Surge in cargo volume keeps handlers busy
To meet the growing ground handling requirement of the increasing air freight volumes, ground handlers are adding certified personnel, ordering additional ground support equipment (GSE), training staff, and adopting new technologies for efficient resource management. Although the profit margins continue to remain thin for ground handlers; there are hopes in emerging markets like Africa, ME and Asia.
Although ground handling is a small component of the airline business, it plays a key role in achieving on-time performance, while minimising operational costs. While the hurdles to perform this role are many, the magnitude of the ground handling market and its growth trajectory is illustrated in many studies.
The ground handling and support software market is projected to grow from $2.49 billion in 2016 to $3.25 billion by 2022, at a compound annual growth rate (CAGR) of 4.56 percent during the forecast period, according to a report by MarketsandMarkets. Recently launched BruCloud slot booking app of Brussels Airport is a successful attempt towards digitising landside management and eliminating waiting and idle times at the facilities of ground handlers, thereby reducing congestion and allowing better capacity utilisation.
The apron congestion is caused by lack of landside management, especially during the sudden upturn in air cargo business, and because of several cargo handlers operating in an airport. Technavio research firm projects the ground handling system market to grow at a CAGR of 6 percent by 2020. Moreover, many airports are considering pooling ground support equipment (GSE), as it can reduce congestion and free up the apron space. These are to be owned by airport or Airline Operating Committee and stored centrally, which can be leased by ground handlers as per requirement. This in turn saves the purchasing and maintaining cost.
Brigitte Press, Head of Ramp, Passenger Service and Operations, Fraport AG, informed, “Fraport Ground Services already started hiring additional staff in 2017 due to the expected increase in flights. Besides the standard purchasing programme for GSE, an additional budget was released for ordering various GSE categories from dolly to push-back trucks.”
While the industry faced capacity shortages in 2017, Frankfurt Airport’s (FRA) robust management technique allowed it to be prepared in terms of staff, qualification and equipment to cope with last year’s volumes.
Press elaborated, “Fraport Ground Services is focusing on recruiting and training ground handling staff, as well as further improving the ground handling processes. Stability and flexibility in handling is one of the key factors for smooth functioning of an international hub like FRA, and guaranteeing on-time performance for our customers.”
“In terms of future developments, Fraport Ground Services is intensely exploring fields such as automation, autonomous driving, self-services or use of self-learning robotics,” informed Press.
The right safety management system (SMS) for ground handling enables correct use of ground handling equipment and vehicles, and ensures compliance to safety regulations, thereby reducing ground handling incidents. As per IATA, by reducing damage to aircraft and ground vehicles, and improving safety, the aviation industry could save $4 billion annually. IATA recently introduced GSE Standards that require fitting of proximity sensing and warning systems to GSE for preventing it from damaging aircraft.
T2RL, a research company dedicated to airline industry, indicated in a study that the cost of flight disruptions to airlines is five percent of airline revenue or $35 billion worldwide. Shaving one minute off the time an aircraft spends on ground between flights, can save $5 million to $10 million a year, as per the Boston Consulting Group report. Press suggested, “All stakeholders who are contributing to ground handling to ensure a punctual turnaround, should be connected, and share data and timings to further enhance the overall efficiency.”
“It all starts with data,” opined Steen George Pedersen, VP, Global Marketing & Performance Management, Swissport Cargo Services. “Currently Swissport received an FWB for about 52 percent of all shipments we handle. This shows that the industry is not up to par when it comes to sharing data. The additional costs that all parties in the supply chain have due to inefficiencies, like in this example, are enormous. Next to that, we firmly believe that industry standardisation is key to efficiency and speed. As long as systems and processes are not aligned, it will be difficult to make huge leaps forward.”
As the industry is looking towards big data, blockchain technology and other types of data driven initiatives, Swissport is actively participating in several projects to gain experience with these technologies. That includes, process mining software, blockchain, and artificial intelligence and machine learning. “There is plenty of potential in the warehouse environment too. Currently, we are engaged in automated ULD-build-up software, intelligent security systems, piece-level tracking solutions, and other initiatives,” said Pedersen.
For Swissport, 2017 was an exceptional year in all aspects, a very strong demand in Q1, continuing in Q3 and Q4 with record tonnages globally. When asked about the preparedness for the continued growth this year, Pedersen commented, “To work closely with our partners, and plan current and future demand is essential to cater for future peak seasons. We address this through our monthly meetings with our key customers. The recruitment and adequate training of qualified staff are further initiatives to prepare for future peak seasons.”
Reducing turnaround time
For Hong Kong Air Cargo Terminal Limited (Hactl), the ramp handling business continues to grow, and it set a new record of handling 102 freighters in a single day. It is Hong Kong’s largest ramp handler of freighters. Vivien Lau, Executive Director, Hactl, said, “We have adopted many measures to speed-up cargo processing: including improved truck-flow and parking management, automated and expanded facilities for processing of visiting drivers’ documentation, and adoption of mobile computing to streamline our ramp operations.”
Lau added, “Adopting mobile computing throughout Hactl’s Super Terminal 1 and ramp operations has enabled better utilisation of manpower and equipment, better visibility for customers, and reductions in carbon emissions.”
In addition, the cross-border e-commerce expansion continues to impact ground and cargo handling capabilities. Lau sees cargo handling becoming increasingly dynamic. “There will be a need to broaden skills and resources to handle smaller shipments, varying shapes and diversified commodities, driven by the phenomenal growth of e-commerce. Hub and spoke strategy remains key for major airports and airlines, so speed and efficiency in handling transit cargo are vital,” remarked Lau.
