Three days of engaging debate were enjoyed alongside an ever-growing exhibition in Downtown Miami at GHI’s fourth regional Americas event, June 26-28. With a 20% leap in attendance to 310 delegates, the 2018 event was bigger and better than ever before. Nearly 70 representatives from 30 different carriers were present, while exhibitors soared to 31 technology and GSE suppliers, up from last year’s 23. Networking was at an all-time high, with 1,135 one-to-one meetings taking place, complemented by the return of GHI’s Meet the Airline speed-networking forum, which debuted in March at the GHI Asian Conference. Nine carriers took part, including Alaska Air, LATAM, Allegiant Airlines, American Airlines and Copa Airlines, with 95 five-minute meetings taking place in one hour.
The big debate
In the first of several panel debates dedicated to regional issues, John Redmond, Menzies’ SVP – The Americas, touched on the impact of President Trump’s protectionist policy on US passenger and cargo figures. “It’s hard to know what he is trying to achieve and whether they will be short term,” he said of the freight levies, adding that the greatest short-term risk is to cargo volumes. Jon Conway, Director General of ASA, highlighted that price increases are impacting GSE suppliers, as the price of raw materials increases.
On the recurring concern of cost-cutting at the expense of operational safety, most of the panel were in agreement that this is now a rare problem. Conway observed that the incidence of “cowboy operations” is decreasing, with Redmond reiterating that he doesn’t believe shortcuts are being taken when it comes to safety. How to ensure this is always the case by keeping wages fair but costs within the realms of profitability was the concern of American Airlines’ Olga Svirskaia – a challenge made harder by the reality that labour, the airline’s highest cost driver, is at an all-time high in the Americas region at present.
Ruben Atehortua, Avianca Ground Operations Director, suggested that the greatest price pressures on handlers are often imposed by their competitors rather than the airlines. By far the most controversial comment to come out of the debate was Atehortua’s assertion that profit margins are often “bigger for ground handlers than for airlines”: a sentiment with which Conway and Redmond vehemently disagreed.
The need for more technology on the ramp in the quest to standardise ground handling processes got a mention, with Conway commenting that outdated infrastructure is limiting technological advancements such as electric GSE. He was optimistic that “below the wing technological devices will accelerate over the next 10-20 years,” and, nearer term, predicted that 70% of ground handling in the region will be outsourced by 2022.
Honing the operation
JetBlue told delegates of how GSE is their secret weapon in boosting safety and OTP. With ground damage rates at their lowest since 2000, Director Airport Services and Planning, Josh Goldwitz, attributed three reasons, which derive from the airline’s ownership of its GSE: risk elimination through design modifications; oversight of its fleet; and engagement with its partners.
Swissport’s Jose Canales reminded delegates of the handler’s impressive 97.7% departure punctuality in 2017 in the face of airline arrival punctuality of 64.3%. Alongside customer surveys and other KPIs, innovation is important to continuous improvement, Canales stressed, detailing the computer vision timestamping technology being trialled in Australia, which maps the turnaround process to determine anomalies and trace revenue leakage.
Corporate Culture Coach, Desiree Perez, went on to impress the importance of being a good leader to get the best out of your staff. Accommodating the changing motivations of the millennial worker was deemed particularly important in view of the 75% of the workforce that this generation will comprise by 2025. “Millennials crave opportunities for leadership, development and feedback,” Perez explained, and organisations hoping for longevity in their workforce should adapt to this shift in incentives.
Americas by numbers
On day two KPMG’s Rohit Tomar provided a market analysis of Latin America, expected to grow at an annual rate of 6% over the next 20 years, driven by economic reforms and growing competition. Within the region, an RPK growth of 10.5% was recorded last year and the market is expected to reach a value of US$130m in 2019. Challenges in the region include high taxes and fees and restrictive government policies; in Brazil, for example, fuel pricing policy adds an extra US$800m in costs annually. Opportunities remain, however; the recently approved Open Skies policy between Brazil and the US being one example.
Consolidation has altered the landscape of the industry, Tomar went on to say. New alliances, between both legacy carriers and ground handlers, and new business models, such as long haul low cost, threaten profit margins, making adding value to the customer’s supply chain more important than ever for handlers. Tomar described a trial at Budapest airport this year, which saw revenue sharing from duty free sales between Wizz Air, the airport and the retailers. The average spend per passenger increased by 4.3% in three months, which, if reproduced across Europe, would see an uplift of US$860m in sales.
As regional economic growth recovers in 2018, including Brazil’s long-awaited recovery, most carriers have seen improved financial performance in 2017, reported ICF’s Eric Toler, despite increasing fuel prices. However, many of Latin America’s largest airports face infrastructural constraints, such as Lima, Santiago and Mexico City. Self-handling remains prevalent in the region, added ICF’s Andy Dobson, with the exception of LATAM Airlines, which sold its ground handling unit, Andes Airport Services. The changing market dynamics, the pair warned, could put pressure on costs and performance, leading to more M&A partnerships and the need to identify new revenue sources.
In his legal update on the trends impacting the Americas, W. Chris Harrison, shareholder at Ogletree Deakins, touched on the growing trend towards the carriage of emotional support animals, drastically increasing minimum wages across the US and the tripled incidence of complaints by PRMs since 2004, which has seen carriers at increased risk of being sued for liability.
On the matter of the PRM, a panel addressed the emerging trend whereby able passengers request wheelchair provision in order to achieve a speedier journey through the airport. It begged the question: what qualifies as a PRM? The panel was unanimous that pushing to legalise the right to refuse the service was ill-advised given the sensitive nature of the subject.
