Service provider CEOs took to the stage in the big debate in Athens to discuss the issues of the day such as the ‘race to the bottom’, minimum standards for handlers and collaboration between all players
There was a renewed sense of confidence from the assembled heads of some of the industry’s leading ground service providers in Athens.
After the doom and gloom of summer 2020 amid serious disruption at many locations because of staff shortages, coming just as the industry was pulling out of the pandemic years, Steve Allen, the
CEO of dnata, struck a positive note: “Well, we are all here this year,” he joked.
The theme of the big CEO debate was ‘Beginning of the end for the race to the bottom?’, the point being that the ground service provider (GSP) market has for years been squeezed on many fronts, especially on price.
“This has been the motto of the ground handling sector ever since the first independent GSPs came to the fore in the 1990s,” said Fabio Gamba, Director General of Airport Services Association (ASA), and he asked what the major stakeholders can do to enable the industry to be characterised as racing to the top.
“We have got through probably one of the toughest years in our history,” Allen told delegates. “So, all the beatings that we’ve gotten in the last year have just told all the airlines, airports and governments that ground handling is important.
“In the last year, we were in a downward spiral of not being able to go to our customers and ask for more money because our performance was so bad. But now we can get into a virtuous spiral,” he said, as GSP performance has markedly improved.
“I think we need to stop talking negatively about the beginning of the end of the race to the bottom and start talking more about how we can raise the bar and how we can improve,” said Allen.
“Now we can talk very positively about how we can enhance the customer experience, how we can enhance their brand and how we can become part of their ecosystem rather than complaining about the race to the bottom,” said Allen.
The term ‘race to the bottom’ is “tiresome”, according to Sally Leible, Chair of Airport Terminal Services. “I think one of the most important answers lies in the short-term nature of our contracts,” she said.
This is an approach that “doesn’t allow us to build staff, to build the training programmes that we want, to have sustainability and equipment investment” – all of which requires a longer-term view, said Leible.
Richard Prince, CEO of Aviapartner, advised caution about using the term ‘race to the bottom’, pointing out that no-one forces a ground handler to sign a contract. In his view: “I think it’s about ensuring that the industry has the highest standards of safety and it’s about being able to attract and retain the right people,” he said.
From the perspective of Philipp Joeinig, Menzies Aviation CEO, handlers choose to operate in what is a “structural growth industry” with aircraft orderbooks at an all-time high and forecasts of strong traffic growth, and he sees positive sentiment on all continents that handlers can add value to passenger journeys.
However, Joeinig noted that handlers under the umbrella of ASA must work more closely with civil aviation authorities and monitor the decision-making process for the number of ground handling licences issued at an airport, with the emphasis on ensuring high operational and safety standards are maintained.
Gamba pointed out that while all players are invested in high standards, the services industry is extremely fragmented, with many small players located at just a single or a handful of stations. The view of smaller handlers regarding the number of licences issued at an airport, or their ability to influence the decision-making process, is different to the larger players, he said.
“What we are trying to do, through the civil aviation authorities and with the regulators, is set realistic bars to deliver the right levels of service and safety,” said Allen. ASA is the proper body to lead this push, which is one of the prime motivations behind the industry putting more money into the association.
Standards
Listening to the discussions about standards, and in particular safety standards, Gabriel Mocho, Secretary of the Civil Aviation Section at the International Transport Workers’ Federation (ITF), asked the panellists for their view on the future for minimum labour standards.
The imposition of such standards from outside the industry would not be welcomed, but they could be agreed at local or airport level, said Mocho, whose federation represents some 18.5 million transport workers globally.
“We continue to see challenges with bringing people back to our organisation, to retain and to keep them and then to help them grow a career within our industry and build the skills they need,” said Prince.
“I’m all for minimum standards for employees. However, as an industry – airports, airlines, service businesses – we need to recognise we must be more attractive and that requires a whole range of different employee propositions that are funded,” he went on. “And there is a price to that, and we have to strive to ensure that we achieve it so we can deliver on that promise.”
Consolidation progress
With some of the largest handlers represented on the panel, the question of further consolidation in the industry was raised. It is a “natural progression”, said Allen.
Swissport’s CEO Warwick Brady added: “This is a course we love to play and so you are going to see acquisitions. All I would say is that in some markets it’s like Whack a Mole: you take one out and another one jumps up. So, it is quite hard, and you need to be a bit thoughtful about your acquisition strategy.”
The debate examined how the nature of ground handling may change in the coming years. For a business that is so people-centric, with up to 70% of a handler’s cost base coming from employees, it is inevitable that there will be more automation in the passenger journey, with features like bag drops and automated boarding, said Aviapartner’s Prince, pointing out: “GSPs currently deliver a transaction-based product but the reality is that resources are hard to find.”
However: “With our emphasis on human capital I don’t see GSPs disappearing but taking on a different role. I just can’t see an A320 loading itself,” joked Brady.
The last word goes not to a handler but to an airline. Speaking from the floor, Maurice van Deursen, Vice-President Procurement Airport Services at Air France-KLM, talked about his goal to create the right partnerships between the different players, alongside the competition tension all parties feel, to ensure successful outcomes.
“We all have a vital role in this industry, and therefore a vital, important responsibility,” said van Deursen. “As airlines we all compete in the same world, and handlers are all competing with each other, but in the end there’s a bottom line that binds us all together.”
