When global travel resumes in earnest, ground handling should not just aim to return to 2019 processes or technology.
Wide variation in turnaround times internationally suggests Lean Six Sigma methodologies and technological upgrades have the potential to unlock a range of efficiency and profitability improvements for most players. Here we consider some of the likely opportunities by player type.
Figure 3: Room for improvement
Note: Rounding errors for Tokyo, London and Hong Kong
Source: Last available pre-pandemic data at OAG Aviation Worldwide
Airlines - assess and negotiate partners
In the short term, the demand for sanitized travel may continue to lengthen turnaround times, but medium-term passenger expectations will continue to demand quicker, slicker boarding experiences, most likely facilitated by smartphone apps requiring quality back-end data.
This is a good moment for airlines to consider their ground handling contracts, and to reconfigure where current partners are not keeping pace with passenger expectations or long-term turnaround time pressures. In a vibrant ground handling market, the cheapest contract is not necessarily the best value when factors beyond contract cost are considered.
As figure 4 shows, ground handling costs need to be understood on a clear value basis encompassing asset utilisation. Airlines should more often seek to reflect this in ground handling contracts, with performance payments tied to asset utilization rather than simple turnaround times with penalties. Currently, it is all too common that contracts are cost - not value - engineered, leading to a range of ancillary penalties.
As the demand for innovation of ground handling operations grows, there will also be cases where it is appropriate to consider the business case for taking ground handling or elements of it (back) in-house, an option whose greater degree of control and flexibility has proven alluring for some market leaders and may represent the best option for airlines at certain airports.
Figure 4: The case for value (2019 USDbn)
Note: (a) (Total “Aircraft Total Direct Operating expence”) *Average % of Airport and handling charges of Total Opex by Ryanair and Lufthansa (in the absence of identified similar breakdowns by US airlines)
(b) (Cost of delay in US by Airlines as of 2019) * (% of Airport and handling charges of “Total additional costs due to delay of aircrafts”.) Ryanair and Lufthansa’s opex levels used as a proxy for the purpose of this calculation.
Source FAA – Economic Values of Investment and Regulatory Decisions, FAA – Cost of Delay Estimates, 2019, Ryanair Annual Report 2019, Lufthansa Group Annual Report 2019.
Airports - take greater control
Accepted wisdom around the efficiencies gleaned through enforced competition between ground handling providers is being eroded by examples such as Toronto and Qatar, where consolidation of operations has produced better outcomes.
Whilst multiple ground handling providers are meant to ensure efficiency through competition, it is not always the case. When a multitude of operators independently ensures sufficient capacity to cope with its own peak demand, aggregate airport-level capacity will be bloated. It may benefit some airports to own their own ground support equipment and then lease on a pay-per-use basis.
Similarly, airlines contracting with ground handling independently without airport oversight can produce structural problems at the airport level. Bigger airports can benefit from consolidated operational centres with airport-level reach, as well as floating teams that can despatch operators anywhere on the facility. Airports may benefit from a more hands-on approach to ground handling operations, for example in specifying particular requirements around tech deployments or staffing.
Airports have a role to play in deploying specific technologies such as sensor tech, cameras, and AI on stands, all of which increase the flow of information between ground handling, airline and airport, and can facilitate more efficient boarding and pushback prep.
With the retirement of A380s, 747s, there is a smaller scale range in numbers of passengers to handle, less variability in things like stand types or fueling equipment. This provides an opportunity to reduce the overall quantity of apron assets while standardizing processes.
The roll-out of EV powertrains might see a shift to pooled equipment. It makes sense for the airports, the difficulty with pooling I see, is for airports, ground handlers and airlines having a common approach with perceived market share and priority access concerns.
Ground handling - optimize and invest
At the practical level, COVID-suppressed volumes translate into an unprecedented decongestion of airports, providing a real opportunity to rethink processes, trial and rehearse new methods and technologies.
At the simplest level, consider rehearsals. Ground handling teams, accustomed for years to work at 100% capacity, work on little or no turnaround practise. In contrast, F1 professionals will typically do over 1,000 dry runs per race day pit stop, with over 50 dry runs on race day itself. This is the level that makes two second pit stop times possible. While F1 may sound like an extreme example, ground handling operators have a once-in-a-generation chance to tackle the significant scale of optimization opportunity available to them, applying Lean Six Sigma methodologies in a controlled environment.
Improvements can be further enhanced by the deployment of technology to facilitate real-time visibility of turnaround checkpoints and problems for the ground handling team and the airlines. Again, now is the time to source the relevant tech and to ingrain it into teams' existing processes.
Another way to respond to the ceaseless pressure to reduce fixed costs can be to ally with other ground handling operators to exploit synergies of staff and assets.
There is a significant, untapped opportunity to apply Lean Six Sigma techniques to all turn activities, above and below wing. It's one of those things that very few do, but once it's applied and scaled, more will be wondering why they didn't do it sooner.
There are quick wins in process reengineering and training before the big ticket technology overhauls. When it then comes to technology, it's about spending smarter, not spending more overall. For example, most airports have excess non-powered equipment. Apart from underutilized assets in non-pooled settings, this contributes to the less obvious cost of apron collisions. Telematics, meanwhile, might look expensive, but fewer, pooled equipment with telematics would reduce the costs of collisions.
As conventional auxiliary power units are increasingly replaced with hydrogen fuel cells this decade, there's a number of implications for ground handlers. Less need for ground electrical supply or tugs, for example. But the water by-product also removes the need to replenish onboard water supply. This could shave 10 minutes off a typical A320 turnaround - but now puts the potential bottleneck back on ground handling activities like baggage. Processes will likely need a redesign.
Supply chain - update technology
If ground handling operators cannot expect a return to 2019, nor can their suppliers.
Those who make it their business to build and supply the solutions of the future, based on technologies such as IoT and AV, can future-proof themselves against the competition in the coming decade. Ground handling suppliers have an opportunity to facilitate the significant evolution we expect the 2020s and 2030s to bring, wherever technological investment in the process can be leveraged into meaningful value savings.
EV will likely win over other technologies given short apron journey lengths, opportunistic charging between peaks and overnight charging. But this is not without significant investment in distribution infrastructure at many airports. We have seen some airports with a preference for hydrogen and other reduced carbon powertrains.
I see a future in ground support equipment for autonomous technology such as autonomous airstairs, baggage tractors, etc., operators will need to consider more of their processes and human training - both to avoid accidents and realize the value add.