Another question surrounded where the responsibility for the passenger lies while they are inside the airport. Reporting a 25-30% rise in requests for wheelchairs since 2013, American’s Svirskaia stressed that legal responsibility is not as big a concern as bad publicity, which forces the airlines to meet – and exceed – expectations, regardless of technical responsibility. Regarding the added expense of PRM provision, JetBlue’s Goldwitz queried if there was any regulatory relief to be had, but Harrison suggested that an airline’s best approach is to tighten up its criteria for offering the service. Eric Hartmann, VP Aviation Services for AGUNSA, meanwhile, highlighted that cost is hugely influential in a handler’s ability to cater to PRMs as the GSE is so costly.
The panel agreed that stakeholders should come together to decide on parameters for reasonable expectations surrounding the service, such as a timescale for providing assistance, and that more forethought should be given to infrastructural requirements when building terminals in the future, to facilitate PRM handling.
The afternoon divided into North American and Latin American streams addressing the respective regional challenges, with the latter hosted in Spanish. The North American stream revisited the issue of high attrition in the region, with Desiree Perez asserting, of the new generation workforce, that “loyalty is not that important anymore” and “the most motivation people get is when they succeed.” Marva Richards, Operations Manager at Airport Services Antigua, informed delegates of the challenges of handling in the Caribbean, which centre around costs (of training, equipment and acquiring certification like ISAGO); however, happily, the issue of high staff turnover is not one they suffer from here.
A panel discussed the operational challenges of the region, with JetBlue’s Goldwitz commenting on the constraints the carrier has experienced, particularly in the Northeast, because of congested airspace. Paul Eubanks, Senior Director Policy & Regulatory Affairs, ACI, highlighted that it’s nearly 25 years since the last big development in the region: Denver airport. While US$100bn worth of infrastructure investments have been identified as necessary between 2017 and 2023, Goldwitz suggested new approaches to maximising the existing facilities, such as GSE pooling, to save space.
Industry of the future
Following a lively delegate dinner cruise, the final day told of transformative potential of blockchain, with KPMG’s Tomar asserting that this secure, data-sharing capability will soon become one of the industry’s largest ancillary revenue generators. “Loyalty programmes have the capability to become the second largest currency in the world,” he predicted, adding that “the way we do business is going to change” and ground handlers will have to adapt to becoming retailers like airlines.
The event drew to a close with a panel discussion surrounding the trend towards the electrification of GSE. While battery-powered equipment is undoubtedly becoming a more popular choice, particularly on the East Coast in the US, concerns surrounding charging cycles and infrastructure constraints remain an obstacle to wider take-up. When questioned on the total cost of ownership, Mark Garlasco, CEO of TLD USA, estimated less than a year to recoup the initial outlay, while Mototok’s Marketing Director, Thilo Wiers-Keiser, added that electric units are also cheaper to run, requiring less maintenance and no fuel.
After many years with lead acid as the mainstay, Russ Evans of Posicharge explained that people are now adopting the faster-charging lithium ion in the US, Middle East and parts of Asia. He added that electric GSE is slower to adopt in the LatAm region, where airports are loath to invest in the necessary infrastructure; however, this will change as airports compete to be the greenest. “If we’re not at least 75% electric on the ramp within ten years in the States, I’d be shocked,” he asserted – a notion on which the panel was unanimous. “Airports elsewhere are mandating 100% electric within five years.”
JBT’s Nick Heemskerk was optimistic about the promise of automation on the ramp, explaining that the technology is already there but GSE is usually the last area to adopt it. “What needs to change is the culture and standardising the environment of the operation,” he advised. Garlasco relayed TLD’s vision of having a controller monitoring several pieces of equipment in the future before Heemskerk concluded that, much like the automotive industry, which has seen the advent of electric, self-parking cars of late, aviation is also entering a transitional period.
South America in summary
The day two stream hosted in Spanish heard of the trends emerging in the LatAm region, starting with the low cost carrier model, which has grown significantly. Various startups have begun or are soon to begin operations in Brazil, including Flybondi from Argentina, Flycana from the Dominican Republic and Amaszonas from Bolivia.
With orders for up to 162 new low cost aircraft in the region, it was predicted a fleet increase of almost 400% could be expected; however, there have been delays in aircraft deliveries and entry into the market, owing to a lack of infrastructure. Handlers have subsequently seen a slowdown in growth, with fewer services requested in the handling packages, leading to lower contract prices, while the bottom line has been affected by an extended lead time on GSE (120 days to have equipment on time).
In terms of limitations to growth potential, new economic progress in Brazil could add pressure to the infrastructure of São Paulo and domestic airports, while the main airports in Argentina, Colombia, Ecuador, Mexico and Peru also pose limitations to growth. It was suggested that the Government must rapidly increase investment in the capacity of these airports, as well as in technology, to accommodate the predicted growth in demand in the coming years.
The importance of promoting aviation by modernising regulatory frameworks, to avoid excessive regulation and protectionism, was raised. While Chile and Panama have created the ideal conditions for growth in this respect, Brazil’s regulatory environment needs to align with global best practice, it was heard. The value of international certifications, like ISAGO, in protecting the operational standards at airports were underlined, while a national aviation fuel price policy was also deemed important to stimulate the Brazilian economy, based on the extremely high tax burdens that make Brazil’s fuel among the most expensive in the world.
On the matter of staff recruitment and retention, it was mentioned that, as the minimum wage has increased, so has formal unemployment; however, there are no difficulties in sourcing ground handling staff, despite the high turnover of the sector, and no turnover to report at the management level.
A pragmatic attitude prevailed throughout the annual event, with plenty of fruitful of discussion surrounding industry improvement necessary across the board to future-proof the business. Next year, the Floridian affair is being taken south to Panama. Join us at the Hard Rock Hotel, 25-27 June 2019.