ARGS talks to Swissport’s leader Warwick Brady about the ‘people challenges’ it faces in 2023, the business outlook and relationships with airlines. Mark Pilling reports
In 2022, Swissport recruited 37,000 people as it burst back into business, responding to the surge in traffic after Covid, explained the global service giant’s Chief Executive Warwick Brady in an interview with ARGS.
I asked him to repeat the number; it is eye-wateringly high, and significantly more than the 17,000 he thought would be needed when speaking at the IATA Ground Handling Council event in Paris in June 2022. “Correct, 37,000,” he said. “At the peak of the summer [2022] we had 54,000 people [in total] but that has come down a bit obviously because you take out the agency staff.”
More remarkable than the mammoth task of recruiting and onboarding 37,000 people, is that Swissport’s attrition rate for these new recruits was 70%. It is a painfully high number, but as Brady explained, Swissport is not alone in the retention challenge.
“We’ve studied this and in the US Walmart is 70%, other handling businesses are 90% to 100%,” he said. Swissport sees the greatest level of attrition at the 180-day mark.
Recruitment is an expensive undertaking, with this drive costing Swissport €130 million (US$140 million) in 2022. “We think it is about €4,000 to recruit a person by the time you’ve paid for the advertising, got them in the process, trained them, badged them, and paid them while we wait for that,” said Brady.
“I think a normal attrition for this sort of business would be 30%,” he said, meaning the inflated attrition rate it is experiencing has added €60 million ($64 million) in costs to the business.
Solving the problem
Unsurprisingly, Swissport is making huge efforts in this area. “The big picture is making sure that we recruit the right people that want to join our industry,” said Brady. “We spent a lot of time profiling. If it’s a front of house role it’s all about people who like people. And if it’s the ramp or the warehouse, it’s people who like working outside or not in an office.
“That part of recruitment is important. Then we have the onboarding – you make it as personal as possible. We must be competitive on pay. You need to provide a stable schedule for working” to enable people to plan, he said, noting that Swissport operates a four-week roster.
“We need to make it flexible, and we need to create an environment where they actually like working. So, the break rooms need to be clean and well maintained. If it’s hot, we need to give them water. You need to do those small things; we’ve got to recognise people. So, there’s lots of work going on. It’s all about what I call shutting the back door,” said Brady.
The recruitment and retention issue are constantly being worked on by Brady and his managers with daily calls at a local level, and every Friday he discusses the state of play with the leaders of Swissport’s HR and operations teams. “We go through the 25 hotspots where we really have a real labour shortage or a skill shortage, and we need to make sure that they’re in good shape,” he said.
Each hotspot is an airport base, with Brady mentioning Manchester and Birmingham in the UK, as well as Berlin and Amsterdam.
Another significant issue, and one that affects many other businesses, is people not wanting to do some types of work in the post-Covid world. “If you look at unemployment in the US, for every unemployed person there are 1.7 jobs,” said Brady. “There is a kind of theme of young males not wanting to work. There is a real continued labour shortage especially in some parts of the US. Getting really good talent into the business is still a challenge.”
The other issue “is getting people back into our industry”, said Brady. Providing flexibility in how people work, offering rosters with six days on then three off, or five on and two off, is an important factor for the new workforce. “We are having to adjust how we manage an employee and how we contract people because everyone wants this kind of flexibility and not everyone wants to work full time.”
The hotspot countries for labour are primarily the US, UK, Australia and some parts of Europe, said Brady. It is not an issue in Africa, the Middle East, or Latin America. “In those markets not only have we hardly got any attrition, we’ve got strong retention,” he said.
Summer risks
There is a danger that the severe delays seen in some regions last summer could be repeated this year, said Brady. “In the keys markets of the UK and the US, probably less in Australia because it is not as seasonal, and some hotspots in Europe, there is a reasonably high risk that we could have some repeat of last year in certain specific geographies.”
Reducing this risk is why Swissport is obsessed with improving its recruitment pipeline and lowering attrition. It is critical to provide excellent customer service and to cope with strong demand.
“We are operating in an environment which has not been seen for 20 or 30 years in terms of inflation, wage pressures, energy shocks and labour shortages,” said Brady, who believes the industry is finding its feet in dealing with these challenges.
Demand picture
“What we see in the aviation space is very strong demand with our airline customers for summer,” said Brady, with “revenge tourism” as travellers resume overseas travel still a factor driving growth.
“In terms of ground handling, passenger traffic will be very strong – not to the level of 2019, but very strong and coming back much more stable,” he said, although Swissport is expecting a drop-off after summer if the recessionary environment persists.
On the cargo front, the picture is mixed, with the market expected to soften.
“This business is such a sensitive one [to outside factors] that we do a daily P&L (profit and loss analysis) with a four-week outlook. So, if volumes go up or down, we adjust our workforce and ground handling schedule accordingly,” said Brady. “We are very short term in terms of managing our cost base.”
Stronger industry voice
An important move by the ground services industry over the past year or so has been to come together under its industry body to amplify its collective voice. “We’ve just strengthened the Airport Services Association (ASA – see related story on page 44), to be at least a proper body that’s equivalent to IATA,” explained Brady.
“IATA has got very strong, and we need a more balanced and partnership approach with the airlines because we’ve professionalised the industry,” he said.
Other major trends are consolidation among service providers and the outsourcing of services by carriers.
