It is a given that aircraft ground handling as an industry has an interdependent relationship with the operation, movement, servicing and maintenance of aircraft. This in turn creates the same opportunities for both start-up and existing ground handlers that airlines have identified. Emerging aviation markets can be identified in the Middle East, much of Africa, the Indian sub-continent, Russia, a number of the CIS (Commonwealth of Independent States) countries and the Baltic state.
As airline networks expand, their need for handling will expand with the greater reach of operations. However, it remains all too easy for carriers to self-handle where it is possible to operate such in-house activity.
While it remains difficult to determine the exact numbers and locations of the new greenfield airports likely to open over the next two decades, what is not difficult to undertake is to identify where these new airports are likely to be. However, the undeniable attractions these new investments will represent for ground handling companies, there are a number of pitfalls that must be avoided.
The main one is the inability to see that airports are not a single asset class, despite sharing such obvious characteristics such as runways, passenger terminals, cargo villages and luggage systems. The main determinant of an airport’s performance has to be factors such as location, captive market, mix of airline customers and management team. All of these can and will in turn affect an airport’s investment potential and activity level for ground handlers.
In China, on 14 March 2011, the National People’s Congress approved a new national development programme for the five years to 2015, including the planning and construction of many greenfield airport developments. The plan marks a turning point in China’s economic development; no longer is the emphasis on headline growth. Rather China seeks ‘higher quality growth’. Having raised the living standards of hundreds of millions in the last 30 years, the country is now seeking sustainable growth through overcoming challenges such as pollution, intensive energy use and resource depletion.
According to business consultants KPMG, the Beijing government is continuing its Hub-and-Spoke network, much like the United States model to move rapidly growing tonnes of cargo and passenger numbers. Between 2011 and 2015, 50 new airports will be opened, taking the total to 230, in line with the long-term goal set in 2008 of having 244 operational airports in 2020 and it is estimated that by 2030, another 5,000 aircraft will be needed to service demand. A central piece to the aviation development plan is a new Beijing Airport to accommodate the rapid growth in both domestic and international passengers.
In late 2013, an Air France Consulting team went to Shanghai, appointed by China Eastern as part of a consulting engagement with the Chinese company, to improve the organisational processes and ground operations of China Eastern. Experts from Air France Consulting described and explained the operation and organisation of a hub control centre of an international Airline.
The growth of airports is an obvious and clear driver of the spread of national, regional and international scheduled airline networks and operations. What can easily be under the radar, however, is the growth of ad hoc, general aviation that is likely to happen at the same time. One interesting market for general aviation (GA), such as private jet and turboprop aircraft as well as helicopter operations, is China. Since China’s central government announced the opening up of low-altitude air space for general aviation in November 2010, because of the current low level of GA activity, fixed based operators (FBO) are rare in China and few foreign companies have ventured into China’s FBO market. One which has is Switzerland’s Jet Aviation AG, which inked a joint venture with Beijing-based Deer Air Company. A second is Colt International. “We’re expecting 2013 to be our third straight year that fuel sales grow by 50 percent,” said Daniel Coetzer, managing director of Colt International Europe. “Our customer base in China has increased by about 40 percent and we have more European customers visiting the Pacific Rim than ever before.”
In 2012, China’s business jets topped 336, and 96 of those aircraft were added just that year, according to a survey conducted by Asian Sky Group, a business aviation services consultancy based in Hong Kong, China.
In Scandinavia, FBO ground handler ASE Handling is excited at the prospects of growing private aircraft use in the region and elsewhere. Joe Belmaati, station controller, says: “I think travelling in privately owned jets will become more wide-spread for convenience as well as security reasons.”
The Copenhagen-based handler, with branches in Sweden, sees growing flights from China and Russia as a territory as two areas of opportunities. Belmaati considers that the general airline handling industry will expand as more people will be flying in the future, both as airline and private jet passengers.
His interesting take on where business opportunities might lie for handlers is the supply of bespoke services to clients.
Out of Africa
Bob Gurr, director of sales and marketing of South Africa-based handler BidAir Services, has an interesting take on what is a good opportunity for a start-up handler: “Any one where you are a monopoly!“ he says.
BidAir, a member of the BIDVest Group, is “definitely” looking at emerging markets, says Gurr: “BidAir definitely has an interest in looking at viable market opportunities in sub-Saharan Africa. Other growth markets, such as India and South America could be of interest as well.”
