American Beauty

Cover Story

American Beauty

By Richard Rowe

February 2000

With its lavish lines and dashing good looks, San Francisco Airport’s stunning new international terminal building is a conceptual dream. Passengers will love it, but what about the ground operators? Richard Rowe paid a visit.

If ever an airport needed a new international terminal it was San Francisco. A flourishing route network to the Pacific Rim and a strengthening Atlantic product has long exerted tremendous pressure on the old, 10-gate international facility built almost half a century ago.

International traffic has doubled since 1985, and is forecast to rise from seven million passengers in 1998 to 12 million by 2006 (overall traffic at the airport is expected to jump from 40 million to 51 million by 2006).

With its limited number of gates, remote operations ruled the roost at the old facility and some carriers had to resort to rescheduling flights to the evening for when gates became available. To make matters worse, several carriers added international flights in anticipation of the new terminal’s original opening date of May 2000. By the time the opening was eventually pushed back to December, the old terminal was fit to burst.

It was a similar story out on the ramp. San Francisco is a land locked airport, with water on two sides and a major freeway on the other. Subsequently, ground support equipment staging and parking space was like gold dust. GSE was left wherever it could be parked, greatly compromising safety. Equipment had to be monitored constantly and impounding was common.

The airport acted, in July 1996, by issuing a moratorium on the number of ground handlers at the airport. "This was put in place on all new ground handlers unless they had a sponsoring air carrier which had exclusive space to park and maintain their GSE," explains Kevin Van Hoy, Property Manager, Aviation Management, San Francisco Airport.

This pruned the number of ground handlers at the airport, and stabilized a market that had seen its fair share of comings and goings between service providers. The surviving players comprise three, full service ground handling agents: Swissport, Ogden (now part of Menzies Aviation Group), and local handler, Monarch Aviation. Dominant carrier, United Airlines, self handles and offers third party services partly as a revenue stream and partly through alliance (Star) and reciprocal arrangements with airlines such as ANA, Air China, and Virgin Atlantic.

Most other U.S. majors--including Northwest, Continental and Delta--self handle and perform some alliance-related work. Continental even ramp handles Alitalia at the new terminal despite not having an international service of its own at San Francisco.

With the new international terminal now in operation, the airport is in a handling holding pattern. "We are evaluating the ability to handle the equipment we currently have out there to see whether we can accommodate an additional ground handler," explains Van Hoy. "The demand for an additional handler is there from the carriers, and we have made a commitment to them that after six months we would let them know if we could accommodate another handler and then help them with the bid process."

With a price tag of US$993 million, construction began on the new, reputedly earthquake-proof international terminal in 1995--the centerpiece of a $2.6 billion airport makeover. Given the quality of life in the past, it was with some relief that the airport unveiled its new facility with a phased opening that began in September, but saw the bulk of movement in early December.

Although the timing was ambitious--just in time to face Christmas and Chinese New Year--the transition went smoothly with no sign of the vitriolic press coverage that accompanied the flawed openings of Hong Kong and Kuala Lumpur’s new airports in 1998. By December 10, San Francisco could talk proudly of its new international terminal which, at 2.5 million square feet, is the largest terminal in North America.

Systems testing took place well before December. Local charter carriers Allegro and SkyService (handled by Monarch Aviation) were willing guinea pigs. "We put through over 100,000 passengers and about 160,000 items of baggage before starting general operations," says Robert McKinley, Assistant Deputy Director, International Terminal Management.

Airport trainers also put 2,000 airline managers and employees through their paces during the build up, as well as conducting numerous orientations. The airport was aggressive about identifying accountability and ownership for particular systems.

"We had a group of professionals move into this building who were very familiar with what they were supposed to do on the first day of operations," says McKinley. "The transition went very well, and the training had a lot to do with that."

The operational advantages of the new facility are as clear as the light that streams through the upper reaches of the terminal building. The 24 wide-body gates (with two more to come) consign remote operations to a thing of the past. The addition of dual loading bridges on each gate allows for more efficient boarding and deplaning.

Passengers are delivered quickly to a revamped, centrally located Federal Inspection Services (FIS) area that can process 5,000 passengers per hour, as opposed to the 1,250 of the old FIS facility. San Francisco used to be one of the only international terminals in the U.S. where immigration was conducted after passengers had collected their baggage. In the new terminal, passengers clear immigration to find their baggage waiting for them.

Passengers are served by 168 check-in positions in 12 designated check-in aisles. There are more carousels, better staging areas, and a "common use" rather than proprietary terminal which allows maximum flexibility for accommodating flight irregularities without resorting to remote operations and bussing.

A fully automated baggage handling system, designed and installed by BAE Automated Systems, takes bags down to where aircraft are parked rather than to a centralized make up room. Hand held scanners are used for positive bag match and baggage reconciliation which is built into the inline baggage handling system.

