Among the many ground handlers active in South-east Asia whose business has grown exponentially in recent years is Bangkok Flight Services (BFS), which offers a full range of ramp, passenger and cargo handling services at the Thai capital’s Suvarnabhumi International Airport. In fact, BFS has grown at a rate of more than 10% a year since it started operating there in 2006 and currently, on average, brings over 100 new staff into the organisation every month.
Consequently, says BFS managing director Stewart Sinclair, it has become part of the handler’s culture to manage that growth. Coping effectively with that rate of expansion means addressing resource planning issues relating to equipment and staff, including recruitment, uniform issuance, initial and subsequent refresher training, and much more, he notes.
It is not always easy to predict equipment requirements early enough to cope with the rapid pace of growth being experienced. Typically, BFS has only between 60 and 90 days’ notice that it has been selected by a carrier as its handler before starting work for the airline, whereas the equipment required to handle the additional tasking usually takes four to six months from ordering to delivery. Thus, “We have to do a fair amount of ‘crystal ball’ gazing to try and stay ahead of the curve,” Sinclair points out. However, BFS is at least in the fortunate position that it has the facilities and qualified staff to undertake its own employee training, allowing it to react quickly to accommodating large intakes of new staff.
KL Airport Services (KLAS), which offers cargo handling, in-flight catering and aircraft maintenance and engineering services as well as ground handling at a number of Malaysian airports – including in the capital’s busy Kuala Lumpur International Airport – has grown almost 150% in the last five years. Despite this rapid rate of growth, “We have managed relatively well due to a combination of adequate resources, funding and human capital management,” explains Kam Weng Woo, Head of Business Development & Integrated Logistics Services of KLAS.
“However, the continued growth at such a pace is not sustainable, with the biggest emerging challenge being the shortage of skilled manpower. With the growth of LCCs and other industries, the ground handling industry is experiencing high turnover, due largely to the many opportunities available in the job market. Front-line ground handling is also not as appealing to Generations Y and Z,” he continues.
Senai Airport Terminal Services Sdn Bhd (SATSSB) has also had to handle an increasing number of aircraft and traffic movements through Malaysia’s Senai International Airport. However, for SATSSB, this has represented what it regards as “a positive challenge”.
That pace of growth is not likely to slow any time soon, says SATSSB’s deputy CEO Safuan Basir. Indeed, with the ASEAN (Association of South-East Asian Nations) Open Skies policy likely to come into force during 2015, the airport operator and handler expects its business to increase still further.
Located south of KLIA and not far north of another busy aviation hub, Singapore’s Changi International Airport, Senai International has continued to develop despite its proximity to these major gateways. It provides a useful alternative and complements the capacity of Changi and KLIA in both commercial and general aviation, he believes. Increasing demand has led SATSSB to invest heavily in new infrastructure and new service provision since it took over operations at the airport in 2003.
Being a private sector airport operator and handler has given it certain advantages over some of the state-owned handlers that have dominated the ground handling sector in many Far Eastern markets. Being a commercial operation has allowed it to control managing and packaging the airport’s products – including its ground handling – and thereby provide cost-effective solutions to potential customers. “We believe there are big opportunities for more privately owned airports in this region simply to cater to the growing demand and connectivity within this region,” he adds.
An evolving market
The ground handling business has changed over recent years, perhaps as much in Asia as anywhere else. The main difference may be simply one of scope, so many new airports having been opened across the Far East over the last 10-15 years.
Ten years ago, there were only one or two handlers in the majority of the region’s major airports, while over the last decade we have seen major hubs like Changi, KLIA and Bangkok all welcome many more ground handling providers to their aprons, both to cater to the increasing demand from carriers and to create a more competitive environment for airport handling and related service provision.
According to SATSSB’s Safuan Basir, LCCs flying through the region are likely to represent the majority customers for these secondary, new-entrant ground handlers, these airlines’ operations being characterised by higher flight frequencies and quick turnaround times; he believes that the ‘pioneer’ handling companies will continue to cater for the long-haul and full-services flights because of their bigger resources and comparative strength of position in relation to the newer handlers. However, there is significant potential for major handling companies to partner, and perhaps form joint ventures, with the smaller and secondary handlers in order to expand their coverage.
