Changing the status quo

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In an era where technology has become widely prevalent and significant emphasis is being placed upon logistics, several airlines are starting to look at the total cost of ground handling.  Lionel Alva...
Ground handling covers all the activities related to aviation on the ground carried out for airlines, including check-in and transport of passengers, baggage handling, refuelling of the airplane, catering, preparation and arrival of the flight including cleaning, de-icing, positioning of the aircraft, freight and mail processing etc. With ground handling operations becoming more technology driven, airlines are assessing various lean business models to ensure the quality and reliability of its business models. Undoubtedly, ground handling plays a pivotal role towards impacting bottom-lines in the aviation industry. A recent market research report, Aircraft Ground Handling System Market (Passenger Ground Handling Equipment, Cargo Ground Handling Equipment, Aircraft Ground Handling Equipment, by Product, Application & Geography) - Global Forecasts and Analysis to 2014 - 2019, highlights that the global aircraft ground handling system market was estimated to be valued at $347.50 million in 2014, and is expected to reach $456.76 million by 2019. Being that it is a highly specialised activity, there are certain aspects of ground handling that are unique to the industry. Costs are often in stark contrast to low profit margins. Speed, efficiency and accuracy are important in ground handling operations in order to minimise turnaround time and handling costs; the industry is under constant pressure from increased competition, rising passenger and cargo traffic and the price sensitivity of low cost carriers to produce these results. That degree of speciality and the operational costs lie uneasily with the potential outcomes of ramp and apron accidents, one of the unique issues. Rethinking ground handling approaches While recent trends delineate significant potential in the ground handling industry, this specific segment does also have to deal with a unique set of challenges that impede its progress. Since factors such as the changing dynamics of the global economy, competition and rising manpower costs continue to affect the aviation sector. And while the market is experiencing growth, margins are being eroded due to increasing competition and rising manpower costs among other factors. “The biggest challenges for all groundhandlers in Europe are low margins, rising costs, operational efficiency, data quality, and customer service improvements. Service level agreements are increasingly more copious (in excess of 40 pages!), demanding, and difficult to fulfill,” says Diana Schoeneich, managing director of LUG aircargo handling GmbH. These challenges have further been compounded by airlines that are seeking electronic auctions to negotiate their handling fees to as low as they can go. Conversely, ground handlers who are striving to secure the critical mass they need to survive, while also seeking avenues to survive thought optimisation and productivity increases. Such an approach has led to a somewhat precarious situation since much levies upon the extra efforts of the front line staff. “Many airlines are starting to look at the ‘Total Cost of Ground Handling’ and in many cases, they realise that the lowest price in ground handling is not the cheapest overall. More and more airlines understand that extremely low prices have a strong impact on the quality and reliability of their offering. Delayed aircrafts, missed connections and stranded passengers are not a sustainable position for an airline,” says Luzius Wirth, executive vice president, Groundhandling & Group Services, Swissport International.Rather than seeking the lowest possible costs for handling, it is far more viable to offer the best packages that offers a healthy balance of efficiency and value. Thus to overcome some of these challenges, airlines can sign global strategic partnerships enabling them to leverage economies of scale. The handlers can then conversely sell the same product worldwide. As a handler, we are required to play our part in containing costs and working with our airline customers. The problem is that the handler has long-term commitments – premise leases, staff contracts, purchase and maintenance of capital equipment. We need to make an appropriate return to shareholders and maintain necessary long-term investment in equipment, technology to drive improvements in processes, and staff training,” asserts Vivien Lau, executive director of Hactl. For a ground handler, a pragmatic course of action is to seek out avenues to optimise the customer portfolio per station to minimise peaks in the daily operation. Lau highlights,“Handling costs are negotiated for individual contracts, based on highly-complex profiling of the customer’s business and his requirements for service levels. We always seek to be as competitive as possible, consistent with maintaining the very high service standards that we demand of ourselves, and for which we are renowned. The fact that Hactl remains Hong Kong’s largest handler, with 40 percent market share and over 100 handled airlines, suggests that we provide the required balance of service and price.” In most cases efficiency improvements are a win-win for all concerned. Partnership between airlines and suppliers makes a lot of sense in these circumstances. IATA, the airlines and airports have already seen much success with joint projects such as e-ticketing and self-service, projects that improve the customer experience as well as delivering efficiency gains to all parties. Ray Jetha, SVP, Sales and Marketing, Consolidated Aviation Services, observes “We are currently seeing some consolidation in the handling business. The big players are getting bigger and increasing their global footprint. The big trend is not so much what is happening in our industry, it is what influences our industry. By that, I mean what’s happening in world trade. The economic and growth concerns in China, and the situation in Greece etc.” The major downside to pursuing a global strategy is that a one-size-fits-all approach does not work in all markets. Even so, there is still room for improving efficiency and standardisation of the working processes. Societal and cultural aspects still hamper a global working process whereby the same service can be provided at any given airport, worldwide. This lack of standardisation still allows the local players to pull out and gain contracts. Cargolux highlights that in the air freight industry, for instance, standardisation enables speed