Flag-carrier Finnair makes high demands on its third-party airline ground service providers. James Graham talks to Mikko Tainio, head of ground operations, on how to make the grade as a supplier
Finnair’s business strategy is to leverage its far northern location as a country to work as a bridge between Europe and Asia. Shorter distances across the northern great circle mean travellers to and from Helsinki have quicker journeys than the busier and longer southern routes to destinations in China, Asia and Australasia.
According to Tainio, Helsinki is so important to the business activity of the airline that there is no way the airline will risk handing its ground services to third-party operators.
He says: “As our strategy focuses on Europe-Asia network traffic, we view our Helsinki hub customer service as so vital that we keep it in house to make sure we are flexible with new products and concepts for our customers. All other ground handling is outsourced.”
The legacy carrier claims to be one of the most innovative, safest and longest-operating airlines in the world. Finnair’s route network connects Asia, North America and the northern regions of Europe and beyond through its hub at Helsinki Airport. Helsinki’s geographical location provides Finnair with a natural competitive advantage, as the fastest routes between many destinations in Europe and mega-cities in Asia go through the city.
The company employs approximately 4,800 professionals and its revenue in 2014 was approximately Ä2.3 billion.
Outside of Helsinki Airport, Finnair uses a wide selection of national and global suppliers at its 20 Asian and 100 European stations. When possible, the airline aims to co-operate with its preferred suppliers. A typical agreement length varies from one to three years.
Doing business
Third-party ground handlers enter into relationships outside of Helsinki through a range of pitching, tendering or competition, depending on the station in question. According to Tainio, there are a number of ways would-be suppliers can come forward.
He says: “There are different approaches depending on the destination. In the case of new destinations we try to include all the possible options to the tender process. In the current destinations we try to improve our operational quality and cost level with the current suppliers while still always keeping our eyes open for would-be companies.
“Naturally it is possible to dispense with any supplier if they don’t meet our expectations, but this rarely happens.”
The airline has established a template contract for ground service providers with standardised contract terms. However, Tainio acknowledges there is always some need to adjust the details to match the local operations where the airline is established.
Tainio leads a well-functioning team of 300 ground handling staff on three continents and several thousand outsourced service partner employees globally. Like most operators in the aviation industry, Finnair faces a range of headaches in securing and retaining trained and professional staff.
He says: “There is a lot of geographical variance; we are seeing a lot of turnover in staff in the US, for example, whereas in Asia we have countries with staff of tenures well over 20 years.
“In Finland we are among the most lucrative employers so getting talent in is not that hard; what we are focusing on is building good career and training paths to keep all the talented employees with us.”
Asia stands as a region likely to see growing need from Finnair for airline ground services: under its long-term plans, the carrier aims to double Asian traffic by 2020 from the 2010 level.
Learning curve
Tainio has headed up Finnair’s ground operations since June 2015. He came to the post with an unusual background: aviation finance. At Finnair for 11 years, Tainio’s last position as head of Group Business Control Finnair saw him leading change in the demanding airline industry, transforming a legacy airline into being a lean, efficient and competitive operation. By driving, managing and tracking the most substantial profitability enhancement project to date, he achieved cuts of Ä200m by the end of 2015.
He says: “As my background is more in airline finance and administration there has been a learning curve – but at the end of the day, as with any post, 90% of what you need leadership, a well-functioning team and a huge appetite toyou’re your hands deep into the details when needed!”
The operational performance, with on time-performance achieving 89.5% in 2015, is absolutely vital, he believes. Without it, Finnair’s heavily banked, transfer-focused traffic structure could not be as successful as it is. Robust processes, active operational steering and partnerships that work well, especially at Finnair’s hub, are key elements in this achievement.
Trends in ground handling
Finnair’s ground handling activities are reacting to changing passenger practices and desires across the flying public. Tainio’s role is to monitor these developments and tailor Finnair’s offering in ground handling services as appropriate.
He says: “Customers want to customise their journey – the times when the ticket included all services are gone and now a wide selection of ancillary services is valued, be it seat upgrades, lounge access or choice of food. We are increasingly focusing on providing these through digital channels as well as through our ground staff.
“Transparency comes through the customer having a constant understanding of what is happening next and any irregularities; for example, a new itinerary suggestion, or information on luggage delivery, just pops into their mobile device.
“There is an ever-increasing number of self-check-in kiosks and also online, mobile and app check-in possibilities available. Also the automated bag drop has become widely used at Helsinki Airport, with plans to expand to other countries and stations as well.
“Next in line we are exploring permanent bag tags as home-printed bag tags – that would enable the customer to skip one step at the airport and go directly to the bag drop.”
Green Helsinki
Tainio has ‘ownership and management’ of the Helsinki hub ground operations for the carrier. This reflects the importance the airline places on the station.
He says: “Helsinki Airport and its location is absolutely vital for Finnair, making possible the 24-hour rotations of our Asian wide body fleet and making a huge impact on our customers’ transfer experience. As Finnair and Helsinki Airport continue to grow together, we are making sure that all traffic continues to run at least as smoothly as it is currently doing. When we succeed the impact is growth of our traffic, revenue and – also – Finnair’s and our partners’ bottom line.”
The airline currently operates a range of 52 aircraft, including Airbus A330s, A340s, A321s, A320s and A318s. It also operates Embraer 190s and 170s. Given its icy homeland, it comes as little surprise that its use of de-icing liquid is great. In fact, the airline had a target to reduce anti-icing fluid usage by 40% by 2016.
Tainio says: “The de-icing truck’s proportional mixture system according to the Out Air Temperature for Type-I fluid, and use of alternative de-icing methods such as brooms, hot water and forced air, has reduced the use of de-icing fluids significantly, but actual usage of de-icing fluids depends on the weather. We are also constantly looking for new methods to reduce the need for de-icing fluids.”
The airline also takes a green attitude to its ground handling suppliers, notes Tainio.
He says: “Environmental issues are an important part of the supplier selection process and we demand that ground handlers follow our supplier code of conduct and audit and monitor our suppliers. As such, we do not have exact diversity targets for suppliers, but equality and non-discrimination are foundational values for Finnair and part of our audit programme.”
