first do something like this, you cre-
ate credentials. The difficult stage is getting into the market.”
Even in its airline handling, WFS takes a different ap-
proach compared with some of its competitors, Bijaoui
believes. “For example, we can check bags in for passengers
going to the airport on the Mass Transit Railway.”
He sees the process of takeover and consolidation in the
airline handling industry continuing. “I think we, for instance,
www.ags-airlinegroundservices.com Summer/Autumn 2015 Airline Ground Services 13FEATURE | HANDLERS
certainly consider opportunities in Ger-
many and elsewhere.
“It’s hard to say what the right bal-
ance is, but personally, I think it is better
if there are some limits on the number
of players.” He points out that handling
companies have to make often large in-
vestments in very specialised ground
support equipment and it takes time to
get a return on capital invested.
COMPETITIVE PRESSURES INCREASE
IN GERMANY
The three affiliated companies,
AeroGround, Aerogate and Cargogate,
say they maintained their position
as the only full-service provider at
Munich Airport in 2014. Nevertheless,
the competitive environment for
AeroGround “will continue to be
challenging and exciting in the future,”
are getting to the point where the global However, he does see some govern- they predict – mainly because of the
offering to airlines is there. And the air- ments drawing back from allowing the competitive pressure on German
lines are starting to outsource – even total free-for-all competition that has aviation companies in particular (for
their hub operations in some cases occurred in some markets such as Italy, example through civil aviation tax) and
– because they can see that they have where life has become unsustainable the resultant cuts which have a great
partners like us who are able to employ for handlers at many airports. Ironi- influence on price competition for
massive numbers of staff, as we do in cally, it is countries where monopolies ground handling services.
Paris, for example.” Airlines are taking were tolerated but then thrown open Both low-cost and network carriers
a back-to-basics approach in which they to competition that have suffered the are putting high cost pressure on ground
concentrate on what they really do best – most, whereas the UK and northern handling companies, while at the same
flying planes – and nothing is sacrosanct Europe, where competition has always time the requirements on quality and
– even home hub handling operations. been allowed and has evolved over on-time-performance are continuously
There are also quite a few family- time, are the most mature markets, rising. Success depends on ensuring a
owned handlers in many parts of the in his opinion. “WFS has stayed away high flexibility in response to constantly
world, Bijaoui considers. “Yes, in Eu- from a number of markets, because of changing market needs; continuous, ef-
rope, it’s beginning to consolidate, in the the sheer amount of competition.” That ficient cost control; and improvement
USA possibly a bit more, but even there, said, it will be bidding for opportunities and adaptation of processes and services
there are opportunities.” at all 42 Spanish airports and would according to customer needs.
Cargo handling accounts for 60%
of WFS’s global business
14 Airline Ground Services Summer/Autumn 2015 www.ags-airlinegroundservices.comAviation - The ISS Way Service performance that facilitates our customers’ purpose through people empowerment To ISS this means we care for your aircraft and airport facility as if it were our own. This is why we continuously aim for improved service performance that facilitates your purpose through greater people empowerment. When we enter into a new relationship, we make a big effort to understand your culture, the airport facility and the needs of the passengers, staff and visitors passing through. By doing so, we are able to develop a service solution customized to meet their requirements and align the training and support of our employees to make a difference in your organization. Because, in the end, we want our people to take care of your people, your passengers, and your facilities – so you can focus on what you do best. www.at.issworld.com/aviation
FEATURE | HANDLERS
As for the LCCs, there is no longer
a homogeneous model, Angus believes,
with different new-generation airlines
carving their own product point in the
market as they evolve. A growing num-
ber of new-generation airlines recognise
service differentiation is an important
tool to maximise yield.
Crucially, for a short-haul airline op-
erating an 80-minute sector, product dif-
ferentiation on the ground is as impor-
tant as in the air. This creates a growing
scope for handlers to genuinely add value
to new-generation airlines, rather than
simply being a commoditised supplier.
