Future focus

posted on 17th March 2020
Future focus

The aviation industry managed to hold steady in 2019 – but as the challenges of last year remain unresolved and new threats emerge, how might 2020 turn out?

The International Air Transport Association (IATA) says that passenger demand rose by 4.2% year on year in 2019 – rather less than in the previous 12-month period – but an achievement given the challenges it faced.

Economic uncertainty, weak global trade and (geo)political tensions all affected demand.

Nor has the start of 2020 been much easier, with the shooting down of PS 752 in January and the outbreak of the coronavirus around Chinese New Year.

ACI World director Angela Gittens points out: “With ongoing trade wars and rising geopolitical tension in the Middle East, the … developing situation may not be a momentary shock to the air transport industry; rather it has the potential to produce a significant shift in this year’s global economic growth trend,” while the coronavirus health crisis could also contribute significantly to a “volatile” year.

Despite the immediate difficulties, demand for air transport is still expected to rise in the coming decades.

The addition of a third runway to London’s Heathrow airport has just hit an obstacle, but other gateways are expanding in anticipation of that growth – for instance, Orlando International Airport in Florida is building a new South Terminal, due to open in 2021. Elsewhere, Istanbul’s new airport was inaugurated in October 2018 and has attracted several new airlines, while numerous brand-new gateways are under construction across China.

Some trends that have developed in recent years will continue to make their effects felt in 2020 and beyond.
According to a spokesperson at Turkish ground handler Çelebi, the two main shifts relate to reduced handling rates and sustainability.

“We are constantly challenged for the rates in turnaround handling,” he says. “Many low-cost airlines are considering going with self-handling, as they believe they will save on costs. We have to adapt to this challenge. Ground handlers need to see how they can still run a profitable, quality-oriented business, while maintaining a safe environment.”

As regards sustainability, the trend in ground handling is for increased investment with the goal of cutting carbon emissions.

Indeed, Groundforce Portugal commercial director Catarina Mota points out that aviation is still one of the world’s most polluting industries.

“Turning into a carbon neutral industry will be very challenging, but if the problem is actively addressed it can be transformed into a competitive advantage as environmental awareness is growing significantly, particularly among the millennial generation,” she observes.

Mota suggests that a shared strategy between aviation stakeholders, including passengers, where incentives are applied to the pricing structure, could accelerate the reduction of the carbon emissions.

Individual stakeholders are already doing what they can to improve their environmental performance. For example, Çelebi is lowering its carbon footprint in India by introducing an advanced taxiing solution, Taxibot, across key airports in the country.

The pilot-controlled semi-robotic Taxibots are designed to reduce fuel consumption by 85% and foreign object debris by 50%, ensuring safety and reducing congestion at the airport, Çelebi says.

“The use of Taxibots will also bring down the emission of CO2 and other noxious gases by 85%, and cut noise pollution at the airports by 60%,” the spokesperson adds.

Investments in other ground handling services, such as lounges, are also set to take place this year as Çelebi focuses on extending its services beyond its core products. A focus for 2020 is its premium service, Çelebi Platinum.

Tech trends
Ayah Abdelhamid, marketing manager at Egypt-based ASE Group, says that “it is undeniable that we are moving, at a fast pace, into a digitalised era; and the key to not only keeping up but moving ahead is the innovation you will bring to your product.”
For the past decade, ASE has been working on techniques to maximise revenue for airlines through ancillary services. Today, there is also an increasing need to reduce costs.

Abdelhamid points out: “New technology is constantly being developed in attempts to reduce costs for airlines in a harshly competitive market in which prominent names are shutting down and ceasing operations overnight. However, in order to achieve maximum results, all stakeholders must develop, innovate and even revolutionise their infrastructure, protocols and processes.

“For example, the introduction of online visas was mainly implemented for security purposes; nevertheless in order to make the ultimate use of it, we need to integrate the border system (for e-visas) with departure control systems for a quicker processing of passengers.”

This, in turn, will speed up the overall handling time per passenger, reduce disruptions, reduce turnaround time, increase on-time performance – and thus reduce costs for airlines.

“In 2020, I expect to see a ground handling market with no room for a traditional entity. Automation, accuracy, and speed will be imperative keywords for the industry’s upcoming performance,” Abdelhamid sums up.

