March 1, 2005
Hamburg airport recognizes its ground handling services

Faced with an increasingly competitive and liberalized market, Hamburg Airport has reorganized its ground handling services.

Hamburg Airport's HAM 21 Extension Project is indicative of the progressive nature of Germany's fifth largest commercial gateway. Far from resting on its laurels the airport is aggressively improving services for its near 10 million passengers per annum (mppa) and airline clients.

Of course, the driving force is not merely the philanthropic nature of its management but rather an intuitive understanding that the market it operates in is becoming increasingly competitive as liberalization within the European Union presents ever greater challenges and opportunities.

Aside from the expansion, part of Hamburg's response to this dynamic situation has been the reorganization of its ground handling operations. The airport subsidiaries -- AHS Hamburg Aviation Handling Services, CATS Cleaning & Aircraft Technical Services, STARS Special Transport & Ramp Services and GroundSTARS -- will now have their operations coordinated by a central Ground Handling business unit.

Although Hamburg is the major shareholder in each individual company, it did have partners to consider but as Ulrike Riedel, the new Head of Ground Handling at the airport explains "they were consulted and agreed. After all, the main target -- a successful business -- is shared by all shareholders."

This is not the first time Hamburg has responded to market conditions with changes in its ground handling structure. Almost a decade ago, EU laws on competition led the airport to partially privatize its ground handling units.

"In the mid-90s Hamburg Airport developed the Hamburg Model for an airport organization," Riedel reveals. "A major part of this was the change of ground handling departments into different subsidiaries for transport services and deicing, loading and cleaning. The organization as well as the newly implemented wage agreement was modelled to the specific market and competitive environment at that time. This was an important step to increase the flexibility and the competitiveness of each service."

A natural progression

Riedel views this latest shuffle as simply the next stage of development, a natural progression: "Despite the improvements, the airline customer often prefers one contact," she says. "For this reason the contracts were always centralized in Hamburg Airport itself and the services then sub- contracted to the subsidiaries.

"Now, contracts and operations are coordinated within the Ground Handling Department," she continues. "It is just the next logical step in the development of the organization towards the customer, who can now address the same unit regarding contract as well as operational questions."

This new arrangement means the Ground Handling Department will have to perform as a well-oiled machine. However, a culture of coordination among the different subsidiaries is helped by the Department's relatively small size.

"We are a small team," informs Riedel, "and we work closely together on all questions concerning the whole or major parts of ground handling." Two colleagues sit on the managing board of each of the different subsidiaries, one responsible for contracts and sales and one for the operational side of the unit. Such direct relationships ensure quick and easy communication.

And on the supervisory level, Riedel is working towards strengthening the links of her network through regular meetings. She hopes this will ultimately lead to a better understanding of the Department as a whole and the needs of the other units.

"Everybody is getting used to the different interests I have to take into consideration and step by step are getting an idea of the wider concept themselves. They are aware about the interdependence of the different services and besides their individual targets are now on the lookout to help their colleagues from next door.

"Of course, my colleagues or supervisors sometimes ask me in the name of which company I am actually addressing them," she jokes. "To make the distinction easier for them they have bought me five different caps bearing the company names on them. We deal with this question very easily."

Commercial success

An integral part of the new set-up is the management of commercial concerns, now centrally controlled by Riedel. One reason for this decision is the need to oversee the different contracts. As these contracts provide the lion's share of revenue for each subsidiary, a central commercial control makes it easier to present a united front and thereby make the best possible gains for the Hamburg Airport Group.

Also, although there are four different subsidiaries, there is essentially one product -- ground handling services at Hamburg Airport. Again, having one person responsible for commercial concerns makes it easier to resolve matters for the success of ground handling as a whole. Naturally enough there are a lot of questions relating to at least two of the four parties and the best solution might not be found by the decision-making process of a single subsidiary alone.

Riedel hopes that despite the ever-increasing competition, gains in revenue are possible. "We are currently in the process of optimizing the structure of the different units to achieve more flexibility," she says. "Any expansion, strictly speaking, will be possible in two ways; within the bounds of the Hamburg market or beyond them.

"As regards to the Hamburg market we of course want to increase or at least stabilize our market share," she adds. "Expansion on a national or even international basis is a very interesting project. We feel the necessity of offering our services on a wider level, similar to our competitors, which are generally operating on an international basis. The trend of more global contracts can certainly not be ignored."

HAM 21 and beyond

A new operating structure and the drive to increase revenue would be enough to contend with but the challenges for Hamburg's ground handling services don't stop there. The airport is undergoing a significant face-lift -- the ?350M (~$450M) HAM 21 Extension Project due for completion in 2007.

This major development will effectively merge the existing three terminals into two, situated either side of a brand new shopping plaza. It will make Hamburg one of the most passenger-friendly facilities in Europe but also force a re-think of current ground and apron activities.

Riedel welcomes the project, particularly the potential of improved technology. "The HAM 21 expansion offers a new infrastructure, which facilitates the organization of the ground handling services," she notes. "The operation will be reduced to two terminals instead of three and baggage handling will be on a new level technically. This is a highly important development for us and will be used for further improvement in the service."

Given the fierce market Hamburg's ground services have to operate in, any advantage will need to be exploited to the fullest. Because ground handling in Germany was traditionally offered exclusively by the airport, the liberalization started in the 1990s has put a lot of pressure on the market. It is still early days for the young companies trying to grab their share of the pie.

A few of the larger ground handling organizations are now beginning to establish a significant network in the German market -- Aviapartner, for example, is now present at five different German airports alone, never mind its other European interests.

"This leads to a competitive disadvantage for the ground handling units, which are only present at their own airport," admits Riedel. "The globalization of ground handling services and contracts is definitely the major challenge for airport ground handling units. And this is likely to increase if there are further steps in the process of liberalization."