Nordic Networking

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. May 2003 Finland's national carrier, Finnair...

"FGH is now responsible for handling services and selling them to airlines like Finnair," says Rahko who is now the unit's largest customer. "The first year was difficult not least because it involved such a huge change in thinking. However, the dust has now settled and the airline/ground handling agent relationship works well."

Crucially, says Rahko, the ground handling operation has benefited from the kind of business focus and cost transparency that was impossible while part of the larger Finnair Group. This in turn has allowed Vauraste to successfully tackle some of FGH's initial failings such as poor punctuality, particularly on long-haul flights.

"We now also have much better systems and day-to-day coordination software in place, together with a new organisational model which makes it absolutely clear where each person's responsibilities lie," explains Vauraste.

But with focus comes additional challenges, not least in the area of baggage services. Finnair is gradually moving to Airbus aircraft and last year it purchased two A319s and took delivery of five new aircraft from the A320 family. This means the use of containers, something that the current baggage area at Helsinki is not well equipped to handle.

Meanwhile, Finnair's strategy of developing Far East routes has created several banks of traffic throughout the day and Helsinki now functions as more of a traditional hub operation. "The challenge is to get the baggage moving in a similar way, although this will be difficult given the current infrastructure," admits Vauraste.

Elsewhere in Finland, cost cutting by all airlines has led to intense price competition in the handling sector and placed enormous pressure on FGH to streamline its own cost structure. One solution adopted last year was to outsource nearly 400 items of motorised GSE, which was acquired by Swiss multinational ABB. Today, FGH Tero Vauraste,  Vice President, FGHuses the equipment under a maintenance leasing agreement.

FGH has also increased its cooperation with a variety of local companies by outsourcing ground handling services at select domestic airports. Services are now provided through cooperation agreements at 10 airports, while FGH provides services through its own organisation at Helsinki and a further 10 stations in Finland.

FGH's gradual process of outsourcing is designed to provide a more flexible and efficient use of labour - the idea being to match resources with the daily cycle of flights that can vary greatly at Finland's smaller airports.

"The strategy sees local entrepreneurial companies take on our workforce to grow their business in the area," explains Vauraste. "It is all about local partners rather than franchising and recognising that passengers are very different depending on the market."

This process began as far back as the 1980s when Finnair used a local travel agency at Kittila, which serves northern ski resorts, to provide full handling services for the airline and other operators. Two years ago, a former Finnair station manager at Kuusamo Airport in Finnish Lapland set up his own company and took on the airline's handling operations.

Most recently, in October 2002, FGH outsourced services at three other smaller stations - Ivalo, Kajaani, and Joensuu - to RTG (Ready To Go), a Finnish company that is itself part of a larger group that provides travel-related services such as cottage rentals and bus tours. Vauraste contends that a company such as RTG is much better able to provide scale benefits for Finnair customers.

Photo courtesy of FinnairVauraste admits that this outsourcing process has involved intensive discussions with the country's labour unions, but says in most cases that partner companies have been able to take on Finnair and FGH staff with relatively few job losses.

"We continue to supervise and check our partners' performance and come down hard when service is not up to standard," he says. "But service levels have been maintained and financial results have improved by as much as 15 to 20 percent at some stations."

Such moves are also designed to help FGH cope with the intense ground handling competition that now exists in Finland and throughout Scandinavia. In the domestic market alone, FGH competes with GlobeGround/Servisair and Airpro, a small handling subsidiary of the Finnish Civil Aviation Authority.

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