AirBaltic is a young, hybrid carrier that started out life as an airline for business travellers 20 years ago, transformed into a low-cost carrier and then finally reshaped itself into the full service airline it is today. Hubbing on Riga in Latvia, nestling on the northeastern edge of the EU, airBaltic dates its establishment as a company to 1995, although it is now almost wholly owned by the Latvian state – indeed, the state holds 99.8 percent of its stock.
In 2012 it carried over 3 million passengers, while its fleet currently consists of 28 aircraft: five B737-500s, nine B737-300s, six Fokker 50s and eight Bombardier Q400 NextGen aircraft. This fleet is in a process of transition: airBaltic is phasing out its F50 aircraft this year, gradually taking out its B737s and adding four more Q400 NextGen aircraft as part of a fleet modernisation programme that will see it concentrate on operating just two Bombardier aircraft types by 2016 – the Q400 and the CS300.
With a network of 60 stations across Europe and the former Soviet Union, airBaltic faces a big challenge in ensuring that its planes are turned around sufficiently quickly at all of those airports to make a highly time-sensitive low-cost carrier model work effectively.
airBaltic initially handled its own aircraft at its Riga home hub but, since 2011, all passenger and ramp handling right across its network has been outsourced. The change came about because of the wide-ranging Re-Shape programme that it adopted in an attempt to return the airline to profitability and to ensure what it called “sustainable future development at Riga”. The airline’s vice president corporate communications, Janis Vanags, claims the airBaltic Re-Shape strategy to have been a success, with 2012 results considerably better than planned.
Cost cutting – as well as revenue enhancement, maximising operational efficiency and fleet modernisation – was an essential part of Re-Shape and one of the strategies adopted as a result was the outsourcing of all of airBaltic’s handling. Having not long before gone through the process of creating its own ground handling operation, this might have proved an unwelcome, difficult process.
Not so, says airBaltic Corporation senior vice president ground operations, Darius Viltrakis. In fact, the move to a total outsourcing model went extremely well, he insists, and not only are the carrier’s ground and passenger handling operations going very smoothly but the financial targets set for the transition of handling responsibilities to contractors have in fact been exceeded.
Of course, there are issues still to be addressed. Ensuring the swiftest possible turnaround of airBaltic’s aircraft on the ground is not easy, especially at some of the former Soviet Union airports where the rules set by the authorities can make it hard to achieve the 30-minute turnaround possible for a B737 – the current cornerstone of the airBaltic fleet – at Western European gateways.
airBaltic had initially ground handled at Riga by means of a joint venture with Havas, the Turkish company that is now a wholly-owned subsidiary of TAV Airports Holding. When the airline pulled out of the handling business, Havas took up the reins of providing almost all ground and ramp handling for the airline at its home hub, although some related services are provided by other agencies.
For example, catering is supplied by LSG Sky Chefs, the Lufthansa business, while passenger another company provides fuelling transport on the apron is the responsibility of the Riga airport authority, and airBaltic also recently resumed responsibility for the airport ticketing office in the Latvian capital.
This last decision has meant slightly higher costs but has also allowed the airline to maintain close links with its customer passengers, Viltrakis notes, and enables airBaltic to bring its own expertise to bear in a critical part of the passenger’s travel experience.
Operating for airBaltic under a five-year agreement, Viltrakis believes that Havas has performed well as a sole provider of ramp and passenger handling services and he has no reason to complain. But how do Viltrakis and his colleagues ensure that Havas provides the highest possible level of service and the quickest possible aircraft turnaround, whether at Riga or at the other stations at which the handler processes the carrier’s aircraft (such as Helsinki or Istanbul Ataturk)?
Firstly, he notes, airBaltic will always have a service level agreement (SLA) with any handler working for it across its network. This will set criteria that have to be met by the contractor. Viltrakis has not opted for the 30 or 40-page volumes of paper that compose the SLAs created by some airlines, however. For him, these are too cumbersome, set too many goals and involve too much logging in for the handler and monitoring and checking for the airline. That is time that can better be spent on actually doing a better job, Viltrakis considers.
Of course, there are criteria to be met, amongst them turnaround times, and these are checked by his team of regional managers, each of which oversee around 10 of airBaltic’s stations and the performance of the carrier’s handlers there. But airBaltic no longer employs penalty and bonus clauses in its SLAs as it once did, having found that any incentives or disincentives tended to stop at a handler’s management or corporate level and not feed effectively down to the people on the ground undertaking the handling processes. Moreover, monitoring and assessing performance to such a degree took up an awful lot of time.
Of course, the ultimate sanction of not renewing a handler’s contract remains in place, but – the way he and airBaltic see it – it is more about the airline working effectively with a handler to ensure the highest possible level of performance, Viltrakis informs. He and his team work closely with handlers to ensure that goals are met, rather than dishing out financial penalties or rewards depending on written parameters. “It’s very important to work closely with the handlers, to agree action plans as required (if and when there is need for change),” Viltrakis explains.
