There were mixed fortunes for airline ground handling activity in the United States in 2015 as the year saw deals inked and labour unsettled
Six years post-recession, US airlines are finally realising profit margins that are on par with the Standard & Poor (S&P) 500 average, a barometer of US corporate performance. According to John Heimlich, vice president and chief economist of pressure group Airlines for America (A4A), one factor above all others is key to this performance: year-over-year improvement was driven almost entirely by lower fuel costs, which fell 34%, outpacing a substantial 10% increase in wages and benefits.
He says: “A4A projected an all-time high for summer travel this year and year-over-year increases continue. With capacity increasing and airfares trending downward, air travel continues to be more accessible and a bargain for cost-conscience consumers.”
His optimism is mirrored in official figures released by the US Department of Transportation, which show that up to June 2015, there were 3.9 million regularly scheduled domestic US flights carrying 675 million passengers. This is a considerable uptick of 20 million passengers over 2013/14 and 40 million over 2009/10’s total. Some 176 million international passengers flew through, to and from the US during 2015.
According to Joe Phelan, Swissport EVP North America, Japan & Korea, it is this optimism that is creating a positive outlook for ground handling in the United States over the next few years.
He says: “The ground handling business in the US will continue to offer opportunities as the US legacy carriers continue to outsource their operations, as do all the low-cost carriers. The handling companies that can offer quality service levels, have multiple lines of business and have the infrastructure to support value-added services will be the ones that have the best chances to remain and benefit for the long term. The forecast for growth in the US is very positive over the next five years and aircraft deliveries are significant.”
This is echoed by Cleveland-based Flight Services & Systems (FSS), according to Mandy Dunn, communications manager. She notes that this year, FSS has been awarded a trio of ground handling contracts for Silver Airways: West Palm Beach, Florida; Fort Myers, Florida; and Charleston, South Carolina. In April, at Cleveland Hopkins International Airport, FSS started ramp handling operation for JetBlue Airways.
She says: “The ground services market is rapidly increasing and we have seen a great deal of activity surrounding requests for ground handling services from airlines. We fully expect this trend to remain as airlines continue to take measures to reduce their operating costs, which usually leads to the outsourcing of many ground handling services. FSS is also growing as a company and we are prepared and anticipate growth of approximately 15-16% each year in the years to come.
“Airlines continue to outsource ground handling services in order to reduce their operating costs and be more profitable as an airline. This trend will continue and possibly even increase extensively as airlines continue to evaluate and make changes internally.”
For ground handling companies, this optimism translates into significant demand for their services, which encouraged takeovers and new launches this year.
One of the most significant developments was the launch of United Ground Express (UGE), a wholly-owned subsidiary of United Airlines, to provide ground handling services at selected US airports. Although it is a separate company from United Airlines, UGE will align with United’s service philosophy. It has begun recruiting and a new website has been launched.
Lynda Coffman, president of UGE, says: “We are launching United Ground Express to provide service in more airports throughout North America. Additionally, we look forward to providing exciting job opportunities and creating diverse and inclusive work environments in the communities that we’ll serve.”
UGE will provide airport ground handling services – including customer service, station operations, and ramp and cargo services – to United’s domestic system. It began services this autumn and will also provide ground handling for United’s new flights to and from Kalamazoo, Michigan, starting in December.
Talent
New launches might cause an issue if the talent pool of trained and experienced staff cannot expand. Phelan says: “We are recognised as a global player with growth and career advancement opportunities, which gives us a unique advantage in recruiting talent. Our HR offices are continuously hiring in our markets as we provide and offer multiple business lines including ramp, passenger service, cargo and fuelling.
“Depending on the market, some are more challenging than others. For the larger markets of JFK, LAX and MIA we usually do not have any problems finding staff. In other markets where we compete with legacy carriers and/or the hotel industry, it’s a bit more challenging. The issue in the ground handling industry with staff is the waiting period for employees to receive their Customs/Border Patrol badges, which could take up to eight weeks.”
Dunn says: “FSS is continuously hiring at many of our airport locations. FSS has a substantial and proven method in place for recruitment of high-calibre and quality employees. We tailor our recruitment strategies for the specific location and situation, but there is a standard methodology we follow that has been working for FSS for many years.
“Some of the best recruitment methods we have found are recruitment through referrals or word of mouth, hiring from local colleges/universities and sourcing from job placement or career services organisations in the local area. We also recruit from the military: we have found great success from local veterans’ offices, air force bases and so on. If we are hiring a large amount of people, for a start-up operation, for example, our director of human resources will hold a job fair in that location.”
FSS hires agents with experience, which definitely assists in the training capacity and overall onboarding of the individual. Dunn adds: “We do not always require experience when we are hiring. We do have a thorough training programme, which includes a combination of online training, classroom training and on-the-job training.”
Confidence
Established ground handlers are also prospering as airlines and airports handle increasing volumes of passengers and freight. Phelan at Swissport says: “As the largest ground handling company in the US, we have to make investments every year with ground service equipment, front line employee training, and leadership training for our management staff. We are planning to further increase our investments in these areas for 2016 as we believe it will give us a competitive advantage.”
During the summer, Worldwide Flight Services (WFS) was awarded a three-year ground handling contract by Allegiant Air to handle 7,400 flights a year at McCarran International Airport in Las Vegas.
Under the terms of the contract, WFS will provide passenger and ramp services for the airline’s MD80, Airbus A319/A320 and Boeing 757 flights. The new contract began in June.
