Innovation Holds the Key to Profit

Summers are short in Scandinavia—and so are the pockets of airlines. As is the case globally, the cost of ground support services has become an all-important issue and providers are having to find ever-improving business models in order to bring to market the efficiencies carriers so clearly need.

In a commercial environment this is easier said than done. Revenues are just as important to a ground handling company as they are to an airline. According to Tero Vauraste, managing director of Finnish handler, Northport Oy, the solution lies in innovation and new ways of doing business.

Northport was previously a business unit within Finnair but has separated to become a wholly-owned subsidiary. It may not seem a drastic move but Vauraste believes it allows a complete change in direction.

“Our vision has always been to be the leading supplier of ground services in Northern Europe,” says Vauraste, “and creating Northport takes us a step further towards that goal. Making Northport a subsidiary gives the market more reliability and really allows us to focus on the customer.”

“We now have the clear business logic of a pure handling agent and this can be expressed in the market,” he continues. “We also have a new brand, which describes both our market and know-how. The ‘north’ in our name refers to the northern dimension of the company’s market area and also communicates our expertise in northern conditions.

The ‘port’ ending describes the company’s largest marketplace—the operations and traffic of the Helsinki-Vantaa hub. Moreover, it also encapsulates the possibility of delivering services to other forms of transport.”

Restructuring the Finnair unit into a competitive concern was a difficult challenge and Vauraste reports the first issue was to deal with Helsinki-Vantaa International Airport, the Finnair hub with a reputation for efficiency and smooth operations.

“We needed to train the staff to become more efficient and have greater flexibility in handling the peak periods,” Vauraste says. “We also needed better use of technology in services and resourcing.”

Helsinki is very different to the 15 other airports in the Northport network, being a hub operation with two distinct traffic peaks. The first is from 6:30 to 8:00 a.m. and handles mainly regional and European departures—origin and destination traffic in smaller airplanes. The second peak, in the afternoon from 3:00 to 5:00 p.m. deals with a high proportion of transit traffic, most especially long-haul connectors from the Far East. Approximately 35 to 40 percent of Northport’s daily operations are concentrated into these two periods.

“At Helsinki we provide full handling in every terminal and have our base in a good location close to the action,” says the managing director. “However, there will be a demand for new facilities as traffic grows, especially in baggage sorting. We’re really pushing this as Helsinki has an excellent geographical location for transit traffic and we want to be able to provide reliable handling in the future. We are working in close cooperation with CAA Finland to respond to these anticipated needs.”

Swedish Model

Northport handles nine million passengers per annum and some 100,000 flights, with 99 percent of its revenue coming from a group of 20 customers. However, the client base actually numbers 200-plus. Extracting value from this extended market has forced Northport into some very innovative thinking. Currently Northport’s only operation outside Finland is at Stockholm-Arlanda Airport, where under the name of FinnHandling AB, it partners with a local company, Proffice Aviation.

Vauraste—who also acts as managing director of the Swedish operation—explains: “FinnHandling AB is a unique model. Because we work with a local partner, we have the advantage of only having to pay staff costs while work is being done for our clients. At all other times, staff work purely for Proffice Aviation and its other customers.”

FinnHandling AB was started when a competitor dropped out of the Arlanda market. It was simply too good a business opportunity to pass up and it perfectly suited Northport’s growth strategy.

However, the management team was very aware that a completely new business model was needed to better answer airline needs for quality and cost-efficiency. “It especially helps to minimize fixed costs given today’s high risk of rapid and drastic volume changes,” Vauraste says.

The Stockholm operation is mainly centered on Terminal 2 but clients can be serviced throughout the airport if required. Facilities are tailored for the business and such has been the success that FinnHandling AB recently received British Airways’ “Self-Service Station of the Year” award.

Heading North

Northport’s endeavors at Stockholm are loosely repeated in Finland’s provincial airports. The company’s work at these small community gateways usually involves between two and 20 flights per day at each location. “The cost-effectiveness varies according to each airport,” says Vauraste, “but success depends on multiple skills training, new modelling like staff renting, new use of technology and new products.”

In the provinces, Northport also outsources to local entrepreneurs, believing them best suited to exploit local knowledge and bring in additional revenues from gaps in the market. Additionally, it affords Northport the luxury of being able to dilute its fixed costs.

Of course, generating revenue, whatever the business model, is far from easy in the extreme conditions of the Scandinavian north. Weather worsens the further north one travels but Northport has developed particular expertise in ground support in cold, harsh surroundings—even by Scandinavian standards.

“We can handle ice, snow, wind or cold—and all the possible combinations,” Vauraste proudly claims.

“Our experience has been building for some time and the best proof we have is the station punctuality of our customers. Finnair has been in the European top three for on-time performance year after year and Helsinki-Vantaa is among the most punctual airports in Europe. All of this is done in northern conditions.”

Looking forward, Northport is pursuing opportunities in Scandinavia, Northern Europe and the Baltic Region. While critical mass is always necessary for a sound business case, the company ability to provide extremely flexible business models and solid relationships ensures it has more open doors than most.

“The market today is highly price-driven,” concludes Vauraste. “The customer’s focus is on their cost—but we consider this to be an opportunity for us. Of course, there are always certain issues for a handling agent and greater understanding of the market is needed from the authorities and the trade unions. However, with further flexibility we will have an even better understanding of our customer requirements.”

It seems the Scandinavian market is cold only to those without the flexibility and ideas to heat things up. Traditional models may be breaking down but that simply creates opportunity for fast-moving enterprises. Short summers and short pockets pose little problem for Northport.

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