Time is Money

Once just a minor irritant for European flag carriers, ultra-aggressive, low cost airlines such as Ryanair and easyJet have become sophisticated, successful competitors in their own right. Throw into the mix the likes of Go, KLM's Buzz, and bmibaby, launched in March by British Midland, Europe's low cost airlines prove that there is at least one aviation sector in good health.

These nimble operators have gained considerable market share at the expense of traditional flag carriers that the low cost brigade regard as grandiose and wastefully inefficient. Ryanair's CEO Michael O'Leary commented at the Irish carrier's annual general meeting last year that the carriers requesting state aid after the terrorist attacks in the US were losing money hand over fist long before September 11.

POST-9/11 GROWTH
While other airlines grounded aircraft, trimmed services and announced redundancies, Ryanair stood by its recent order of 150 new Boeing 737-800 aircraft, immediately reduced fares, and encouraged travel with every trick at its disposal. Such a move was justified when, in February, the airline announced record traffic (up 30 percent) and profit figures (35 percent) for the third quarter of 2001.

Launched in 1985, Ryanair is Europe's answer to the US low cost pioneer, Southwest. Imitation has taken the airline a long way and Ryanair is now Europe's largest low fares airline with 75 routes across 13 countries. It operates four main hubs: Dublin, its traditional home base; London Stansted, now its largest base; Brussels Charleroi in Belgium; and most recently, Frankfurt Hahn in Germany.

Flying Ryanair is by no means a lavish experience, but the airline makes no apologies for its 'you get what you pay for and enjoy the savings' attitude. It is equally hard-nosed in its approach to ground handling and the preferred model has generally seen the airline self-handle at Dublin and outsource elsewhere.

"Until recently, Dublin was our core station where we felt we needed total control," Charlie Clifton, Director of Operations, Ryanair told GSE Today.

Interestingly, the Dublin operation runs with an almost virtual staff. "About 50 to 60 percent of ground handling staff [at Dublin] we get through an agreement with recruitment agencies," explains Clifton. "The supervisors are all permanent."

Clifton acknowledges that using temporary workers sees high staff turnover, but is unrepentant as long as service targets are hit and costs are kept rock bottom. "It's a very efficient model," he says. "We get the flexibility, but also keep ground handling at arms length."

Overseas, Ryanair is equally canny about leveraging the best deal possible. "We would be reluctant to self-handle outside Ireland," says Clifton, perhaps with a casual reference to what rival low cost airline easyJet has attempted elsewhere (see sidebar, "Easy life?," below).

It would certainly be difficult to replicate Ryanair's Dublin model at say, London Stansted. Under TUPE (Transfer of Undertaking Protection of Employment) regulations, Ryanair would be legally obliged to inherit significant numbers of staff from the displaced ground service provider. "This would involve about 300 to 400 staff and all the costs that go with it," says Clifton.

As it is, Ryanair is currently changing its handling provider at London Stansted from Servisair to the much smaller UK ground handler, Groundstar. Ryanair sees its new supplier as being that little bit faster on its feet and able to offer dedicated staff for flights. "The company [Groundstar] is more able to replicate the model we have in place at Dublin," says Clifton.

"We are regarded as leading edge in low cost airlines and Groundstar knows that if it does well for us at Stansted then it has an opportunity to grow with us elsewhere." Groundstar is already scheduled to take over the airline's smaller handling operation at Birmingham International Airport in June. A lean, medium-sized service provider, Groundstar offers services to a range of airlines including British Airways, Air 2000, Monarch, Britannia, and Go at five airports in the UK: London Stansted, London Heathrow, Newcastle, Manchester, and Birmingham.

TARGET MARKETS
At 98 flights a day, the multi-million [British] pound, five-year Ryanair contract would be a big deal for a handler twice its size, and Groundstar's Managing Director, Tim Briers, is understandably delighted. He believes the award speaks volumes about the company's ability to be flexible, whomever the customer. "We are not specifically targeting high or low cost airlines," Briers told GSE Today. "We are targeting airlines with ground handling issues to solve as well as working in partnership with our existing customers to further improve quality and value."

Briers sees no difficulty in handling a mixture of low cost and full service carriers - "British Airways is our largest customer" - as long as the flexibility exists to tailor a product to the demands of volume and speedy turnarounds. "In some ways, they [low cost] are simpler particularly because aircraft commonality means standardisation in equipment and training," says Briers. "As a ground handler, we get high utilisation of both."

Low cost airlines may have different needs in terms of service options, but they do not necessarily mean low handling rates. "We just take out some of the service elements and tailor the price to the product," says Briers.

And, a passenger is still a passenger, he adds, whomever they fly with. "Ask passengers what they really want and it is to get on the aircraft as quickly as possible and reach their destination safely. Satisfy the passenger and you satisfy the customer airline."

DIVIDE AND CONQUER
Briers says that Groundstar is looking long-term with Ryanair but has taken steps to mitigate any potential risks. Additional GSE has been leased [from TCR UK] rather than bought, with the result that the brand-new contract is served by mostly brand-new equipment.

Although Ryanair's model allows opportunities for the handling community, and specifically companies like Groundstar, Clifton is clear that the airline is not about to bundle all of its ground handling contracts with one service provider. "It would be a huge negotiation and the ground handler has you over a barrel," he says. "It's far better for us to divide and conquer."

What Ryanair relishes is the fact that the award of a major contract at London Stansted gives a company like Groundstar the critical mass required to step in and provide competition elsewhere.

Ryanair's new handling partner needs no reminding that its customer has different needs to other airlines, with the emphasis on speed and cost. "We just don't want to pay for services that we don't need, and not many handlers are geared up for that," notes Clifton. "We have no air bridges, no passenger bussing, no stands and we use 'power on, power off' operations."