Angus concludes: “We have been told
by several observers our cargo complex at
Heathrow dnata City is the most technol-
ogy-enabled airport cargo facility in the
world. We are also working on several
Æ
projects to use mobile technology to im-
Despite this, AeroGround Flughafen handlers to grow their business in part- prove efficiency and reduce turnaround
München sees further growth opportu- nership with the network carriers.” times. As a company, we recognise the
nities in the satellite extension project But he adds a word of caution: important role technology plays in our
at Terminal 2. Physical completion “There are several examples recently operations and work to be ahead of the
of the scheme, which will give 27 ad- where outsourcing has gone wrong, with industry standard, rather
ditional aircraft parking positions, is significant reputational damage to the than catching up to
scheduled for end of 2015 and prom- airlines involved. This does not mean our competitors.”
ises extra ground handling volume for the outsourcing model is flawed, rather
the airport’s own ground handling op- a reflection that their hub handling is
erators. In 2014, AeroGround extend- a vital element of their product and
ed its strategic focus on off-campus ac- brand. Airlines need to think carefully
tivities and signed a strategic alliance about whether their chosen handler is Stewart Angus,
agreement with the Greek Goldair deploying sufficient resources to ensure divisional senior
vice president,
Handling and AAS Airline Assistance safety and on-time performance.” international airport
Switzerland under the name of ground. Angus predicts that it is likely that operations, dnata
net. The agreement covers close co-op- several companies will change hands
eration in marketing and sales at the in the next few years and acquisition
airports that all three ground handlers of smaller handlers is also probable.
currently operate. He says: “The ground handling market
According to AeroGround, “the seems to be following the same path as
added value for our customers is repre- the in-flight catering industry during
sented by simplified administrative pro- the past decade, which left two main
cedures, a centralised key contact man- players through consolidation. I don’t
agement and the comprehensive use of think the ground handling market will
operational know-how for innovation necessarily follow the same ‘two-player’
and cost reduction.” With the creation of model, but I believe we are in for a pe-
a European ground handling network of riod of significant consolidation.”
local and regional experts, it is planned But as for new players enter-
to add further members in 2015. ing the market, “if you look at the
margins of the ground handlers,
DNATA – OUTSOURCING IS VIABLE it is difficult to imagine anyone
BUT TAKE CARE would want to enter this market – if
At Middle East-owned global group anything, as noted above, we are more
dnata, divisional senior vice president, likely to see consolidation,” he considers.
international airport operations Stewart Dnata has targeted growth in the
Angus sees “a definite trend by major Middle East and Asia Pacific – its home
carriers to outsource their hub handling. regions, which are displaying strong
The low-cost carriers (LCCs) have growth. In mature markets such as
always worked to this model, but there is Europe and North America, the tide is
a growing realisation amongst the major turning. “We sense a mood change from
network carriers that they are carrying many in the airline community who
legacy costs in an area that is not their have suffered the consequences of de-
core expertise – an investment which teriorating handling service for several
could be better deployed elsewhere.” years, including flight delays, aircraft
So: “There is real scope for the major damage and poor passenger perception.”
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begins today
We won’t just turn around your aircraft
We will turn around how you feel about cargo,
passenger and ramp handling.
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Lets do something betterFEATURE | INSURANCE
GROUND DAMAGE
– WHO PAYS?
I
Simon Abbott, underwriting was fortunate enough to speak destroyed as it dramatically jumps its
executive for worldwide last year at the Preventing Air- chocks. Aircraft are expensive assets
craft Damage (PAD) conference and damage to them by a vehicle on
aviation insurance provider in Dublin, about the contribu- the ground can be substantial. In ad-
Global Aerospace, looks tion aviation insurance makes dition, the increasing complexity of
towards the huge costs incurred by modern aircraft with features such
at who bears the cost of
the aviation industry in respect of as composite fuselages means repairs
ground damage to aircraft damage to aircraft on the ground. In can be expensive. A direct result of
this article I hope to expand more on the aircraft being AOG (aircraft on
this subject to clear up the misconcep- ground) is the business interruption
tion that the aviation insurance mar- costs which is a whole new ball game,
ket picks up the bill. Nothing could be and can be very subjective. These can
further from the truth. be costs incurred by the airline due
Firstly, I think it would be help- to disruptions to the schedule, repo-
ful to understand how big a problem sitioning of aircraft and crews, re-
ground damage to aircraft actually placement aircraft, compensation to
is. Of course ground damage can be passengers – to say nothing of more
anything from ‘hangar rash’ – dam- unquantifiable ramifications, such as
age caused to an aircraft while it is reputational impact on the airline.
