PRIVATE COMPANY WINS UNPRECEDENTED GROUND HANDLING CONTRACT AT UNITED ARAB EMIRATES AIRPORT

posted on 5th June 2018

In the first agreement of its kind involving a United Arab Emirates (UAE) airport, Ras Al-Khaimah International (RAK) has awarded a ground handling contract to Kuwaiti-based National Aviation Services (NAS), a private company. The state has hitherto monopolised the sector in the Middle East. The CEO of NAS, Hassan El-Houry discussed the implications for the country, the region and for private aviation service companies with Airside International’s Bernadeta Tendyra.

“This really is a game changer,” says Mr El-Houry, who began his professional life as a business consultant with Arthur Andersen and Ernst and Young. “I think that the government of Ras Al-Khaimah is really forward-thinking and I have a tremendous respect for them, for what they’ve done. His Highness Sheikh Saud, the ruler of Ras Al-Khaimah, and indeed the RAK Industrial and Development Office (IDO) held an objective evaluation of the best handling agent, and I think they understood the political implications of this decision but they went through with it anyway.” Its weight, he believes, has indeed “been felt throughout aviation circles in the region”.

The implications to which Mr El-Houry refers are “potentially huge for the Middle East”. The NAS CEO observes that “all airport authorities in the region, or airports wherein there is a monopoly, are monitoring the results from RAK. They will notice a marked difference in quality and pricing of services at the airport, and the breadth of services on offer. That will encourage them to liberalize their industries to reap the benefits of the open market.”

“For the government of RAK, and this is important, it sends the message that this emirate is a business-friendly and open place to do business. It is a place with a visionary ruler and a government that makes decisions based on merit and commercials, not politics,” Mr El-Houry argues.

Most Middle Eastern countries – with very few exceptions – have hitherto been state monopolies in ground handling terms. “If you look at Dubai, it’s a monopoly; Abu Dhabi, it’s a monopoly; Oman, it’s a monopoly; Qatar is a monopoly; Egypt is a duopoly and the market’s closed; Saudi Arabia is a monopoly, so most of the Middle East is closed,” says Mr El-Houry. “We are obviously focusing like a hawk on opportunities where these exist; we’re pushing really hard but 85% of the market is a monopoly.”

Yet developments at RAK Airport undoubtedly represent a sea change for ground handling services in the region. The state-owned airport authority has hitherto performed these functions; however, as Mr El-Houry rightly observes, “this structure is not optimal because government entities are rarely commercially driven and are usually burdened by government bureaucracy”. By contrast, NAS is a “dynamic, commercially driven entity” that has a “vast network of relationships we can tap into”. Private sector peers will doubtless take note.

“We are leveraging those relationships to drive cargo and passenger business to the airport,” says Mr El-Houry. “We are also using our knowledge and experience in the Middle East to improve the quality of services at RAK Airport.”

NAS’s precedent could thus precipitate significant change within the regional aviation sector and beyond. “I hope that others will follow”, says Mr El-Houry, “because I think that they will see the value of bringing in a private handler. It takes just one to break away from the herd and the rest start to follow.”

He is convinced of the value injected by private companies. “Bringing in a private handler means better pricing, you know that you have better quality, you have a commercially driven entity at the airport, which means that we are trying to push volumes there. We are also trying to serve our clients better, to offer them the best price that we can. We’re responsive, we’re attentive to their needs, we’re creative with the services that we provide or try to supply, all of the services that passengers and airlines need, and I think that others will follow.”

Under the terms of the contract, NAS will supply RAK Airport with ground handling services that include ramp handling as well as check-in, arrival, transit and cargo services. Pearl Assist, NAS’s worldwide network of ‘meet and assist’ and lounge services, will also be available at the airport. RAK International’s master plan meanwhile includes proposals for new arrival and departure lounges, F&B (Food and Beverages) outlets, a Free Trade Zone, cargo facilities, parking lots and offices, in a bid to meet traffic demand for the next 20 years and beyond. Outsourcing ground handling is an important feature of the airport’s on-going development strategy.

“Being a private company obviously helps because that eliminates a lot of the red tape,” says Mr El-Houry. “When you’re owned by the government, whether directly or indirectly, you have certain procurement laws, you have certain expansion policies and procedures, certain decisions have to be raised up to certain government officials and that takes a lot of time. From our experience, you tend to lose an opportunity once it’s sitting on someone’s desk for a month or two. And with us that doesn’t happen. We can take a quick decision and we can act on it very quickly. The other thing is that we’re not affiliated with any airlines so most airlines are comfortable sharing with us their cargo loads, the origin of their cargo, the nature of their cargo, they’re comfortable sharing with us their passenger numbers, their passenger profile, whereas they would be reluctant to share that with their competition, if the latter also owned the handling agent. These two advantages we also play to.”

Mr El-Houry further extols the merits of NAS’s highly diverse, creative and opinionated team, a feature perhaps more characteristic of a private company than of a state monopoly. “We have a good mix of men and women, people with 30-40 years of experience and people with five-six years of experience. We have Middle Easterners, we have Africans, we have Indians, we have Europeans, we have Americans – we have people with all kinds of views and we encourage discussion, we have a very strong open door policy and that allows the smallest person in the company to voice his or her opinions to the CEO or to anyone else. And a lot of very good ideas come from the people on the ground… “

Mr El-Houry is encouraging airlines to look at RAK: “You’ll get many facilities and the airport will help to meet any of your aviation needs – we, as NAS, are happy to offer special discounts on ground handling, and some of the region’s best hotels are at RAK…” He refers to the “mutually beneficial partnership” between NAS and RAK: “the airport authority is open for business and actively encouraging passenger airlines and freighters to use their airport; they are successfully driving volumes to the airport. We have an experienced and highly rated team on the ground there, and some of the newest European-manufactured GSE. Everyone who has been to the airport has been impressed. We expect high growth rates in both cargo and passenger flights.”

NAS “wants to show the rest of the UAE and the rest of the Middle East what a private handler can do… you know, it is one of the Emirates that’s really fast  growing, and the fact that they’ve let us in is just an indication of how they see the future playing out for them.”