Moreover, simply switching quickly between handlers may not be the right thing to do even if performance is not perfect. He notes that any problems may not be about the handler, but may be about excessive regulations or other aspects of the operating environment at a particular airport – the labour culture, the presence of strong unions, and so on.
Thus all handlers at a particular gateway may face challenges and one may not be noticeably more efficient – or inefficient – than another. And it is airBaltic’s policy not to have a preferred handling partner across its wide-ranging network; it has different handlers at different airports, chosen by a competitive process that is not just about written tenders put forward by hopeful contractors at the gateway but is as much about the experience and knowledge of Viltrakis’s team when it comes to selecting the right handling partner.
In this regard, he says that it is well worth airBaltic executives who are expert in ground handling visiting gateways that are to be added to the airline’s network and meeting any handlers involved in tendering for its business there. “We want to go beyond the handlers’ brands and go with whichever of them is the best at that particular airport,” Viltrakis points out.
Plus, a visit from airBaltic’s own ground handling experts can lead to improved aircraft turnaround times. On occasion, the airline’s own staff have shown local handlers in the former Soviet Union states that turnaround times can be speeded up relative to what had previously been thought possible. Minimum turnaround times of an hour and a half have been reduced to less than an hour in this way, he says.
“Flexibility is one of our team’s best assets,” Viltrakis declares. airBaltic has supervisory teams at some of its network stations (about 10-15 percent of its airports), while it relies on its regional managers to monitor and work with local handlers at the majority remainder. While turnaround times are not the only concern when airBaltic comes to choosing new handlers or assessing existing ones – price/cost is of course also a particularly important issue – Viltrakis and his colleagues rely heavily on their own experience and knowledge of handling to ensure that the job gets done quickly and efficiently by each contractor.
Istanbul headquartered Pegasus Airlines is a rapidly expanding low-cost carrier that has grown its network at a phenomenal rate. Barely a month goes by without the announcement of new destinations being added by this growing Turkish airline, and part of the reason for its success is how little time its aircraft spend on the ground.
Pegasus is the only low-cost carrier in the region to operate just one aircraft type – the B737, although it flies a number of different models. The airline offers a wide-ranging network from its hub at Istanbul’s Sabiha Gökçen International airport and even carries bellyhold cargo on its flights as a valuable ancillary revenue stream. Yet the airline management has found a way to keep the amount of time its aircraft spend on the ground to an absolute minimum.
In fact, within Pegasus the time an aircraft spends on the apron at an airport is not known as ground time but Pit Stop time, explains Bogac Ugurlutegin, vice president – ground operations at the carrier. “Less time on the ground means more time in the air ¬– and thus more revenue for us,” he points out as he validates the Formula 1 wording.
“This is one of our main cultures,” he continues, “and our mission is to build up a Pit Stop time culture on the ground (with our handlers), though without compromising safety.”
Ugurlutegin points out: “A ‘Pit Stop Process Chart’ has already been published for all our contracted ground handlers, after measuring each service on the ground.
“Of course, airport and terminal facilities are a major factor in Pit Stops,” he goes on. “We believe that Pit Stop management starts before landing with planning and coordination of all parties, including airport and terminal management, handlers, caterers, fuellers and so on.
“We are a network airline carrying cargo, yet we have only 20-minute Pit Stops at some stations,” Ugurlutegin enthuses. “This is our magic!”
Of course, 20 minutes is not possible at all destinations, especially in parts of the network such as airports in Russia and Ukraine. With great differences in airport and terminal facilities, target turnaround times do vary. But the minimum Pit Stop time can always only be achieved through the maximum level of cooperation between all parties concerned, he stresses.
“This is a teamwork culture. Without our ground handling partners, we couldn’t manage anything,” Ugurlutegin notes. “But we also ensure our service quality by inking standard service level agreements.” In that regard, Pegasus maintains reports on scheduled and actual Pit Stop times, the landing and take-off punctuality of each route.
Looking ahead, Ugurlutegin confirms that Pegasus intends to undertake a large part of its own handling at its Sabiha Gökçen gateway on the Asian side of the Bosphorus in the near future. As from 1 June this year, Pegasus will do its own passenger handling at its home hub. Plus: “If we decide to do our own ramp handling there, we could do all the tasks except fuelling with our own team,” he adds.
As to where partners are used: “We prefer to work with companies which are able to apply our procedures and culture with an attractive price,” Ugurlutegin informs. In the past, the required turnaround times were not always achieved, but: “I very much believe that we managed to overcome these difficulties as a result of our professional team at Pegasus and our ground handling partners,” he adds.
Rigorous procedures in regards to handlers are also applied when going into a new station, Ugurlutegin remarks. “We have a network team and before selecting new destinations we check all the airports around and compare all their facilities.”
Issues such as runway/taxiway performance, parking positions, ground services, peak-time performance and the equipment standards of local service providers are some of the most important concerns for Ugurlutegin and his team. l
Start-up low-cost carrier fastjet is trying to make it big in Africa – one of the aviation industry’s toughest environments and not an easy place for any air operator to make a steady profit. But it nevertheless has plans for rapid expansion and a quick turnaround of its aircraft on the ground will be amongst the keys to success.