towed out of the hangar – to colli- In 2007, the International Air
sions between aircraft or even engine Transport Association (IATA) esti-
run-ups, leading to the aircraft being mated that ground damage is running
18 Airline Ground Services Summer/Autumn 2015 www.ags-airlinegroundservices.comFEATURE | INSURANCE
at US$4 billion a year and the Flight FSF with its Ground Accident Preven-
Safety Foundation (FSF) estimate tion programme and IATA with ISA-
in 2006 was US$7 billion a year. In Aircraft are expensive assets GO (IATA Safety Audit for Ground
2002 the National Business Aviation and damage to them by Operations). Part of the ISAGO audit
Association (NBAA) estimated that a vehicle on the ground is a requirement for SMS (Safety Man-
for business aircraft in North Ameri- can be substantial agement System) to be implemented
ca, annual ground damage costs were by the GSP. SMS has been a game
running at around US$100 million a changer for the airline and airport in-
year; and finally, at PAD in Dublin last dustries but the point here is that it
year, numbers were cited at US$7 bil- covers the deductible. The point, how- has been a regulatory requirement, so
lion. The reality is it’s anybody’s guess ever, is that the cover is only available it’s mandatory and applies to all.
and nobody actually knows. What is for property damage and not for busi- There is, of course, another angle
clear is that it has a massive effect ness interruption or consequential here. Profit margins in the ground
on the bottom line for airlines and losses. So if the property all risks cov- handling industry are low, and typi-
to some extent ground handlers. As er is not triggered (that is, the damage cally GSP personnel are poorly moti-
mentioned these unaccounted costs is below the deductible amount), then vated with a high turnaround of staff
are growing, due to a number of fac- any subsequent business interruption who are operating around some very
tors such as increasing cost to repair is not covered. expensive real estate. SMS would help
aircraft, the frequency of these losses Based on the various industry es- raise the minimum safety standards
due to congestion on the ramp and timates, if we took a figure of US$5.5 of the GSPs but the implementation
claims inflation which we estimate for billion as an average of the annual of SMS and its continued certification
property damage runs at 2% a year. cost arising from ground damage, is costly.
Using the 2% claims inflation takes how much of this is covered by insur- Ground damage is a major issue.
FSF’s estimate to just shy of USD8.4 ers? Taking into account GSPs’ own The majority of the losses fall onto the
billion in 2015. insurance coverage and airlines’ hull airline’s balance sheet, an extraordinary
Some of this cost is contractually and liability cover, then I estimate item they can ill afford. Regulators need
picked up by the ground service pro- that aviation insurers only pick up to step in, as they have done with the air-
viders (GSPs) themselves. According about 15% of the annual cost. Some lines and airports, in requiring the im-
to IATA’s standard ground handling airlines do purchase consequential plementation of SMS by GSPs to enforce
agreement, GSPs are liable up to loss cover from insurers; however this a minimum universal standard of safety
US$1,500,000 for physical damage is typically subject to a deductible of on the ramp, thereby putting the GSPs
– but that does not cover consequen- say 15 to 30 days, with a maximum on the same footing as the airlines and
tial losses unless the GSP intended payout per day and with an aggre- the airports.
the damage or was deemed reckless. gate cap per policy year. Now insurers
But, how many contracts are standard could pick up all of the shortfall via
IATA contracts? And which standard consequential loss cover to provide
IATA contract is being used, as there insurance up to the US$5.5 billion
have been a number of revisions over but the airlines would then
the years? What is clear is that some be faced with an insurance
of the cost is defrayed by the GSPs. bill of some 400% of what
So what about the amounts in- they are paying today! In-
curred over and above the GSP’s surance is not the solution.
amount or where contractually the There are several worthy
amount paid by the GSP is differ- industry initiatives such as
ent? Aviation insurers provide ‘hull
all risk’ cover to the airlines, which
covers property damage to the hull of Abbott: “Regulators need to
the aircraft arising from an accident. step in, as they have done
The cover is broad, as the term ‘hull with the airlines and airports
... to enforce a minimum
all risk’ suggests, subject to some fair- universal standard of safety
ly standard exclusions such as war/ on the ramp”
terrorism or pollution. The cover is
subject to deductibles which vary de-
pending on the size of the aircraft, so
a narrowbody carries a deductible of
US$500,000, a hybrid US$750,000
and a widebody US$1,000,000. In
other words in the event of partial
damage to the aircraft, insurers will
only pay repair costs over and above
the deductible unless the aircraft is a
total loss, in which case no deductible
applies. Without wishing to get into
too much detail a specific deductible
insurance is purchased by a number of
carriers which, as the name suggests,
www.ags-airlinegroundservices.com Summer/Autumn 2015 Airline Ground Services 19You can also read
