Finnair's ground handling business unit has grand plans for the future, including possible overseas expansion. But, for now, its fortunes remain closely tied to the mother airline, writers Richard Rowe.
Finland's national carrier, Finnair, may be relatively small in stature, but its typically Nordic approach to quality and impressive Asian route development has seen it compete stoutly with much larger airlines. The result is a balance sheet that makes it one of the more financially secure airlines in Europe. The carrier has remained buoyant thanks largely to a series of pre-emptive initiatives; with profits up in 2002, cost cuts and capacity adjustments initiated as the economy softened, even before 9/11, have clearly paid dividends. However, the continued uncertainty about a recovery in economic growth, plus the ongoing conflict in Iraq, means that 2003 promises to be grim even for Finnair. The fact that the much-hyped 'outbreak' of SARS has its roots in Asia makes that almost certain.
It was no surprise then that CEO Keijo Suila recently pointed to a need for even deeper cuts than previously implemented. Discussions began with labour unions in early April following announced plans to create Euro 60 million in personnel savings - a move likely to trim 1,200 staff from the Finnair Group workforce.
These most recently announced job losses form part of a wider Euro 160 million cost cutting exercise designed to achieve permanent changes in cost and operating structures.
Just how much such action will impact the carrier's ambitious business unit, Finnair Ground Handling (FGH), remains to be seen. Formed in January 2001 following perhaps the largest structural shake-up in the Finnair Group's 80-year history, FGH was spun out together with the carrier's catering and technical arms as part of a wider Aviation Services division.
Operations at capital city airport Helsinki Vantaa - which currently sees 10.5 million passengers a year - dominate FGH's agenda. Activity at Helsinki includes a full range of handling services, together with the provision of manpower for the Finnair Plus lounges, ticketing for overseas airlines, and some technical activities such as water and toilet servicing.
Although still a relatively new operation, at least in its current form, FGH has managed to forge a solid business that supports not only Finnair's needs, but also the ground service requirements of up to 20 other airline customers. Last year, the unit's 1,200-strong workforce handled more than 100,000 flights and eight million passengers.
"At Helsinki, legally we are a self-handler, but we increasingly look to operate as an [independent] ground handling agent," explains Tero Vauraste, Vice President, FGH. "The majority of third-party flights operate outside of peak times, but with Finnair at its busiest in the morning and mid-afternoon, the two businesses work well together and allow excellent utilisation of resources throughout the day."
FGH's annual turnover hit Euro 60 million (US$64 million) in 2002, although the division incurred a loss for the calendar year; much the same is expected in 2003, but the plan, says Vauraste, is to turn a profit in 2004.
Much will depend on the fortunes of Finnair itself - which accounts for 70 to 80 percent of FGH's total revenue - and the unit's ability to generate additional third-party revenue. Current third-party work includes the handling of British Airways - the only fellow oneworld member that flies in to Helsinki following the exit of Iberia in January 2001 - plus most other non-Star Alliance flights.
There is no doubt that FGH has undergone a period of considerable adjustment following its restructuring, says Jukka Rahko, now VP, Ground Operations at Finnair, but previously in charge of all ground handling activities at the airline.
Cover Story Ground Services: To Have and To Hold? by Richard Rowe With cost always a major driver, there can be few airlines that have not deliberated on whether to turn existing ground...