Stephan Hirmer, head of passenger processing services, airport IT product management at Amadeus Airport IT in Germany, outlines several key areas where technological developments are likely to gain ground.
First: “Over the next year, we expect to see an increase in ‘off-airport activities’ enabled by cloud technology,” he says. “As outlined in IATA’s NEXTT vision for the future, off-airport activities will help airports to unlock capacity without the need for new infrastructure investment, by moving essential passenger handling tasks outside the airport.”

For passengers, off-airport activities mean greater choice and convenience. Ground handler Off Airport Check In Solutions (OACIS) has made this a reality in Australia, using the cloud to offer ‘pop-up’ check-in and bag-drop from virtually anywhere.

Elsewhere, Hong Kong International Airport is leveraging the cloud to offer mobile check-in kiosks at off-site locations such as the Hong Kong-Zhuhai-Macao Bridge border-crossing facilities. With flexible and mobile technology such as this, airports can add capacity on demand, scaling up and down as needed.

Hirmer predicts: “When off-site passenger handling becomes the norm, airports can repurpose areas previously reserved for check-in, expanding revenue-generating shops and restaurants, making the airport more experiential, rather than purely functional.”

The second area of innovation that he identifies is biometrics. This technology is already removing friction at every touchpoint in the passenger journey.

“Imagine being able to pass through the airport without ever presenting a passport or boarding pass,” Hirmer posits. “Instead, your face is your passport. A simple scan is all that’s required to check in, board, or access the airport lounge.”

For passengers, biometrics mean a simplified, streamlined experience; for airports they mean fewer bottlenecks and increased speed of passenger handling.

For example, in a recent pilot at Fraport Slovenija Airport in Ljubljana, the use of biometrics cut boarding times by 75% per passenger.

Right now, the barrier to a truly frictionless passenger experience enabled by biometrics is that there is no standard, according to Hirmer.

“Each system is different, with little integration between systems. This means passengers need to register and re-register at each destination. The solution to siloed biometrics is a common standard for the industry that works across borders, airlines, and airports.”

The final key development is personalisation. Noting that passengers now expect convenience at every touchpoint in their journey through an airport, and services which are tailored to their exact requirements, Hirmer says: “Flexible modern technology is enabling airports to serve passengers according to their needs.

“For example, hybrid automated devices allow airports to offer self-service and full-service in the same footprint. You can see these types of devices in action at Singapore Changi Airport’s ‘Jewel’ complex where ICM Airport Technics, an Amadeus Company, has deployed its Hybrid Auto Bag Drop units.
“So, whether it’s a solo business traveller who prefers an automated self-service journey, or a family travelling for leisure who prefer a full-service experience, airports can cater to both, offering self-service and agent-service from the very same device,” Hirmer sums up.

Mota, meanwhile, highlights the integration of the passenger journey as a defining trait of the coming decade.

“The passenger journey is not fully controlled by the airline, since it goes beyond the flight. While ground services can be influenced by the airline, other services are completely outside its control.
“However, the passenger has the perception of taking a single journey, not recognising the different providers intervening in the process,” Mota continues. “Although business specialisation is important, establishing partnerships along the value chain will be key to provide the seamless experience expected.

“At Groundforce Portugal, we establish partnerships with our customers where expectations are clearly defined in order to assure alignment with the service provided. The emergence of IT solutions consolidating all the information from different players is challenging, but it will provide a better travel experience,” she states.

For instance, an integrated system offering to each passenger information regarding traffic on the route to the airport, the status of the check-in queue, wait times at security or the path through the airport to the boarding gate, would increase the quality of the travel experience.

Mota considers that as the industry moves forward and seeks to implement new initiatives, benchmarking of other industries may be helpful.

“The underestimation of technology disruption, or having a silo mentality, can seriously affect the sustainability of the business model as other industries [have] found out by adopting a reactive approach regarding dramatic changes that were occurring in their environment,” she says.

Competition
One of the drivers of innovation in the aviation industry is the low-cost carrier (LCC) segment, according to Harald Eisenaecher, chief commercial officer at airfare benchmarking data firm Infare.

He explains: “The already fierce competition between airlines is set to intensify driven mostly by the rise of the LCCs. At Infare we’ve been closely following the development of this market, which now drives around 33% of global airline traffic.