A LOOK TO THE FUTURE
Clifton sees the ground handling world treading a similar path to the airlines, with larger ground handlers introducing a low cost operation within its main service oriented option. "I think ground handlers have to make their minds up and become one or the other."

For now, Groundstar is something of an exception in that it is happy to accommodate no frills airlines in its customer base. "I'm sure this will change as other handlers realise what the future holds," suggests Clifton. "After September 11, long-haul, transatlantic lights vanished and ground handlers were left with the bread and butter like us and easyJet. We are never peaky - always busy throughout the year. Half of them, though, don't want the business of people like us. They should think about that."

MAINLAND EUROPE
In mainland Europe, Ryanair flies to secondary airports such as Stockholm Skavsta instead of Stockholm Arlanda in Sweden, and operates two growing hubs at Brussels Charleroi and Frankfurt Hahn. Ryanair negotiates hard with each airport for a bundled package that includes ground handling, landing charges, and other standard airport charges. Most of the airports are too small to offer choice in ground handling and provide the service themselves.

Each airport knows that the main driver to attract an airline like Ryanair is cost. They also know that securing such a tenant would go a long way to help them compete with their own larger airport competitors. An enticing package of entry services is usually forthcoming.

Here, again, opportunity knocks for flexible ground handlers, offers Clifton. If Frankfurt Hahn grows according to plan, for instance, there is every chance that the airport will eventually want to exit ground handling - as has been the case at regional airports across Europe - or at least partner with a specialist ground handler.

Ryanair's low fares and growing European network have attracted a significant proportion of business travellers, a demographic that Clifton sees as a bonus in ground handling terms. "It's easier because there are fewer bags and check-in is quicker." Business travellers don't expect a quality beyond what we offer, he adds, and accountants like the fact that executives can travel from Dublin to London for £29 (US$40) rather than £200. "The fact that Ryanair, easyJet, Go, and Buzz have arrived gives us all a greater credibility [for business travellers]," believes Clifton.

FINE TUNING
Although it already runs a tight ship, Ryanair believes that its ground operations could be fine tuned even further given closer working relationships with the airports at which it operates. Ryanair has already worked in tandem with London Stansted on the development of the airline's pier at the new Satellite 3. Opening in June, the new facility has been built with Ryanair's 'power on, power off' operations very much in mind.

"We represent 57 percent of the traffic at Stansted, and if that traffic is made easier to handle then it has to be good for the airport," Clifton says. "If it works well, we are more likely to open up additional routes."

UNDER CONSTRUCTION
Ryanair is hoping for the same cooperation with the construction of the planned Pier D at Dublin, although it points to some foot dragging on the project. The airport operator, Aer Rianta, was directed by the Irish government earlier this year to build Pier D in time for the 2003 summer season. Although planning permission had already been granted, Aer Rianta questioned the security and immigration implications of a planned single storey development that would allow the mixing of inbound and outbound passengers.

If given the green light, it will be possible for Pier D to be built and functioning by January 2003, but any modifications, such as adding a second storey, will add substantial time and cost. "This would cause even further delay to any development by Ryanair at Dublin by up to two years as the facilities will not be in place to handle any of our growth," says Clifton.

Time is always of the essence for Ryanair and if growth is not possible at Dublin, it will simply switch its attention elsewhere. Those ground handlers that think they are up to the job would do well to keep pace.

About the Author: Richard Rowe is a Contributing Editor for GSE Today and is based in Edinburgh, Scotland.

EASY LIFE?

Based at its paperless 'easyLand' headquarters at London Luton Airport, easyJet exudes the low cost ethos from top to bottom. The airline keeps distribution costs low by selling most of its seats online - approximately 89 percent in August 2001. Meanwhile, the airline's simple service model means no tickets, no preassigned seats, and no free lunch.

In addition to London Luton, the airline also has major operations at Liverpool, Amsterdam, Geneva and from April, Paris Orly. By reducing turnarounds at each to below 30 minutes, easyJet achieves extra rotations on high-frequency routes, and maximises the utilisation of its all B-737 fleet. Each aircraft flies for a remarkable 12 hours a day.

EasyJet's virtual airline beginnings in 1995 were founded on the principle that if it wasn't core, it wasn't done in-house. This model changed dramatically in March 2000 when the airline began to self-handle for the first time at London Luton and then in Geneva six months later. EasyJet's thinking was that it had become large enough to take control of such services.

Under TUPE regulations, easyJet took on 250 staff at Luton from the previous handler (Reed Aviation) and about 200 at Geneva. All ex-Reed employees, already well-versed in easyJet's needs, were enrolled in a course, known as Grand Prix 2000, which emphasised the importance of quick turnarounds. With a list price of around US$40 million per aircraft, the only way to achieve low fares is to reduce the unit cost by getting more from each aircraft.

"We wanted to look at the economics of how self-handling might work and what an operation might look like," explains Ray Webster, Chief Executive, easyJet. But volume or not, is ground handling really core for such a lean operator? "We regard treating our customers well as a core competency," counters Webster.

"We endeavour to turn the aircraft quicker," he adds. "We also aim to reduce the cost per passenger, partly by increasing passengers and efficiencies, and simply by being a better organised ground handling unit as we gain more experience."

The airline acknowledges that self-handling has added a layer of costs and a layer of complexity, but says that ground handling is now better simply because the airline has dedicated staff and greater control. Nonetheless, self-handling has not been an easy adjustment with some steps forward and some steps back.

It's a tough trade off for easyJet, caught as it is between distinguishing itself from the bare bones, 'get what you pay for' service approach of some low cost operators, but equally keen not to become like the bloated airlines it has so successfully taken on.