Speed and timeliness is imperative to e-commerce business, which is driving air freight growth. Swissport has started providing ground services to Amazon to enable their e-commerce business. Pedersen stated, “These processes are used as a blueprint, and will be rolled out to other stations as well. Last year, Swissport started implementing cargo kiosks in some stations and the roll-out of this initiative is ongoing. We aim at a global roll-out eventually. These kiosks enable a self-service solution towards the forwarders and truck drivers, eliminating or reducing waiting time, and speeding up the process.”
Swissport has rolled out a standard e-AWB process across the network. The data accuracy is much higher in this case that allows for faster shipment processing.
Resource management is one of the criteria of strong ground handling business. Swissport has a detailed focus on accurate planning of its resources in a competitive environment.
Future of ground handling
As per IATA, more than 50 percent of all handling is carried out by independent ground handlers. The market is likely to see around 60 percent of ground handling outsourced by 2020, providing greater labor flexibility and lower costs at spoke stations, according to Boeing’s 2017 Services Market Outlook report. The report also cited that airline alliances have reduced the number of potential clients for ground handlers, which is likely to drive consolidation among independent handlers.
Moreover, the profit margins for ground handlers is spiraling down due to increased competition in the sector. Pedersen predicted, “North America and Western Europe will represent demanding pricing environment driven by tight margins. We will focus on organic growth in these markets by complementing our core ground handling competencies. On the other hand, growing markets like Africa, Middle East, Asia or South America will provide an excellent growth platform for ground handling activities. Emerging markets like Asia will represent a massive expansion of airline traffic, mainly driven by Low Cost Carriers (LCCs) providing new and longer routes.”
Swissport is already present in all of these markets, with several stations in the Middle East, Africa or Australia. Last year, it acquired Aerocare, the biggest ground handling provider in Australia and New Zealand. This move has set a strategic foundation for the company in the Asia-Pacific region.
On the other hand, Lau impressed upon that the future of cargo ground handling globally is likely to echo Hactl’s current operations. She said, “Our $1 billion Super Terminal 1 showed the industry the scope for automation, and also how to reduce the physical footprint in locations where land is at a premium. Our COSAC Plus management system has been developed in-house, with process optimisation at its heart. We have also adopted many measures to reduce our carbon footprint, which have won us a number of awards.”
If we go by the industry consensus and initiatives, the future of air cargo, including ground handling, will be digital and transparent for improved efficiency. Highlighting the need for digitalisation, Lau said, “The industry must stop fragmenting IT development, by building a uniform platform that works for everyone, and facilitates data communication and sharing across the entire supply chain. An air cargo industry that is increasingly digital will progressively eradicate re-keying errors, improve speed, reduce costs and provide customers with the visibility and service standards they demand.”
Siginon Aviation has been in the business of ground handling for over two decades in Kenya, and is now looking to expand. “Profitable regional expansion is being explored to go beyond Kenya borders in ground handling and related services. We are also leaning towards tapping into the growing perishable market,” said Jared Oswago, Operations Manager, Siginon Aviation.
Last year, Qatar Airways Cargo appointed Siginon for ramp and ground handling at Jomo Kenyatta International Airport. Oswago said, “As a response to the spurt in volumes, Siginon is investing more in robust systems and equipment for improved efficiency. We are training our staff more and challenging them to aim higher in the level of productivity.”
The industry is addressing the range of challenges facing ground handlers and airlines, with initiatives like proper training, adoption of new technologies and safety audits. Alexander König, Managing Director, PortGround, remarked, “Continual training for our personnel who are involved in handling aircraft is naturally an important element in our work to ensure that we’re in a good position in the long term and are also equipped to use forward-looking technologies.”
PortGround GmbH, a subsidiary of Mitteldeutsche Flughafen AG, offers ground handling and freight services at Leipzig/Halle and Dresden Airport. “PortGround’s priority is to automate production processes and make investments in the latest handling technologies. It has its own idea centre for technological solutions in order to improve or introduce process operations,” said König.
The company has IATA-certified personnel in order to handle all types of aircraft and cargo, including large animals. When asked about the expectations from stakeholders, König remarked, “Access to the information systems of stakeholders would be useful to make it easier for us to manage our process operations. Another aspect, which would have a positive impact, involves networking the handling systems that are collectively used in order to simplify production.”
Highlighting the business generation aspect, König said, “Our major focus is on gaining new customers. Beyond this, our activities are geared towards interlinking customer processes with those of our company; this helps us safeguard our existing business in the long term.”
The industry is also calling for a collaborative approach between airports, airlines, handlers and forwarders to better manage the cargo growth. Russi Batliwala, CEO, Chapman Freeborn, said that the industry was not prepared for the upturn in 2017 due to the limited aircraft including freighters, and not enough ground staff at airports.
The growing air freight volumes have triggered the need for space and expansion of services in ground handling. As Boeing’s Services Market Outlook report indicates that airlines are likely to spend $4.5 trillion in the next 20 years on airport ground, station and cargo operations, up from the current $138 billion, the industry is gearing up to be future ready. This includes improving operating margins by lowering costs, investment in robust IT solutions, better coordination and ramp management, certified personnel, in addition to collaborative decision making at airports (CDM), GSE pooling, which thereby ensures efficient ground handling services.