Cargo Handlers are Taking Services Beyond the Fence

Airlines for years have looked at ground handlers as levers to squeeze cost out of their cargo operations.

In the main, this is driven by airlines' desire to draw handling into their performance measurement and service level initiatives and the need to ensure seamless data flow for operational as well as regulatory requirements, such as security regulations and customs links.

Servisair is rolling out a freight management system in North America that interfaces with customs to meet government security requirements and has an alert function for cargo from unknown or infrequent shippers. Equipped with a host of functions, such as a billing module, the set-up can be tailored to fit individual service level agreements, said Kerry Galegher, vice president of cargo for the Americas.

He hopes to have the rollout across North America completed by the summer. Servisair now provides freight handling at six American airports and is looking to expand its North American footprint. Vancouver, Toronto and New York's Kennedy Airport are under consideration, as are airports in Mexico.

After launching its new cargo system in Canada and Europe, Swissport is rolling it out in the U.S., starting with Chicago.

In line with carrier requirements, the system is Cargo 2000 compliant and allows airlines to pick between four and eight measuring points in the process. As defined event deadlines approach, alerts are triggered automatically to alert staff that it may be necessary to allocate additional resources to the task in question in order to avoid delays.

"The idea is to alert staff of an event before you run into a potential failure," said Christian Saaner, regional operations manager for Europe, the Middle East and Africa.

Last year Swissport introduced an Internet-based tracking tool fed by EDI messages to enable airline customers to track traffic through the handler's system.

EDI messages are also used for tracing shipments that move by truck between Swissport stations at different airports. This type of traffic constitutes the bulk of the handler's trucking activities in Europe, but increasingly Swissport is asked to deliver the cargo to the final consignee, provided the consignee has a bonded warehouse.

"We're also taking over classical functions like booking, loading, planning," Harman said. This allows the handler to treat trucks as flights and provide a seamless service. "It saves the airlines cost. They don't have to open a bond."

Just as they reach down the supply chain toward the consignee, handlers can also extend their activities in the opposite direction.

Servisair's portfolio includes cargo sales. "We can manage the cargo product for a carrier to the point where we become a virtual cargo division for them," said Galegher.

Although legacy carriers are interested in outsourcing a greater amount of activities than in the past, the prime airline candidates for such an approach would be budget passenger airlines, he said. To date, budget airlines in North America have not embraced this philosophy, but some of their European counterparts have farmed out their entire cargo operations and he believes U.S. players will eventually follow suit.

"The time has come to look at an all-inclusive product. We're willing to listen to anything that a customer would bring to the table. If we don't take a hard look at this, we might miss some opportunities," he said.

Servisair is not likely to rush at any such opening, however. Mindful of possible concerns from airline customers that their handler could compete with them, Galegher said, "It has to be the right opportunity and the right carrier; there has to be confidentiality, and there has to be trust."

For the legacy carriers, cost considerations have been the chief engine driving their move to outsource more work to handling agents. But that also can carry peril.

Faced with an inexorable rise of red ink, the idea of farming out its cargo handling looked vastly appealing to United Airlines Cargo back in 2003. Management figured that giving the handling at its major stations to third-party operators could reduce its costs by $100 million. The airline ultimately reached that goal, but the road proved rockier than expected. Initial performance problems caused an exodus of customers, so UAL was forced to spend a lot more energy on quality levels than had been anticipated.

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