“The leanness of the LCC business model means that margins are razor-thin and, as such, big data has been employed forensically to keep carriers ahead of competitors.”

Infare predicts that the traditional airlines will look to replicate this model, particularly when it comes to personalisation and the selling of ancillary services.

“Personalisation is increasingly a ‘must-have’ for all airlines,” Eisenaecher says, echoing Hirmer’s point.

“Passenger demands are on the rise and with more ancillary options to choose from than ever before, airlines that offer tiered services – business class and economy – as rigid structures, will become a thing of the past. Traditional airlines recognise that LCCs have been more successful at making the most from big data.”

Indeed, Eisenaecher describes data as “the new oil”, continuing: “It is the lifeblood of the digital economy. Online e-retailers such as Amazon, with their customer-centric business models, have been highly successful in using data to keep ahead of competition. Airlines will look to replicate this model, offering price points that respond dynamically to customer demand.”

Infare has seen demand for data increase dramatically in recent years, both from LCCs and from more traditional players.
In particular, Eisenaecher believes airfare data will be crucial for airlines when it comes to route development. Ryanair, for instance, uses customer and fare data to determine which of its routes are least cost-effective for its passengers. The carrier can then revise its pricing strategies and provide customers with the most attractive and affordable routes.

Infare also anticipates a greater uptake in artificial intelligence (AI) and machine learning.

“This technology will revolutionise data – and it will be industries with high levels of competition, such as aviation, that will be the quickest to adopt it.

“AI will be a game changer when it comes to big data. In developing new routes, airlines will be able to make long-term forecasts, marrying the technology with complex data sets,” Eisenaecher predicts.

There are ways to apply technology to the day-to-day running of a business at the administrative level, too. Isabella Nagel is responsible for strategic business development at PDC, a provider of decision support software for resource planning and scheduling.

She says: “Today, new technologies enable transparent breakdown of costs and automatic invoice control. These technologies have been developed to heighten digital collaboration between airlines, ground handlers and airports.

“We are definitely moving towards a new era of digital collaboration and numerous opportunities for streamlined processes between stakeholders.”

PDC estimates that up to 10% of invoices contain mistakes. In cooperation with Aegean Airlines, the company has developed a tool for contract management and invoice control to identify incorrect invoices: PDC GroundCost.

According to Nagel: “Aegean Airlines is now able to check most of its invoices in just a few minutes. This means that it now thoroughly checks all invoices rather than resorting to spot checking.

“Furthermore, as suppliers introduce invoices in IS-XML format – the newest IATA standard format for machine-readable ground handling invoices – invoices without mistakes can be entirely automatically approved for payment,” she adds.

Problems and potential
Havaş sales and marketing assistant general manager Mete Erna says: ‘’So far, the start of 2020 has involved military escalation between the US and Iran, followed by the downing of a Ukraine International Airlines flight, huge fires in Australia and the new coronavirus epidemic in China. All these factors have contributed to the existing pressure on the aviation industry due to the grounding of B737 Max aircraft and the escalation of the tensions over international trade between the US and China.

“Despite all of this, we still see growing demand for air travel thanks to the global increase in income per capita (especially in developing countries), and air travel becoming more affordable. If the effects of the new coronavirus epidemic can be contained, we expect to achieve a growth percentage close to double digits in our business in 2020 in line with the general forecast about the markets we operate.”

Link Aero Trading CEO Amir Samir sees a “booming future” in Africa and in the Middle East. Growth in air travel in the region will have a knock-on effect on the ground handling sector, ground support equipment (GSE) sales, manpower and airport infrastructure.

Samir sees great potential across eastern Africa in countries that have been “starved for decades of a spark of modernisation, investment and tourism”.
“The more these countries’ own laws, local regulations and investment constraints are liberalised, the more passenger and cargo traffic will grow,” he says. “This will lead to accelerated modernisation of GSE fleets, creation of up-to-standards training centres, development of qualified, skilled manpower, job creation and improved standard of living.”

Abdelhamid at ASE Group notes that four of the company’s locations were ranked as the top four fastest-growing airports in Africa in 2019: Sharm El Sheikh, Marrakech, Hurghada and Casablanca.

