Ground Handling: One Year On

Cover Story Ground Handling: One Year On Faced with an intensely challenging market over the last 12 months, many ground handlers have spent much of the past year rethinking what services to offer and where, writes Richard Rowe By Richard Rowe...


Cover Story

Ground Handling: One Year On

Faced with an intensely challenging market over the last 12 months, many ground handlers have spent much of the past year rethinking what services to offer and where, writes Richard Rowe

By Richard Rowe

October 2002

October cover imageAfter the rise, comes if not a fall, certainly a rethink. A ground handling market characterised of late by a feeding frenzy of internationalisation, bullish network growth and big money buyouts has been forced to take stock of new business realities.

One year on from 9/11, the industry's recovery has begun, but the global economy remains shaky. The low cost and business aviation segments are buoyant, but mainline carriers remain bruised and vulnerable. Carriers have demanded greater productivity from their suppliers and made it clear that requested service levels must come at a lower price.

On the supply side, these customer demands have been met with considerable analysis. Smaller operators are struggling with higher insurance premiums, while larger operators have looked closely at their regional and international networks. In some cases, they have even re-examined their whole service offering.

It seems that the propping up of marginal stations, unless of extreme strategic importance, is no longer tenable. Handlers are now more brutal when analysing specific markets. If no potential exists for long-term benefits, an operation is more likely to get the chop.

"We are more inclined to cut marginal stations than before," admits Conrad Clifford, Commercial Director at Menzies Aviation Group (MAG). "Generally speaking, however, we have simply cut back on some operations and taken advantage of other opportunities,"

One such opportunity is in Australia where MAG recently acquired the lease for the former Ansett domestic cargo terminal at Sydney's Kingsford Smith Airport. Elsewhere, from October 1, MAG will also phase in the opening of nine new cities in Mexico on the back of a ramp handling contract with Continental Airlines. MAG is already present in 10
Mexican cities.

This is good news for a company that has seen retreats from other markets this year. In March, MAG called an end to its passenger and ramp handling operations at Korea's Incheon International Airport, having only begun operations a year before when all international traffic switched from the old Seoul Gimpo airport.

Operating with a modest customer base — passenger services for Northwest Airlines and ramp services for Federal Express - the operation was hampered by lack of access to cargo facilities that were needed to provide a comprehensive handling service. MAG has, however, retained a presence, and its operating licence, in Korea through a local partner and does not rule out restarting operations in the future. Discussions continue about an interim solution to the cargo facility problem.

Back in Europe, MAG also retreated from the German market when it sold its shares to Swissport, which, in turn, pulled out from San Juan (Puerto Rico) in June and pulled the plug on its Dutchport venture at Amsterdam Schiphol in January.

Also in Germany, a challenging market for independent handlers, Servisair stepped out of Stuttgart, while Aviapartner retreated from the cargo handling market in Munich (although it retains a ramp handling presence at the airport).

The question of how much such retreats have to do with 9/11 and how much they were influenced by local operating conditions is moot, but the events of last year may have represented the final straw for
operators at each location.

DIVERSIFICATION
As service providers re-examine customer requirements in specific markets, they have also analyzed what spread of services they should offer. Above all, there is a move to persuade airlines to buy multiple ground services from just one supplier across a network of stations. As such, many service providers are looking beyond traditional ground handling functions to examine ancillary activities such as cabin cleaning, lounge management, cargo handling and line maintenance. It's about adding synergies and economies of scale, as well as reducing the risk from potentially cyclical business lines.

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