Along with this growth in both airport and handler numbers has come a fundamental change in the nature of airline-handler contracts, with a move in many countries away from the traditional reciprocal handling deals that were endemic throughout Asia. Whilst many legacy Asian carriers do continue to adhere to reciprocal arrangements, the new carrier entrants to the market, notably the LCCs, look for the most flexible and cost-effective handlers, regardless of their ownership.
According to KLAS’ Woo, recent years haves seen the development of a more competitive environment in which handlers must operate and with the ASEAN Open Skies agreement almost certain to be effective aas ofs ofin December 2015, the market will be further liberalised. In the past, most of the Far Eastern markets were the province of just one or two ground handlers but, with the gradual implementation of the open skies, KLAS will is expected to see the entry of the big players into some of the growing markets.
Not all handlers agree that the sector is becoming sufficiently liberalised. One who spoke to AGS notes that in many locations the market continues to be skewed by national or local laws and regulations that either prevent foreign handlers from operating at all in some locations, or at least make it very difficult for them to compete effectively by favouring local handlers (which may on occasion be local airlines).
Adapting
The ground handling business used to be well defined;, with the various responsibilities of passenger handling, ramp handling, flight operations to be provided frequently negotiated as a package. Now it is much more segmented. With the proliferation of self-service kiosks and web check-in, the requirement for check-in agents has reduced in scope and numbers. Centralised load control is now much more common, more and more airlines do not need to buy the full weight and balance services from the ground handlers, further reducing costs for the airline. The impact to the ground handler is reduced revenue, due to being asked to provide fewer services to be provided and a narrower scope of duties.
Automation and simplifying business processes has have also impacted what is traditionally a skilled manpower-based service, Woo considers. He notes that KLAS has diversified its revenue stream and from a 100% dependencye on ground handling business, it is now deriving ancillary revenues from aviation-related but non-ground handling activities such as the rental of facilities, passenger loading bridge operations and integrated logistics. This now represents 22% of KLAS’ total revenue and the handler is hoping to increase it to 30%.
There is widespread consensus that the nature of the Asian ground handling market will continue to change and that the challenges facing handlers there will also continue to evolve. For BFS’s Sinclair, like KLAS’s Woo, one of the biggest issues to be faced is the decreasing availability of appropriate staff. Generally, the rate of unemployment in Asia is low, and in South-east Asia it is very low – there is less than 1% unemployment in Thailand, BFS’s home base, for example – so finding high quality English-speaking customer service agents is a challenge, Sinclair reports. Plus, handlers are constantly having to increase staff remuneration just in order to remain competitive. This steadily increasing cost base is why a lot of handlers now prefer two-year contracts with airlines to longer term fixed contracts, he says.
The importance of LCCs to the region’s aviation sector has already been alluded to and Sinclair is very much of the opinion that these airlines will have the same effect in Asia as they did in Europe and the US, in that they will fuel huge and rapid growth in the region’s aviation (and handling) sector. He notes that the pure LCC model is evolving to offer bundled add-on services at a quicker rate in Asia than originally happened in Europe or the US and that Asian LCCs have carried cargo almost since the launch of the model on the continent – as opposed, at least initially, to LCC operations in Europe and the US, despite having the same rapid turnaround ground times of 25-30 minutes across all the continents.
LCCs are not the traditional ground handler’s market and the handlers need to be agile and flexible enough to accommodate the LCCs and their passengers’ needs. Moreover, most large LCCs are big enough to self-handle, thus further eroding the available markets.
Investment
Of course, while the cost of labour is certainly increasing in South-east Asia, ground handling staff remain relatively inexpensive and, as a result perhaps, Sinclair believes that there has up to now been no real focus on the part of many handlers to employ modern technology to replace people. This is a shame, he says, believing that the sector should always be looking for areas in which to improve productivity.
While he thinks that for many handlers the process of automation will remain a secondary consideration until the economics of the industry positively force it, Sinclair points out that BFS has invested heavily in modern technology, For example, it has spent the last three years developing its own IT systems and now boasts a suite of tools covering such handling-support tasks as resource planning and allocation, time and attendance, purchasing, cargo and billing. “We are continuing to develop our real-time tools to ensure we maximise the use of our resources at all times,” he insists.