She says: “Egypt is coping with the rising passenger figures by opening three new international airports: Sphinx International Airport, New Cairo Capital Airport and Berenice International Airport. Another major event for Egypt in 2020 is the eventual return of UK flights to Sharm El Sheikh.

“Meanwhile, new carriers are entering or re-entering the market with us like Air Astana, Privilege Style and FlyBaghdad.”

Havaş is also continuing to follow up opportunities to grow its network – and Erna expects major ground handling companies to keep consolidating (in a recent example, Avia Solutions Group acquired Aviator in February)

Staff mismatch
Erna expects digitalisation and automation to continue to gain momentum in 2020, with increasing emphasis on automated passenger and baggage processing services. Developments in this area should ease the challenges in the labour market in some countries in the medium term.

However: “Attracting talent still remains an issue due to the mismatch between the expectations of potential employees and the wages, as well as the prospects, that the industry can offer to its people,” he says.

Keith Purdom, responsible for business development at Rsmart Software Solutions in Finland, agrees. “High staff turnover and the resultant loss of experience – and the costs of recruitment and training – have been a constant topic and it seems to affect ground handling agents worldwide.”

Many industry conferences have discussed reducing this staff churn through better leadership, better working conditions and pay increases. Purdom says this is “all laudable and necessary but there is little focus on gaining better efficiency from those same increasingly costly staff”.

One solution is the Rsmart Roster Management Service (RMS), which automates roster preparation, offers dynamic on-the-day staff deployment and can highlight where too many (or too few) staff, or particular skillsets, are available as well as capturing data to help manage costs and contracts.

Purdom says: “We are live on three continents to date and especially relevant where handlers are under cost pressure or coping with the growing pains of rapid expansion.”

A dynamic and unpredictable market
Axel Feil, vice president sales and marketing and business development at AeroGround Flughafen München, states that the main focus for 2020 will be dealing with the increasing labour costs and the lack of skilled employees in an unstable market.

In a dynamic and unpredictable market further challenges faced by the ground handlers include insolvencies within the customer portfolio which are, unfortunately, predicted to continue in the coming years.

It is apparent that due to the changes in airline business models, there is now less planning of security for ground handlers worldwide. High profile topics such as the coronavirus and the Boeing 737 Max disaster also affect the entire aviation industry.

High tariff claims and wage agreements are expected to increase the financial pressure on both handlers and airlines.

The focus on trial operations and the opening of BER airport is difficult, Feil continues. New processes and procedures must be tested, and the need to split traffic moving to BER and SXF airports is also challenging.

Working in ground handling is not as appealing as alternative sectors within the industry (such as security or logistics). Low margins leave little financial leeway to increase the appeal to potential employees.

In order to digitalise processes and improve efficiency, AeroGround is investing time and money in a number of new technologies and activities.

Together with Fraport, a virtual reality training program was created, the content being shared via an ‘Aviation VR Training Hub’ to be used by new and previously trained employees. It has also been showcased at recruitment events to give candidates a first impression of workplace and ramp activities.

It has also introduced a mobile app specifically for employees’ internal communications including shift timetables, corporate and industry news as well as contact and chat functions.

Other initiatives include tests, feasibility studies and co-operation in safety awareness, apron accident prevention, labour protection and collaborations in external projects to improve punctuality and quality; and the implementation of a system based on Artificial Intelligence in order to optimise ground handling processes.

Ramp safety
“We can definitely see the industry challenges (coronavirus aside) involved in keeping ground operations safe, maintaining a high-quality workforce and being competitive,” says Michael Bar-on, vice president product management at Trilogical, which develops ground mobile asset management solutions for the aviation market.

In particular: “Due to the increase in the use of composite material aircraft, together with the new IATA ‘No Touch Policy’ standard, more and more airlines are requesting that their ground handlers find technological solutions to safeguard their aircraft.

“In 2020 we see these requests becoming mandatory and a factor when selecting a ground service provider. In 2019 we have seen this mainly in Europe and Asia, but in 2020 the demand will spread to the US market.

“Furthermore, our view is that we will see insurance companies getting into the game and providing incentives in the form of partial financing or reduced premiums, much like we have seen in the automotive industry, where new technology was adopted to reduce the risk of accidents,” Bar-on adds.