“There’s a massive trend now for all those large airlines to outsource, because when you get down to it their capital needs to be on aeroplanes, while our capital needs to be on equipment,” Brady said. “Airlines are not efficient in running ground handling operations. They just can’t be as efficient as us because their overheads won’t be as low.”
That some airilnes prefer to insource services perplexes him to an extent. He observed how Swissport undertakes the handling for Qantas, Swiss and Lufthansa at key hubs. “We do the HON service at Munich for example,” he explained, which is the ground service for Lufthansa’s first-class customers. “They trust us with this brand.”
There are locations where the market is not functioning well for anyone, and Brady points to airports with low barriers to entry. “For example, let’s take Amsterdam. There are seven handlers there and that becomes a race to the bottom. The pricing is not sustainable. People do not invest in new GSE. So, we’ve got this open market with too many handlers. You don’t get professionalised handling.
“And that is what has happened in the UK over the last 10 years,” he added, and it has led some carriers to take their handling in-house. “The handling market has been very poorly managed, which is why you’ve seen the emergence of DHL in three locations and you’ve got Jet2 insourcing.”
Swissport is the market leader in the UK and is changing its model in this difficult market to provide a great service, improve the attractiveness of the industry and deliver a better return. “We are trying to rebase the UK as a market,” he said. Out of the 300 airports where Swissport is active there are 25 that need some form of rebasing work and 10 of those are in the UK.
Partnership approach
Since he took over Swissport in May 2021, Brady has advocated a partnership approach to risk and reward with airlines. This works well with Swiss in Zurich, Switzerland, with Qantas in Sydney and with Brazil’s Azul at its Viracopos base.
“These relationships are born out of resetting the contractual relationship, so they get the service and they get the cost,” said Brady. There is another relationship type, however.
“On the other side you’ve got airlines that effectively treat you like a third-party orphan ground handling agent – the bottom of the bottom,” he noted, and these airlines change agent every three years. “They don’t get the right economic cost because it’s not just about price: it’s about actual delivery. So, we’re saying we are going to be the right partner to deliver the lowest economic cost.”
But change can be slow, and Swissport is not afraid to walk away from airline service RfPs that have unrealistic conditions. “Some airlines are still sending us a contract where they ask for no inflation and fixed costs for five years,” he explained. “We won’t participate. Nothing personal. Our job is to take accountability for running a really good ship, where we will have productive labour, but we can’t take the risk of wage inflation going up 15% to be competitive.
“We have got some aggressive customers where we’ve given them notice and said, unfortunately we’re losing money. You can’t have the great service at a loss,” said Brady. Most end up staying with Swissport but a handful do leave. “Let’s say one in 10 leave, which is fine, because I’d rather produce a good service at the right cost.”
In some cases, it is akin to “hand-to-hand combat” with airlines, joked Brady. “It is of course their job is to make sure they get the most competitive price. Our job is to give them the competitive price, but also give them the service because as soon as you’ve got the contracts it is all about the service.”
The return of the Asian carriers to the US market, which they hadn’t served during Covid, is an interesting example of the pricing dilemma. “With some Asian carriers we hadn’t had price adjustments since 2017 to 2018, and we gave them effectively a reprieve over Covid,” said Brady. “Now the price has gone up say 30% because labour has gone up at 40 or 50%. So we’ve had some that have gone to the mom and pop shops, which is fine, but we say we’re not going to service you if it’s going to be at a loss.
“What I tell people is that we are a low margin business, but we do need a margin,” said Brady. “We are going to spend a billion Euros on capital for GSE equipment in the next 10 years.
“As a business if you want us to invest in eGSE, be part of the decarbonisation programme – which the airlines are committed to – we are an important part of that chain. But we need capital to invest and focus on the part of the chain that that we do best. And that means we need to be able to be profitable. Besides, we have private equity owners where if I agree to unprofitable contracts, I’ll just get taken out the back and shot.”
The job in 2023
Fixing Swissport’s hotspots and making major inroads into the firm’s attrition rates are two of Brady’s big targets in 2023. “We want to be the partner that airlines turn to,” he said. “We might not be the cheapest in every location, but we can be the most reliable and we will deliver the same product at Manchester as in Chicago.”
As a privately owned firm Swissport does not offer guidance on financial results, but Brady says the aim is to achieve revenues of €3.5 billion this year. What he does say about margin is Swissport “needs enough margin to sustain our investment, for example in e-GSE.”
Behind the scenes, Brady has been shaping Swissport’s approach to customers with a focus on continuous feedback using the Net Promoter Score methodology. He has also been reshaping elements of its operating model. “We’ve introduced a global operations team run by Karen Cox [who joined Swissport in October 2021 after 17 years at easyJet managing its ground operations] and we’ve got the blueprint for every station: how we run it, how we manage it.”
There is a focus on the station manager “because every business is like a little family”, said Brady. “You want people to be part of that family. You want people not to let people down. We want people to turn up to work. We want them to stay with us.”
There will be opportunities for Swissport to undertake acquisitions this year, too. “We think we should play an important part in consolidating the industry. We are looking for businesses and we’ve got a long list,” said Brady. There are gaps in Swissport’s portfolio in Europe and in Asia.
“We’ve got a real appetite for M&A [mergers and acquisitions], but it needs to be the right M&A in the right place,” said Brady. Swissport has a small team that is constantly evaluating a range of opportunities.
“We’ve been through a number of opportunities that just couldn’t get there on price so we just didn’t fit [but] we will have some acquisitions this year,” he added, with the preference being a “plug and play” deal where the business acquired fits into the “Swissport formula”.