As new-generation aircraft are introduced into the region, ground handlers need to upgrade their equipment to match the technological needs of the aircraft. With the tightening of Environmental environmental laws, are also tightening and may result in more investment is required to address this issue. Environmentallyly friendly equipment is generally more expensive. In the ASEAN region especially, the growth of LCCs will continue with the move towards Open Skies policy. More LCCs will start operations to tap into a market containing a population base of one billion population base, while existing LCCs will increase their frequency.
New airports and terminals are also being built and completed – these will also pose a challenge to ground handlers as they need to spread their operations over different terminals, thus potentially increasing costs.
The Malaysian ground handling business is fairly typical of most other Asian countries, KLAS’ Woo states. “KLIA is still growing, albeit at a slower pace than some of the gateways in the region, and this has made it tough to grow at the pace we would like to,” he says. “Regulations and laws are still pro-business, however, making it much easier to operate than in many other countries where restrictive policies and regulations inhibit the scope of ground handlers.”
Something a little different
As in any industry, individual handlers try to set themselves apart from the competition and offer something different, or just something better, than their rivals.
For Sinclair, providing a flexible approach to BFS’s customers is important, such that client carriers can select which services they want and the company can then look to specifically tailor a package for them.
For some airline customers, BFS provides everything from station management down, so carrier clients do not need to have their own representatives on-site; “We act as if we were the airline,” he says. For certain carrier customers, BFS staff are dressed in the airline’s uniform, while others are in the handler’s own uniform – it really depends on what the customer wants and whether the price associated with varying degrees of dedicated staff is desirable or whether a more generic approach is sufficient for their requirements, he observes.
And, at Senai, being an airport operator, management company and ground handler, SATSSB can offer its customers a one-stop-shop providing the full range of airport operations. The economies of scale accrued as a result mean that costs can be kept down, while SATSSB also has the financial muscle to invest in major development projects such as its Senai Airport Aviation Park, designed to provide a more cost-competitive option for aircraft hangaring, maintenance, repair and overhaul (MRO), fixed-based operator (FBO) and business aviation activities.
dnata Singapore looks to add value
Singapore Changi International Airport, like KLIA and Bangkok Suvarnabhumi, is a busy regional aviation hub, and one for whose capacity is in ever-growing demand. One of the handlers operating there is dnata Singapore, whose CEO Mark Edwards – like KLAS’s Woo – notes that every ground services provider needs sufficient human resources and equipment to handle its workload, and that rapid increases in demand will clearly put pressure on those resources and potentially impact service quality.
“But the greatest challenge in Singapore now and for the foreseeable future is manpower,” he says. “The government of Singapore has enacted legislation restricting the use of foreign labour – with considerable impact on companies throughout Singapore, undoubtedly affecting Changi. To counter the labour issues, there will be an increased use of technology at Changi in the coming years as we attempt to replace current human functions with automated systems and processes.”
While Edwards agrees with his fellow ground service providers that the development of LCCs (in particular new Asian carriers such as AirAsia, Jetstar and Tiger Airways) have caused handlers to adapt their business models to meet the specific needs of these airlines, he also points to another role that has changed significantly in nature over recent years – air freight handling.
Since 2008, cargo tonnages have fallen, and the increased use of belly cargo in widebody passenger aircraft means that fewer dedicated freighters are now operating in the market. But, despite the focus for handlers being these days very much on on-time performance, the turnaround of passenger flights is as complex as ever, with numerous different agencies and their vehicles crowding around an aircraft trying to achieve a quick and successful turnaround.
Edwards can point to a number of trends that he readily identifies will effect an already changing Asian ground handling market. For example, the increasing range of twin-engine widebody aircraft will bring previously difficult point-to-point destinations within range, he believes. “We expect airlines to expand their services to secondary destination in the region and the continued growth of LCCs will open up other new markets.
“Environmental pressure has had little impact in the region, with some exceptions such as Australia and New Zealand. However, it is inevitable this will change as time goes on and we will see policies taking into account environmental needs,” Edwards continues. “And, as for technology, my vision as a passenger of leaving home and sitting in my seat on the aircraft without having interacted with any ground handler, airport or airline personnel is appealing. As a ground handler, however, we need to find ways to add value to customers – to adopt and adapt to technology in order to benefit all our stakeholders.”
