The biggest ground services groups have a relatively limited presence in the Asia Pacific region so far. Swissport International has only a handful of operations, at Tokyo Narita, Nagoya and Osaka Kansai in Japan, at Seoul Incheon in South Korea and at Hong Kong. Its latest venture in the region is in Kazakhstan, where a new joint venture established by Swissport and the airport operating company is due to take over passenger handling at Astana on 1 May.
Passenger traffic at Astana is predictably light but growing strongly, having increased by 13% to reach nearly 3 million last year, while the number of flights increased by 11% to 22,550. In a second phase of the transfer Swissport Kazakhstan plans to take over all ground handling, including ramp and de-icing services, by the end of this year.
Dubai-based dnata provides ground handling at Singapore Changi, Guangzhou in China, Manila’s Ninoy Aquino and Clark International in the Philippines, the four main airports in Pakistan and seven locations in Australia, including the country’s six main international gateways. At Sydney, the biggest operation in the company’s Australian network, dnata handled nearly 12,500 flights and more than 2.25 million passengers in the year to March 2014. Two years ago it set up a new operation at Cairns in support of a three-year contract to provide ground handling for Air New Zealand.
Late last year dnata agreed to buy out Toll Group’s 50% stake in Toll dnata Airport Services, the Australian partner having concluded that the joint venture was no longer core to its transport and logistics offering. The company was formed in 2007 when dnata bought 50% of Toll Air Services; the divestment of Toll’s remaining stake was subject to approval by Australia’s Foreign Investment Review Board. Toll had previously cited wage cost increases and start-up training costs associated with new contracts as placing earnings under pressure, offsetting revenue increases from new contracts with domestic and international airlines.
Menzies Aviation, too, has extensive operations in Australia, where it provides ground handling at 10 airports, and New Zealand, where it operates at another five. Earlier this year, after more than six months of negotiation, the company signed a new three-year passenger and ramp contract with Qantas covering Auckland, Wellington, Christchurch and Queenstown airports. Jetstar Airways has also extended its contract with Menzies subsidiary Skystar Airport Services involving passenger and ramp business in Christchurch, Dunedin, Perth, Hamilton Island and Proserpine for a further three years.
The group’s only other operation in the region is at Macau, where Menzies Macau Airport Services, the joint venture with Air Macau, Eva Air, CNAC and local businesses that was established at the airport in 1994, won a new 10-year operating licence to provide the ramp, passenger, cargo, operations control and line maintenance services. Macau, though, is a relative minnow by Asia Pacific standards, with annual traffic in 2014 of 5.5 million passengers. The company’s 600-plus staff typically handle around 65 flights a day for 23 customer airlines.
The region’s bigger hubs have seen more dynamic developments, though airport operators’ desire to increase competition among providers for the benefit of their customers has not always been rewarded with success. Swissport became the third ground handler at Singapore Changi in 2005 as the Civil Aviation Authority of Singapore (CAAS) sought to create a more competitive market that would result in lower costs and an enhanced level of service.
Those ends were achieved. The CAAS said ground handling rates fell 15% as a result of the third licence. But Swissport pulled out of Changi four years later, citing a difficulty in winning new clients at the airport and consequent heavy losses that local media reports put at more than $30 million.
Ground handling at Changi continues to be dominated by Singapore Air Terminal services (SATS), which has nearly 60 airline customers and around 75% of all flights. Local bank OCBC warned in March that negligible passenger volume growth of just 0.7% in 2014 and a downward trend in aircraft movements pointed to a challenging environment for SATS. The airport has more than 100 airlines offering over 6,500 weekly scheduled flight, and last year’s total of 54.1 million passengers was a new record, but movements dropped 0.7% to 341,390.
Tight cost management and productivity gains have helped the company continue to grow, OCBC acknowledges, and it should benefit from lower oil prices, but challenges include rising labour costs and lower margins as a result of continuing growth on the part of low fare airlines.
Rival dnata Singapore (the former Changi International Air Services) has operated at the airport since 1997 and has around 50 airline customers. In the year to March 2014 it handled more than 40,000 flights and nearly 6.7 million passengers.
In a renewed attempt to offer its airlines more competition and what it hoped would be improvements in service quality, range of offerings and price, operator Changi Airport Group awarded a 10-year ground handling licence to Aircraft Service International Group (ASIG) in 2011. But it was October 2014 before ASIG started operations there with a contract from Jetstar, and then only for staff shortages to force the airline to enlist the help of former handler SATS while ASIG hired a reported 100 more staff. Full handling of Jetstar resumed in November.
SATS also has a 50/50 joint venture with Air India. Formed in 2010, Air India SATS Airport Services (AISATS) provides ground handling at the international airports in Bangalore, Hyderabad, Mangalore, Delhi and Trivandrum. Air India has converted its own passenger, cargo and ground handling operations into a subsidiary company, Air India Air Transport Services Limited (AIATSL). It is active at 43 domestic and 13 international airports.
The formation of AIATSL and the airline’s maintenance arm, Air India Engineering Services, was seen as a prelude to the sale of non-core assets by Air India, which has been racking up substantial losses in recent years. Some reports indicate that the airline’s management had developed a proposal for privatisation of the two subsidiaries and the airline itself before the 2014 general election but they were abandoned after the defeat of the United Progressive Alliance. Independent directors on the airline’s board are reported to be pressing for a resumption of the process.
