Flying into profit

posted on 5th June 2018
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Since January 2011, AeroGround Flugenhafen Munich Airport has been a wholly-owned subsidiary of Munich Airport Authority, turning losses into profit as a private company.

Turning a company around from a loss-making business division to a profitable stand-alone operation is never easy, but when you’re dealing with the fast-changing air transport industry, any success should be celebrated. And that’s exactly what AeroGround Flugenhafen Munich Airport has done, as it welcomed its latest customer, airberlin, to its fold.

“We signed a long-term (six-year) contract with airberlin in March,” comments Axel Feil, executive VP marketing sales and business development. “This is an important move for us, because airberlin is the second biggest airline in our hub airport, Munich, and, indeed, in all of Germany. We now serve 100 customers.”

That AeroGround has any schedule at all is impressive, since 18 months ago, the company faced failure. “We were a business division of Munich Airport Authority,” Feil explains. “But because of that, we were treated as a state company in terms of union negotiations – and pay is standardised across all state-owned companies. This made us uncompetitive with our rivals. We were losing 30m euros per year. We needed more flexibility in the way we operated and the way we rewarded our staff.”

So in January 2011, AeroGround Flugenhafen Munich Airport became a wholly-owned subsidiary of Munich Airport Authority, with the ability to organise its own affairs as a private company. The first thing it did was negotiate new, lower pay rates with the union, which realised that if its members did not agree to changes, the company would close altogether and they would lose their jobs.“We also changed the working patterns to increase productivity,” Feil continues, “and reduced external costs by re-negotiating contracts for things like pushing back and cleaning aircraft, IT, HR and rental of office space.”

“We can ask people to work hourly shift patterns, so that we can employ them for two hours, instead of the minimum four previously required by the unions. This allows us to change staffing according to business levels. We also increased the number of part-time workers to 400 to support our 2,000 full-time employees in peak periods.”

Increased flexibility has also enabled AeroGround to train staff dedicated to either terminal 1, which caters for point-to-point traffic, or terminal 2, which is a hub terminal for the 27 Star Alliance members, offering numerous interline and connecting flights, with associated baggage transfers.

“The two terminals have completely different processes and logistics,” says Feil. “Not only do terminal 2 employees have to be able to transfer the right baggage to the right aircraft in time, but they also have to know how to deal with priority passengers, such as first and business class. Most terminal 1 flights mainly have one class of passenger. In the past, AeroGround had separate operating divisions for aircraft handling, baggage handling and cargo handling. Now we are one big, more flexible and customer-focused and market-orientated organisation. Each employee may work at terminal 1 or terminal 2, but they are responsible for all of the business areas. Part-time staff then fill in the gaps as needed, under the guidance of the more experienced personnel.”

Ramp handling and terminals 1 and 2 make up two of the main business streams at AeroGround; the other two are passenger handling – check-in, boarding, load planning, ramp activities, and preparation of crew briefing – and cargo and warehouse. Each of these activities is handled by an AeroGround subsidiary: Aerogate takes care of passenger handling and Cargogate handles freight, although nearly all cargo is flown on passenger aircraft, as a night flying ban makes Munich unviable for all cargo carriers.

Despite the huge changes which have taken place, AeroGround is still not satisfied. This year, it has invested in 19 new MAN buses – 20% of its bus capacity – to ferry passengers and crew and is introducing more power stow equipment, often known as ramp snakes.  “We got our first power stow conveyor in 2008 and have been adding to this steadily,” says Field. “We now have 14 and are buying two more this year. These conveyors are not only better for staff as they cause less strain, but they reduce baggage damage as loaders don’t have to push bags across the floor of the hold. We can also operate with one less staff member as we don’t need someone in the hold.”

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Other innovations at AeroGround include a baggage reconciliation system and mobile data devices. The baggage reconciliation system enables staff to see how many and which bags have been loaded on any particular aircraft. “This isn’t just useful for security reasons,” Feil emphasises, “but because it can provide an instant view of what bags are missing from an aircraft. It also enables staff to quickly find and offload baggage if a passenger has not turned up at the gate or is being removed from the flight.”

But AeroGround is particularly proud of its MC95 mobile data devices, introduced at the beginning of the year. The Motorola hand-helds can be used inside and outside for a number of applications. For example, a ramp agent can obtain the latest information on last minute baggage and know how long it is going to take to get to the aircraft, allowing the agent to make an informed decision about whether to hold the flight or not. It can also be used to ensure additional services such as buses, toilet and water or cleaning can be arranged quickly when needed.

Another new system helps AeroGround to strengthen its customer focus: a customer relationship management system from Sensix gives the company an overview of what is happening with every customer: contract details, people involved, prices, services, events and a weekly quality report.

Thanks to service-oriented forward thinking like this, AeroGround has been transformed from a loss-making, uncompetitive organisation into a profitable one. If the EU directive to require airports to have at least three handling companies, rather than two, comes into force, AeroGround will consider taking the opportunity to expand into new locations.

“We will initially stay in German-speaking countries – Germany, Austria and Switzerland,” says Feil. “We are a regional expert, not a global player.”

Not yet, anyway. But with AeroGround’s progress so far, it can’t be long before it is competing on a much bigger playing field.