WFS is recruiting 180 new staff to support the contract in Las Vegas, the home of Allegiant Air and one of its biggest markets in North America. In total, WFS is now Allegiant Air’s preferred ground handling provider at 20 cities in the US, reinforcing its position as the airline’s largest service partner.
Claudine Bonthoux, executive vice president North America at WFS, says: “The confidence Allegiant Air has in WFS is a testament to the whole WFS Allegiant management team and our station managers in North America. We are proud to have won such a major new contract and look forward to repaying the airline’s trust in us by delivering the high quality of service they expect from WFS at one of their major airport gateways.”
WFS also picked up a range of new ground handling contracts during the year. As well as covering passenger and ramp handling at Saint Thomas Island and passenger handling at Saint Croix in the US Virgin Islands, there were new contracts with Aer Lingus at Washington Dulles International Airport for the provision of cargo handling, passenger and ramp services while, in March, WFS began work on a new passenger and cargo handling contract with Philippine Airlines at New York JFK.
Contracts also flowed in for Air China in Washington Dulles, Allegiant Air at a new station in Asheville and in Pittsburgh, Azerbaijan Airlines in New York JFK, La Compagnie in Newark, Delta Air Lines at Henry E Rohlsen Airport in the US Virgin Islands, Etihad Airways in Dallas, and Porter Airlines at Burlington International Airport.
Fight For 15
At a time of resurgent air travel, labour unrest in the sector is growing. Thousands of passenger service personnel, security and cleaning staff at Chicago O’Hare International airport have joined the nationwide ‘Fight for 15’ campaign, according to the Service Employees International Union (SEIU). Workers at major origin and destination airports including Seattle, Portland, Los Angeles, San Francisco, Minneapolis, New York City, Newark, Philadelphia, Fort Lauderdale and Washington, DC have been coming together in the Fight for 15 movement to demand a minimum US$15 hourly wage and union rights.
The SEIU claims that in some cases staff at Chicago O’Hare, the third-busiest airport in the US and a hub for both United and American Airlines, are being paid below the minimum wage, forcing them to rely on taxpayer-funded public assistance. In July, the minimum wage for Chicago workers jumped to $10 an hour in what the city says is first wage increase for city workers since 2010. Next year, the minimum wage will increase to $10.50 in Chicago and will continue to go up in increments to $13 an hour by 2019.
At the other end of the country, in September airport workers at Fort Lauderdale-Hollywood Airport (FLL) took industrial action against repeat labour violations by airline contractors G2 Secure Staff and Eulen America. Both companies, which service Spirit, Southwest, American Airlines, JetBlue and others, came under federal investigation by the National Labor Relations Board (NLRB) for violating workers’ rights, says the SEIU.
Baggage handlers, cabin cleaners and others earn an average of $8.14 an hour with no meaningful benefits and are excluded from Broward County’s $13.20 Living Wage Ordinance. Some 29% of workers at FLL must rely on some government assistance, including food stamps or housing assistance, says the union.
The union claims that nationwide it has won a union voice for 15,000 airport workers and has already secured wage increases and other job improvements for more than 45,000 airport workers in the US.
As an employer, it falls to Swissport to pay any enhanced wages enjoyed by staff. Swissport welcomes the levelling of the playing field in terms of wages in the industry.
Phelan says: “More major markets are putting living wage ordinances (LWOs) in place and this trend will continue. In 2015 alone, eight major markets in the US have approved a Living Wage Ordinance, with more planned for 2016. In the end this creates a level playing field for most handlers when it comes to entry level costs for employees.
“For airports around the country to compete with hotels and restaurants for labour a Living Wage Ordinance provides an opportunity to ensure the right talent is in place to reduce turnover and improve overall service levels.”
FSS escaped any labour unrest over the Fight for 15 campaign, Dunn notes. She says: “The actual strikes have not directly affected FSS or any of our contracts. For example, FSS has a very large presence at Boston Logan International Airport, yet there were no FSS employees involved in the strikes that have occurred at BOS Airport over the past year.
“However, we were well prepared and proactive, just in case; we had overstaffed the operation for the particular day(s) of the strike(s). All of our employees showed up and clocked in for work as scheduled, which we were very proud of. We also worked very closely with our business partners and made sure to over-communicate with them during these time periods.”
Competition
There is a great deal of competition in the United States vendor services industry; indeed, it is one of the biggest barriers to entering a new airport location.
Dunn says: “It is difficult to be competitive when a ground handler is looking to enter a new location and competing against vendors who are already on the field or located in that specific airport and providing services. In order to begin services at a new airport, FSS would need to source office space within the airport, which can be very costly, a general manager and leadership team, permits if applicable and a brand new workforce. There is a lot of time, money and effort that goes into any start-up operation, especially for a new airport location.”
The FSS’ business model is to begin services at an airport with a very strong leader and then build a business around that leader.
“It has proven to be a very effective business model for us,” Dunn considers. “Once we have a presence in the airport and start building relationships, we can slowly start adding on pieces of business and new contracts.”
FSS is now providing full above and below wing ground handling for Alaska Airlines at Charleston International Airport (CHS) in Charleston, South Carolina. Alaska Air began their non-stop route from Seattle to Charleston on November 16. Charleston is the seventh new city added this year by the Alaska-based carrier.
At CHS they also service JetBlue Airways, Silver Airways, Delta Air Lines and American Airlines. The Alaska Airlines contract is FSS’ eighth ground handing contract win in 2015 and the second full ground handling addition at CHS during this year.
