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...

Future structure
Two years after the last structural change, Vauraste says that similar discussions are now underway, albeit this time to turn FGH into a full-blown subsidiary of the mother airline.

"We might look for a strategic handling partner to help us create a network," explains Vauraste. "This is very important when developing a third-party handling business."

As Vauraste points out, many ground handling agents in the region are loss making, "so something has to give". And while Scandinavia might not appear too attractive at the moment in its own right, large handling companies might see its worth as part of a wider network.

In addition to Scandinavia, Vauraste is eyeing the Baltic States of Estonia, Latvia, and Lithuania for expansion - all of which are scheduled to join the European Union (EU) in May 2004. Estonia, in particular, traditionally has very strong links with Finland.

"I think the market opportunities are greater in the Baltic States and would imagine that western companies flying into those airports would like western handlers on the ground," suggests Vauraste.

Currently, handling is monopolised by the various airport companies and/or national airlines, but EU entry would make each state subject to EC liberalisation laws. The only sticking point is likely to be the size of the market - although that, too, could develop following EU membership.

Sampling of Finnair?s ground support vehicles.As Vauraste points out, existing competition throughout the rest of Scandinavia is another story and he sees various possibilities for market entry: establishing a niche operation such as lounge and ticketing services to wave the FGH flag (an operation already in place at Stockholm Arlanda); or to enter some kind of deeper, more comprehensive strategic partnership with an established handling organisation.

Naturally, he points out, handling markets can also change rapidly, something that tends to generate other new possibilities.

The main difficulty is that while Vauraste would like to explore possible expansion overseas, FGH's immediate future is likely to be determined by events closer to home. Serious job cuts loom large at Finnair, while there is also the threat of routes being dropped, particularly in European and domestic markets.

"The key question is the extent to which Finnair wants to cut costs and what outsourcing opportunities might appear from other sources," explains Vauraste. "But the main focus for us is to plan and continue preparing ourselves for when the good times return."

Home and Away

Once upon a time - or at least before 9/11 - Finnair, like many airlines, used to have a station manager and several supervisors on the ground to keep tabs on contracted handlers at many of its overseas stations. However, the economic and operating climate over the last few years precipitated the need for deep and long-term cost cuts. Finnair recognised the painful fact that, if true cost savings were to be realised, it had to go beyond trimming staff numbers; instead the airline had to face up to the prospect of closing offices at various airport around the world.

As such, Finnair adopted an area manager approach a little over a year ago. Five key personnel now work under Jukka Rahko as overall VP, Ground Operations - one each serving the North American and Asian markets, and three in Europe.

The approach was implemented airport-by-airport, with the decision heavily influenced by the strategic importance of certain stations and the ground handling options available. At some stations, Finnair has retained a presence using a station manager; elsewhere, it has withdrawn airline staff altogether and handed over completely to contracted ground handling agents, or signed a deal with a local supervision company to act as the carrier's eyes and ears on the ground.

Rahko reports that the strategy has worked well so far, with quality up in 2002. Key to this is that, unlike the previous station manager approach, each area manager now has true, overall responsibility for each region's operations.

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