Bucking the Trend

After just two years at the helm of struggling UK ground handler Groundstar, Managing Director Nigel Daniel has successfully employed outside-industry tactics to affect a remarkable turnaround, writes Richard Rowe. October 2003 Little more...

And that is exactly what happened. This financial year, Groundstar's turnover will exceed '44 million. Crucially for long-term success, the company's reputation for providing good quality service has been restored and gained further momentum over the summer.

In the last 18 months, Groundstar has doubled its business at Manchester and added operations at London's Stansted and Gatwick airports. The plan is to add at least one more station a year and ultimately top out at nine or 10 operations around the UK.

Today, Daniel considers the Gatwick operation as a model station. Groundstar became the airport's third ground handling service provider - or fourth if including British Airways' self-handling operation - when it started business in March this year, with charter operator Monarch Airlines as launch customer.

The risk of starting up at such an airport with just one customer was clear. "We knew we had to sign additional airlines in the first financial year, and at least two before the winter, otherwise we would make a major loss," he says. "But throughout, we thought that if we delivered quality the phone would ring."

And ring it did. Groundstar has just signed long-term contracts with Sierra National, the national airline of Sierra Leone; Air Scandia, the UK-based charter carrier; and Canada's Air Transat. Between them, the three carriers bring an additional 12 long-haul flights per week and over 10 short-haul flights. All three were major target customers.

Meanwhile, in Birmingham, Groundstar recently signed up Duo (formerly Maersk Air, a British Airways franchise carrier) on a contract that starts in November and brings an additional 20 flights per day at the airport. "Again, we won the contract because of the quality delivered in Birmingham and elsewhere and have negotiated a fair price," says Daniel. "Both parties are happy."

Market Sophistication
The Groundstar MD believes that the company's approach has highlighted an important evolution in the industry. Above all, he believes that the old school of ground handler has been caught up - and probably caught out.

"The market has changed, airlines want to cut costs every time you negotiate with them as their margins are also being squeezed. But it is fundamentally wrong to cut costs by taking out labour and using old equipment. All that does is increase the number of delays and overall customer dissatisfaction, which simply increases the overall cost."

Not all handlers will agree, but Daniel suggests that airlines, too, have undergone a step change, not least in their understanding that while quality is paramount and ultimately saves money, it also comes at a certain cost. "It is a message we have driven hard," he says.

But Daniel feels that Groundstar has benefited most from another new approach: genuine cost transparency. All major contract negotiations are now accompanied by a full cost breakdown covering everything from staff numbers, overheads, direct costs and equipment. Everything is laid bare.

"We have given this transparency to seven different customers and six of them have signed contracts with us. The thing that everyone likes is when you get down to price, as everyone does, you can jointly agree where that cost comes out."

Daniel is equally upfront about the margins desired. "Right from the start we indicate what profit margin we want. Such margins are perfectly reasonable and we like to protect them as best we can."

Although such a procedure has been acceptable in many other industries for some time - Daniel says he was doing open book accounting in the automotive industry in 1987 - it is an approach that still smacks of heresy in some ground handling circles.

"Most handlers can't do it because they don't actually understand their costs," he claims. "I believe strongly that if you are going to take a company forward, you have to understand the detail. That is why other service providers in this industry are losing control - there is nobody driving the business that understands the detail."

Company-wide, the feeling now at Groundstar is that it has the necessary reporting procedures in place. By the Wednesday of each week, head office knows to the penny which stations hit their weekly targets, together with key cost indicators such as revenue against budget and labour spent against budget.

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