in air cargo business processes. Another reason why the organisation is a big supporter of industry standards is that it avoids confusion, ensuring same training network-wide, implementing effectively standard operational procedures, minimising the risk of service failure. Consequently, airlines and ground handling agents are working hand in hand, talking the same language. Despite these factors, growth in the aircraft ground handling system market will continue to depend largely on the increase in number of airlines and airports. Expansion, up-gradation of existing airports, and technology advancements, will also increase the demand for aircraft ground handling system market. Schoeneich adds, “In the last few years LUG has invested considerable sums of money towards modernising IT systems, in process analyses and improvements, and in staff training. In May, for example, we have launched a time slot and ramp management system at our cargo centre in Frankfurt/Main. In addition, we are a partner in [email protected], the Cargo Community System of Frankfurt Airport. [email protected] can be used for bookings, pre-arrival notices, customs and security clearance, truck ramp handling, ULD capture, etc.” Staff and ground equipment costs are clearly the major direct operating costs. However, the ever growing security requirements as well as the customs data entries requiring high-tech screening machines, IT tools and software and trained staff contribute to the growing costs. The cargo industry ranging from the shippers to the consignees needs to move forward in the automation process of data entries. Moving away from paper and embracing, one for all, the electronic transmission of data will clearly lower the costs for all. Still too many work flows must be manually repeated, triggering costs and risks of wrong data entries. The latter are certainly the most recent direct operating costs. “Since the implementation of the e-AWB is still in progress, air cargo continues to rely on paper documentation. As inappropriate data quality tends to cause a reduction of planning and handling time and therefore delays, one of the main challenges continues to be the hand-over of data between various parties and systems involved in the supply chain. In order to fight this problem, we plan on developing a joint e-platform linking all stakeholders involved in the supply chain at PVG. Furthermore, we increasingly face the problem of finding and keeping good staff members. There’s a fight for well trained staff,” says Lutz Grzegorz, vice president, PACTL. Ostensibly, IT systems have been crucial towards the optimisation of ground handling systems. Since these systems have provided a wealth of new applications and services, including greater mobility for staff and passengers, improved automation and self service options. “In using technology to drive greater efficiency, SATS has been working closely with various industry stakeholders. At the beginning of this year, we partnered the Civil Aviation Authority of Singapore and the Singapore Aircargo Agents Association to implement a one-stop e-Acceptance initiative to digitise the airfreight export clearance process,” avers Tony Goh, senior vice president, Sales & Marketing, SATS. However, in the quest for efficiency, technology is no magic bullet. And ground-handling paradigms must still rely on effective management, knowledgeable and experienced ramp crew as well as good reliable equipment. “The members of the Air Cargo Community Frankfurt are firmly convinced that a comprehensive solution for data exchange and for documentation on a digital basis, in other words, the creation of an integrated freight process right across all interfaces, will lead to high economic benefits for all concerned – for the airlines as well the handlers, the freight forwarders, other service providers at the location and the customers sending their freight,” says Joachim von Winning, executive director, Air Cargo Community Frankfurt. Apart from seeking digital solutions, certain innovations in the form of different designs and airframes made of composites could impel ground handlers to consider alternative processes and equipment, which would significantly impact costs while lending them a competitive advantage. Overall, such innovations could lead to improvements in aircraft design and equipment may improve efficiency and thus reduce ground handling costs. Jetha adds, “We’ve brought some fresh thinking into the industry and we’ve supported new ideas and new ways of working with investment. A great example is our unique Epic cargo management system, which eliminates archaic, time-consuming processes and work duplication in the handling process and gives our customers the benefit of a paperless solution to access fast and accurate information through our web-based portal. This system obviously saves money and time. We are currently developing a ramp module through the same system.” Recent research conducted by the University of Lincoln's aviation engineering specialists depict how calculating the quickest and most fuel efficient routes could transform ground handling. By using a database of pre-computed routes, consisting of 'building blocks' that can recreate any route airport taxi-way, the researchers claim that decisions could be made in real-time, also utilising the most appropriate speed instruction, or 'speed profile'. These steps could speed up the route-making process. Goh adds, “SATS has also initiated a Fast and Seamless Travel (FAST) check-in trial with its aviation partners. This will help to accelerate the check-in procedure at the airport, and also alleviate manpower shortages and rising labour costs. Besides hardware-led solutions, we also examined how we could better optimise the use of our passenger services staff’s time. We have introduced the flexible-hour scheme and built a pipeline of permanent part-time staff. By matching their availability against peak hours, we are able to supplement our full-time workforce while ensuring consistent service excellence standards regardless of operational demands.” Conclusion Ground handling deals with very complex operations. Even though heavy equipment is required to perform the tasks during a turnaround, flexibility is the key point to reach maximum efficiency. Therefore, adaptability skills of all workers and managers are crucial to evolving technological paradigms. Being a specialised industry, ground handling firms have to deal with the multiple challenges of safety, efficiency, innovation and constant optimisation in the face of increasing competition and declining margins despite tremendous growth.
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