Ground Handling - Common Ground
Medium-term cost savings are on offer if airlines and ground handlers can partner their way out of a low price spiral
Ground operations have suffered from investment shortfalls in the past few years but the future could hit new heights if the sector can strengthen collaboration efforts.
From an airline perspective, working with such tight profit margins—just 1.4% is forecast for 2011—means they have to keep a tight rein on costs. Safety is never compromised, but naturally airlines want the best possible deal when outsourcing ground services.
“The whole sector is caught in a low margin business,” agrees Marcel Witzig, Head of Ground Operations at SWISS. “Everybody involved is asked to produce to the lowest cost possible. Airlines cannot absorb all the financial risks imposed by the regulations and authorities. Ground handlers need to increasingly operate more innovative technology to reduce their own costs.”
The cost of damages
The investment deficiency in the ground services sector is underscored by the huge annual bill for ground damages—some $4 billion. Even this figure may be a severe underestimate as it relates only to direct costs and derives from a relatively small survey conducted a decade ago. Indirect costs, such as the rebooking of passengers or the cost of the aircraft out of service, have been estimated to range from four to 10 times the direct cost.
Often incidents are related to a lack of training or obsolete equipment. For example, a belt loader has its cab on the opposite side to the first point of contact with an aircraft, so drivers are effectively unsighted and judging when to stop. Laser guidance technology—readily available and in common use on many commercial vehicles—would ensure equipment couldn’t physically hit an aircraft.
There are also plenty of initiatives aimed at reducing damage as well as tackling the whole issue of ground safety. IATA’s Safety Audit for Ground Operations (ISAGO) has completed more than 288 audits. As of March 2011, 61 providers are on the ISAGO Registry at 85 locations. The program has also gained broad support from several aviation authorities and has been mandated in Lebanon and Turkey. Work is ongoing with other authorities to make ISAGO an accepted standard. Ground damage accounted for 11% of all accidents in 2010, down from 17% in 2008 when ISAGO launched. ISAGO additionally helps generate considerable cost savings by making case-by-case audits redundant.
Also helping to deliver service quality improvements is the IATA Ground Operations Manual (IGOM). If each airline publishes a dedicated ground operations manual, it can lead to variations in procedures, even for the same aircraft type. This can cause confusion for all concerned. IGOM gives third-party ground service providers a standard set of requirements with which to work, ensuring airlines will receive a consistent quality service wherever they land. “IGOM will be a big step forward in reducing complexity and helping providers in administration as well as training and procedure implementation,” agrees Martin Meyer, Secretary General of the International Aviation Handlers Association (IAHA).
Other initiatives include a new Ground Damage Database (GDDB) and a completely revamped Airport Handling Manual (AHM). The database will form part of the Global Safety Information Center and will launch with eight airlines and three ground service providers (GSPs) later this year. “It is very difficult for a single airline to pick up on trends if they only have a few incidents a year,” says David Tindley, Manager, Airport Services, IATA. “The database is expected to grow rapidly and will allow airlines to identify common problems as well as formulate best practice.”
The AHM, meanwhile, is being revolutionized. Tindley says that apart from moving to a platform-based product—as opposed to being a paper manual—the new version will reset boundaries and push ground operations to achieve higher levels of service.
These ground operations initiatives will deliver considerable benefits for airlines and their GSP partners. Nevertheless, some fundamental issues have yet to be resolved.
For example, it is usually the airline’s commercial department that secures ground handling contracts in outstations. To compensate for the lack of specialized knowledge in the department, airlines deliver detailed procedural guidelines. Not only does this lead to the anomalies IGOM will combat but it stifles GSP flexibility. “This leads to the commoditization of the ground handling service, reducing it to a mere process,” suggests Meyer. “That is ultimately a risk to the airline, as it loses control over its product delivery, continuously changing service providers as it chases the lowest available pricing.”
The lack of a clear line of responsibility also creates headaches for accountants. “When an aircraft is damaged, it affects a multitude of airline departments,” explains Tindley. “This makes it very difficult to keep track of the costs incurred. Engineering will be carrying out repairs and flight operations will have to factor in an aircraft out of service, while crews may run over duty hours, and there may even be passenger compensation, such as hotel expenses. Even marketing could be faced with a loss of brand. A little ground damage could mean a lot of money. There needs to be better communication within an airline to understand the scale of the problem. The GDDB can help with this.”
Trying to involve ground handlers in this issue is a critical pointer for the future of the sector. “We need to review standard service agreements,” says Tindley. “At the moment, a ground handler is only responsible for the direct costs of any damage caused. But it doesn’t pay for all the knock-on effects. The airline suffers these losses and of course this affects the price it wants to pay the GSP.”
However, Witzig believes solving the problem is easier said than done. Contractually, it could be a non-starter, as any progress inevitably leads to greater insurance costs for the ground handler, which would have to be reflected in its prices. “But training and onsite coaching can be intensified,” says Witzig. “There are already handlers around the world that are great in this respect.”
They pay for the privilege, though. Many of the main ground handlers are subject to labor agreements that keep wages at set levels. It further intensifies the price pressure on GSPs.
Breaking the low price spiral won’t be easy. Ground handlers effectively say they can’t improve while their prices are so low and airlines say they won’t pay more given present service levels.
“To make matters worse, there are no game-changing technologies, processes, or equipment out there that can break this deadlock,” notes Tindley.
But there is reason for hope. Committed, collaborative effort can still lift this crucial sector out of its decline. IATA is stepping in to get both sides talking and it is hoped this will lead to valuable developments at the IATA Ground Handling Council and Airline Ground Operations Meeting in Kuala Lumpur in May.
There are small beginnings elsewhere. Munich Airport has launched a program in cooperation with Frankfurt Airport and Lufthansa that deals with the prevention of damage. “The goals are to raise awareness among ground handling employees of possible dangers and their costs, and to create a better understanding of the work environment,” says Siegfried Pasler, CEO of Aeroground, one of Munich’s GSPs.
He insists this is the way forward. “A collaborative routine is very important to security and quality,” he adds. “Constant fluctuations in the operating environment work against these areas.”
Tindley agrees and says airlines must play their part. “Airlines cannot afford to be short-sighted,” he concludes. “Getting involved in the various programs and working groups will provide clear benefits in the medium term.”
Improvement in Ground Operations
Various developments that are in the offing may enhance the efficiency of the ground service sector. One of the more promising is Airport Collaborative Decision Making (A-CDM), which should enable ground handlers to know the exact timings of aircraft landings and take-offs. This will help enormously with improved resource allocation. For example, it is estimated that a push-back truck spends three times longer with an aircraft than is necessary. Ultimately, improved information sharing will translate into cost savings and better customer service.
The dispatcher role is also undergoing change, with technology coming to the fore. Previously, technology wasn’t flexible enough to know when to hold the gate open for that extra minute to allow a passenger to board and so avoid a far greater delay due to paperwork and offload luggage searches. Manual decisions have been essential. But the implementation of the Aeronautical Telecommunications Network (ATN) protocol for Air Traffic Control communications and the Internet Protocol for airline communications will allow greater freedom in ground set-ups. Efficiency is expected to improve as a result.