"The system provides real time data on the boarding process for ground handlers to improve baggage handling and increase on-time departure performance," says Van Hoy.

Of all the airlines operating at San Francisco, it was perhaps United Airlines that most recognized the need for a new facility. United represents about 65% of traffic in the international terminal, and airport-wide.

"We were flat out of real estate, and it prevented us from maintaining schedules," says Ray Klinke, United’s International Manager at San Francisco. "The ground level space was almost prohibitive as far as parking and it put aircraft in jeopardy with the amount of ground equipment that was surrounding the envelope."

Klinke says that the new terminal has given United, and the airport community as a whole, a new face.

But while Klinke believes that the opening of the terminal "was probably the best of any airport in the last 10 years," the much-vaunted baggage handling system has yet to live up to its reputation. The multi-level system should be a huge plus, but the inline screening has yet to function as it should.

"Many carriers have implemented a third level of security in case it’s not done below the floor," says Klinke. "It is the smart and safe thing to do, but more cumbersome from a work standpoint. It’s causing multi handling of bags that shouldn’t happen."

The system has broken down a handful of times in the first month of operations. With a schedule like United’s that sees 12 flights (almost all wide-bodies) departing in a three-hour window between 11a.m. and 2 p.m., the seriousness of such downtime is clear.

Based on their operational experience, there is a feeling amongst some operators that they could have been consulted a little more on operational requirements at the new terminal. "The airport would bring us in to tell us what was going on, but it was more information than intelligence," says one.

United, for instance, has changed some procedures dramatically to counter the bugs. The airline currently handles between 30-70 percent of its domestic to international transfer baggage manually every day. The design of the baggage handling system may be good but, for now, United has to hire additional workers to support it.

According to McKinley, the airport is not sitting idle. "The baggage handling system alone has worked very well, but some of the integrated components such as the security screening have involved more work. There are some components where we need to evaluate their performance and, if necessary, make changes."

The need for additional training is also a factor, according to the airport. "There are ways of handling baggage with a pure sort system that are different to the way it is handled in a straight line baggage system just going to a carousel," comments McKinley. "Airlines must learn to expose bag tags so that they can be read by a reader and not laid upside down."

He does concede, however, that the airport is in a "realistic state of discontent" with the baggage handling system. "It’s not completed to the level we wanted it to be."

Other systems have also to find their feet, according to John Ankrom, Manager of Worldwide Flight Services’ operation at San Francisco. The computerized gate management system currently struggles with multiple airlines departing for the same destination at the same time. It knows, for instance, that a bag is going to Tokyo, but does not always know which flight to send it to, says Ankrom.

Despite all the training, the fact remains that the level of automation in the new terminal represents a major learning curve for airport workers. For its part, the airport continues to conduct twice-daily meetings to run through the day’s schedule in terms of expected passenger and baggage volume.

Fortunately, the airlines and handlers are working well together. "If I get a bag for Northwest for Manila I walk it over and ask what they have for me," says Ankrom. "If I’ve got one, they’ve got one. It has really brought us all together as a community. We all pitch in and help out."

In addition, the sheer size of the terminal has exacerbated some of the personnel problems that have been a defining issue at the airport for the last two or three years. The economy in the Bay area is sky high and the cost of living astronomical. At less than two percent unemployment, and with all the high tech jobs emerging in neighboring Silicon Valley and elsewhere, airlines and ground handlers have found it increasingly hard to attract and then retain good employees.

As a result, high turnover of staff has long been the norm at San Francisco. From the airport’s point of view, this resulted in greater numbers of inexperienced staff and a corresponding concern about airport safety and security. The airport responded with the introduction of what it calls a Quality Standards Program (QSP) for all companies whose employees had an impact on airport safety and security.

"The QSP established minimum standards for covered employees related to hiring, training, equipment maintenance, benefits and compensation for companies who wish to operate on airport property," explains Van Hoy.

The QSP began on April 1, 2000 and applied to security service providers and the airport’s ground handling community--which must have seen some interesting contract renegotiations with the airlines. It was then rolled out to include Skycaps (June 1) and then the airline community (October 1), which Van Hoy says was the greatest challenge.

"What it did was level the playing field to a higher minimum, or the level that the airport thought was achievable in this market and would limit the turnover and create a better employee pool for everyone so that people were not changing jobs so much," says Van Hoy.

From April 1, the minimum salary was pegged at $9 an hour with benefits and $10.25 without benefits. This rose to $10 with benefits and $11.25 without benefits on January 1 this year. It will now be adjusted annually in accordance with increases in the Bay Area Cities/Consumer Price Index (CPI).

Ground handlers became subject to airport operating permits for the first time rather than being brought in by the airlines themselves. The airport had established a direct relationship with its handling community. "It has brought us together in both a work and a documented relationship," says Van Hoy.