The new airline took off as recently as November 2012 and now flies the A319 aircraft model on domestic routes within Tanzania (incorporating Dar es Salaam, Kilimanjaro, Zanzibar and Mwanza).
Rob Bishton is the operations director of the group that incorporates fastjet and Fly540 (the latter operates aircraft in other African markets). He is well aware of the importance of minimising the ground time of fastjet’s aircraft, which are expected to operate in tough revenue service conditions for nine, ten, or even 12 hours a day, he says.
There is little time in the air that can be saved if fuel cost efficiency is to be optimised, while the short one-hour sectors currently being flown within Tanzania mean a comparatively larger number of turnarounds for the young airline. Thus: “It’s all about the ground handling,” Bishton observes.
fastjet has plenty of background experience of operating a low-cost model and the importance of minimising time spent on the ground, with the senior management colleagues at fastjet being able to draw on their experience of having played pivotal roles in such low-cost heavyweights as Ryanair and easyJet.
And certainly, despite the differences in the European and North American operating environments compared to flying in Africa, Bishton notes there have been a lot of lessons learned in the last 10-15 years of low-cost carrier operations in the West that can readily be applied to fastjet’s business.
Perhaps the main lesson is that outsourcing ground handling responsibility is vital and that choosing the right ground handling partner is absolutely key to success. Outsourcing to a ground handling agent (GHA) means that an airline like fastjet can concentrate on its core business, he points out, and that is the strategy the carrier adopted as soon as it began flying last year.
From passenger check-in right through to ramp operations, all is outsourced, Bishton explains. fastjet’s chosen GHA partner is Swissport, selected in part because it already had a footprint in this part of the world, plus it had the “aptitude and attitude to come with us on this journey”, he says.
Selection was fairly swift, with a shortlist of two rapidly created. The process was relatively simple when compared to the procedures followed for choosing a handler in Western Europe or the US, given that in Africa the available choices are few – most airports have a handler monopoly, or duopoly at best.
Swissport either does all the fastjet handling itself or acts as a supervisor over a handler where it does not have a presence itself (for example, at the small Mwanza regional airport). A service level agreement (SLA) was drawn up between the carrier and handler, one that incorporates bonuses and rebates depending on the latter’s performance.
Criteria include such issues as safety, customer experience and efficiency, as well as turnaround times (35 minutes is the ultimate target), Bishton informs. Nevertheless, the SLA between the two parties is not onerous by today’s standards, he adds, as both fastjet and Swissport were to some extent working blind in a relatively untried market.
Clearly, as fastjet expands, so more decisions will have to be made as regards handler partners. Bishton identifies South Africa as a potentially lucrative market to get into, where the operating environment would allow a fairly speedy entrance and rapid build-up of services. Kenya is also a priority, while another is Uganda, but any routes for which national regulatory approval can be gained and which look to offer potential long-term profit are on the table, he says. fastjet is already talking to a number of governments to obtain the necessary green light, he says.
Looking to grow
The carrier is certainly looking to grow. Size will be vital to achieve good economies of scale, while extending aircraft sectors will also have a beneficial effect on the bottom line. Will Swissport be the preferred partner at other destinations? Well, certainly Bishton would like that to be the case. However, he also points out that there are parts of Africa, the west coast for example, where Swissport does not have a presence. Furthermore, any ground handling partner with a footprint there would need to show that it has the necessary resources in place or an implementation plan under way for fastjet to enter into an agreement with them.
That is one of the big downsides of operating in Africa as a carrier, he considers. It requires an awful lot of investment for an airline and a handler to establish themselves at a new station there. Indeed, while labour rates may be lower than in Europe or North America once a GHA is established at an African gateway, the cost of training and recruitment can be high and the cost of moving ground support equipment (GSE) to the airport is likely to be huge.
Another challenge that may affect fastjet’s decisions in relation to network expansion and, consequently, the GHA partners it opts for, is the nature of relevant airport infrastructure. This is poor at many gateways on the continent and, even when the desire to expand the handling facilities is there in the mind of the airport authority, the money or the political will might not be. Clearly, Bishton would not want the expansion of fastjet slowed by the paucity of facilities at any gateway to which it flies.
Despite the challenges of operating in Africa, the lack of adequate infrastructure at some gateways and the as-yet unsophisticated nature of ground handling at many of those airports, he is quite clear that the low-cost airline model will be a success there. The poor road and rail networks mean that, given a choice, Africans want to fly, Bishton explains. And fastjet is already tapping successfully into that burgeoning demand, he says.
“We’ve increased the number of people flying in Tanzania and, with a toe in the water, it gives us confidence that the brand has been well received.” Indeed, Bishton adds: “The brand’s penetration in Africa has taken our breath away; Africans seem to want to embrace us.”
As a result: “Any ground handler is going to have to invest in order to go forward with us (as fastjet expands),” he concludes.