As in Singapore, where there is heavy competition for skilled workers, recruitment is also an issue in Thailand, where the employment rate is more than 99 per cent and graduates with English good enough to work in passenger services typically have degree-level education and consequently have a wide choice of career options.
Political unrest in the first half of 2014 saw significant flight cancellations and reduced load factors on flights to the Thai capital. Even so, the 46.4 million passengers at Bangkok Suvarnabhumi still exceeded the airport’s design capacity of 45 million. Flights from China in particular have surged in recent months and both Suvarnabhumi and Don Muaeng, which handled 19.4 million passengers and 172,681 movements – up 30.8% and 19.4% respectively on the previous year – are expanding.
In February Airports of Thailand gave the go-ahead for a long-delayed expansion plan. A new terminal north of the current Suvarnabhumi Concourse A is planned to accommodate up to 25 million additional passengers, with a 28-gate midfield terminal adding capacity for 15 million more. Along with a third runway, initially 3,900m long and ultimately extending to 3,700m, the additional facilities should increase the airport’s capacity to 70 million by 2019 and 85 million by 2020.
Refurbishment of the second terminal at Don Muang, disused since 2006, is due to be completed in August. Terminal 2 will cater for domestic customers while international passengers use Terminal 1. The airport is set to become southeast Asia’s leading hub for low cost carriers, with AirAsia Group, Nok Air, Thai Lion Air, THAI Smile and Taiwan-based start-up V Air among the airlines operating there.
Thai Ground Services operates at both the capital airports and provides ground handling at a further five international and three domestic airports in the country. It has more than 100 airline customers, including members of all three global alliances. Its contract at Suvarnabhumi is valid until 2040. The group says it is planning to increase its existing two-thirds market share at Suvarnabhumi. It also has an 80% market share at the five airports where it has a single competitor (Chiang Mai, Hat Yai, Phuket, Krabi and Chiang Rai), but handles mainly charter flights at Don Muang.
Bangkok Flight Services (BFS), the joint venture between Bangkok Airways and Worldwide Flight Services at Suvarnabhumi, saw a decline of around 6% in the number of flights handled in 2014. BFS provides ground handling to around 70 airlines and passenger handling for around 20 of them. Recent additions to its customer list include Ethiopian Airlines, Iran’s Qeshm Air, Jetstar Pacific.
At Hong Kong Cathay Pacific subsidiary Hong Kong Airport Services handles two dozen airlines, including Cathay itself and sister Dragonair. It had 48% of the airport’s ramp handling and 24% of its passenger handling business in the first half of 2014. Among the other ground handlers at the airport is Jardine Aviation Services Group (JASG), whose new clients in the last 12 months include Virgin Atlantic and South African Airways.
Several of the biggest airports in mainland China have formed joint ventures with Hong Kong- or Singapore-based ground handling specialists. When HAS formed Shanghai International Airport Services (SIAS) in 2012 with Air China and existing ground handling providers Shanghai Airport Authority and Shanghai International Airport, the new company took over both the airline handling contracts and the existing ground handling services staff at Pudong and Hongqiao.
The new company started operations in February 2013 with the initial target of reducing average transit time from 100 to 60 minutes. Between the two airports SIAS handled 24 domestic and 23 international airlines in the first half of 2014. Cathay says the financial results for the period were better than expected because of cost savings plus an increase in the number of customer airlines served and flights handled. The previous year’s loss had been less than expected because of cost savings.
Shanghai’s two airports now have more traffic between them than Beijing – a combined 89.6 million passengers and more than 655,000 movements in 2014 – and expect the number of passengers to exceed 110 million by 2020. Pudong’s fourth runway opened in March, increasing the airport’s capacity to 60 million passengers and 555,000 movements.
China Eastern also provides ground handling in Shanghai, with more than 8,000 staff at the two airports handling 1,100 flights daily. Ground services contributed RMB2,253 million (US$368 million) to the group’s revenues in 2013 and RMB1,159 million ($189 million) in the first half of 2014.
Beijing Capital, the world’s second-busiest airport, saw its traffic rise 2.9 per cent last year to top 86 million, with movements up 2.5 per cent to 582,000. In February airport operator Capital Airports Holding sold 30 per cent stakes in Beijing Aviation Ground Services, its 60:40 ground handling joint venture with SATS, to airlines China Southern and China Eastern for $4.24 million each. The transaction left SATS with a diluted 28% share of the company.
Air China also provides ground handling services at Beijing Capital International Airport and at Chengdu, China’s fifth-busiest airport with more than 37 million passengers and 270,000 movements last year. Air China handles its own flights and those of EVA Airways, Dragon Air, Air Macau and Silk Air at Chengdu. The airline had 4,000 ground handling staff at the beginning of 2014.
At Kunming, the capital of Yunnan province (and China’s seventh-busiest airport, processing 32.2 million passengers last year), Jardine Airport Service China and Yunnan Airport Group formed Yunnan Airport Service in 2009. By 2014 its 800-plus staff were handling a daily average of 400 flights and 50,000 passengers.