This was not the only change in the airport/handler relationship. Historically, the airport had not leased or permitted exclusive space to ground handlers because of the past turnover in handling operators. However, the airport recognized that there was now a group of handlers maintaining a definite presence at the airport. The airport decided to permit ramp level space with three different locations now designated for Swissport, Ogden, and Monarch. Each permit runs for 30 days. The thinking is that if a handler does leave or no longer needs the space the airport is able to take back control of it.

It is too early to tell what impact the QSP has made on staff turnover and the overall safety culture at San Francisco, but Van Hoy is upbeat. "Turnover and airfield incidents seem to have decreased. We know that people are being trained to a certain standard, there are minimum hiring standards, and people are being paid a sensible wage. Ground handlers are no longer just competing on price, so now they have to compete on service."

John Ankrom at Worldwide appreciates the airport’s efforts. "The airport recognized the fact that the handling companies really do try their best particularly when having to deal with a small labor force. If it wasn’t for the airport, I think you would see some division between the handling agents. We all share information and are in the same boat with pay and benefits, so it’s up to us to make sure that we stay competitive."

Others are more skeptical about the QSP, saying that it has simply leveled the minimum wage rather than making the employee pool any more attractive. "We are now paying the same kind of candidates a dollar or so more, rather than improving the candidates," believes Ray Klinke at United.

As an airline, Klinke can offer the additional carrot of flight benefits, but even a major employer like United needs to roll its sleeves up and get into the job market. The airline is participating in welfare to work programs and recruiting at high schools. It also attends more job fairs than ever before, and offers cash incentives for referrals that lead to employment.

Klinke understands well that the ramp environment is not for everyone. It is genuine niche employment. "Our standards haven’t dropped, but our ability to attract to those standards has become more of an issue," he says.

Ankrom sees more long-term benefits. "In the long run, it [the QSP] will help us, but we haven’t seen a great benefit so far," he says. "As a community we still have the turnover, and there is still the shortage of help. What the QSP has done is allow us to go back to the customer and recoup some of these costs so we can go out and look at how to attract better employees. I have not heard of one carrier that has balked at all.

"You can say that it’s the cost of doing business in the Bay area. Likewise, there is the cost of going from old to new. The square footage has doubled in this terminal, and while I won’t say that handling rates have doubled, I have heard that some companies went up as high as 30%."

Worldwide is one of the companies eager to expand its business at the airport. Currently, Worldwide offers passenger handling to Philippine Airlines and baggage services for American Airlines. Ankrom is convinced, however, that there is a wider market for Worldwide if only the company can be granted a license to offer a full handling service.

"We are one of those [handlers] banging on the airport’s door every day asking to come in. We are looking at one potential customer which has some space set aside for a handling agent, but it’s small and probably wouldn’t help more than just that one customer. There are other opportunities and there are some domestic carriers that have space.

"There are opportunities with customers we do business with in other cities," says Ankrom, who is confident that there are at least 10 carriers to go for in the current market. "There is room for four handlers going after those 10. We don’t want them all, as we know that in this area we couldn’t get the staff, but would like to go in for a couple with a full package and let the chips fall where they fall."

The whole ground handling community will wait with interest for the airport’s word later in the year.

Box story


Troubled Waters?

San Francisco may have a new international terminal which is a credit to the city, but airport officials are still likely to be looking out nervously into the Bay. For the airport needs a new runway as badly as it needed a new international terminal building. It is hard to see how the forecast 51 million passengers by 2006 can be accommodated without it.

Several options are on the table--many of which envisage building out into the bay--but they are currently stuck in environmental reports and an additional runway is unlikely to appear for another 5-10 years.

San Francisco is what might be called an ATC "active" airport, and delays are common. As soon as San Francisco gets a little bit of its famous weather, movements drop from 60 an hour down to 30-35. "We have to selectively cancel to try and protect customers and shrink the delays on the schedule," says Ray Klinke at United.

"In the five years that I have been here at international the minimum number of what we would call ATC days has been 200 per year. It has been as high as 240, or two out of every three days."

Such statistics will weigh heavy on the airport’s mind. It will also be mindful of how some carriers, such as American Airlines, are growing their service more at San Jose just 40 miles down the road. And then there is Oakland, due east across the Bay.

Indeed, as GSE Today went to press, Southwest Airlines announced it will pull its operations from San Francisco on March 5 and relocate most of its flights to Oakland, San Jose, and Sacramento airports.
Southwest currently has 14 departures a day from San Francisco. Eight will relocate to Oakland International Airport and two to Sacramento International Airport. Orange County, Salt Lake City, and Las Vegas will also each receive one additional daily departure.

Southwest Chair Herbert D. Kelleher cited lack of route profitability as one reason for the move as well as, perhaps more tellingly, the fact that operations into and out of the airport "produce a disproportionate number of flight delays rippling across our system."

Editor’s note:

See the March issue for a detailed look at San Francisco’s comprehensive efforts to improve air quality and other environmental initiatives.