South Africa presents as one of the most advanced aviation markets on the continent and shares many trends with other advanced aviation markets. This means that Gurr is a keen watcher of market developments.
He says: “Whilst there is still room for smaller regional or even national players the future would seem to be dominated by bigger multinationals consolidating their positions through acquisition of smaller players.
“Ground handlers need to look at ways of expanding their revenue base beyond traditional airline sources. Services that add value to the discerning traveller, and for which they are prepared to pay, is the way forward.”
As ground handlers bear down on costs when competing for airport contracts, there is a danger that many will de-skill staff to allow minimum salary positions. In his opinion, however, there is evidence that suggests this this may only occur where cost is everything. He says: “Areas of high staff costs look more towards multi-skilling and multi-tasking, whilst lower cost areas do not perhaps see that imperative. This will change going forward as all handlers need to adopt smart practises in order to remain competitive.”
Ground handlers operate in increasingly congested environments, with little additional airport real estate to expand into. This means more time is spent in seeking ways to work more efficiently and effectively.
Gurr sees evidence of this. He says: “There is no doubt that anything other than ‘greenfield’ sites are becoming constrained. We need to ensure that our staff operate in a safe and proficient manner in order to make do with the situation at hand. It is also extremely important that ground handlers are included in the early stages of any planning that the airport authority does for future developments at their airports. All too often the areas not ‘touched’ by passengers receive the ‘out of sight, out of mind’ treatment by airport planners. Ground handlers must be forceful in getting their voices heard at the earliest possible stage.
“There will be further consolidation within the industry, but regional and national handlers will continue to have a role. There will be continued cost pressures on the handlers which they will try and manage through more effective ways of doing business, but may in the long-term affect their ability to continue to provide safe, quality services. The airlines really need to take a fresh look at what they expect from the handlers, is it ‘you get what you pay for’ or is it ‘you pay for what you get’?”
Another opportunity for handlers comes in aviation hardware developments. The arrival of the A380 in South Africa in 2010 provided BidAir with considerable opportunities for new business, notes Gurr.
He says: “We started handling the 380 with Air France in 2010, with Lufthansa being the second operator to JNB. Emirates also introduced the 380 for a while before withdrawing it. As we no longer handle Lufthansa, we now only look after the daily Air France 380. Ramp handling is not much different from that of the 747. Aircraft cleaning is more intensive, but the ground time allows for a reasonable period to clean. The main area of difference on the PAX side is obviously the number of passengers and the need for effective boarding procedures due to simultaneous two-deck loading.”
Greenfield and second airports
In many parts of the world, investments in airports are as likely in greenfield and second airports as they are in established airports. For handlers, such new building will tend to offer more chance of establishing a presence than an expanding existing operation where there are likely to be entrenched operators.
The growing demand for a greater number of airports in Indonesia reflects what industry observers are describing as one of the world’s the fastest growing markets for air travel and the fifth largest domestic air travel market.
The popularity of air travel in Indonesia, not least the growing demands for air travel to replace ferry transport between the country’s many islands, is leading to a crisis in the state’s aging airport infrastructure. This made the headlines this year when In August, Garuda was forced to announce a six months delay in the launch of its first Jakarta-London service to May 2014 because of the capital’s aging airport.
A multi-billion dollar Abu Dhabi Airport terminal is to open in July 2017, to boost the capacity of the airport to 30 million passengers annually. Singapore’s sprawling Changi Airport is set to get much bigger with the opening of a new T5 terminal built to handle as many as 50 million passengers per year. The city-state’s transport minister Lui Tuck Yew has confirmed plans for the new super-sized T5 facility, although the terminal won’t open until sometime in the next decade.
In India, there are some 14 greenfield airports which have received in-principle green lights, including a major facility to be developed at Punefor and Nalanda in Bihar. A projected trebling of traffic is persuading the Indian government to invest US$30 billion in infrastructure over the next ten years in the upgrading of existing airports, the provision of second airports for major conurbations and greenfield airports. The government also intends to invest some US$10 billion in ancillary services such as ground handling, maintenance, air traffic management, security and training.
Projected growth for the country will necessitate provisioning for a second airport at each of the 12 metropolitan cities and a third in the case of Mumbai, paving the way for a total of 13 metro airports. There is the possibility of a second airport in Ahmedabad as well.
Slow and steady
The development of an airport can take years and even decades. Faster developments for handlers can come in the form of new airline services and changes in airline networks with existing airports. Independent ground handlers are working in a generally more liberalised environment compared with the past. There are many opportunities for the taking.
