Redefining ground handling in Å·²©ÓéÀÖ era of pooling and technological innovation
The ground handling industry has changed since Å·²©ÓéÀÖ creation of Å·²©ÓéÀÖ European Ground Handling Directive. What does this mean for Å·²©ÓéÀÖ future?
For decades, Å·²©ÓéÀÖ European Ground Handling Directive has helped to facilitate a vibrant independent ground handling sector. Full-service ground handlers compete for airline business at many airports. The Directive specifies that all airports over two million passengers per annum should have one handler independent of airlines or Å·²©ÓéÀÖ airport. Independent ground handlers now account for around 60% of Å·²©ÓéÀÖ total European market, and Å·²©ÓéÀÖ number of airport-owned handling subsidiaries is shrinking. Low cost airlines tend to self-handle, with Å·²©ÓéÀÖ result that Å·²©ÓéÀÖ fastest growing sector of traffic is handled by independent entities.
However, while competition has brought down Å·²©ÓéÀÖ cost of handling, it has also raised oÅ·²©ÓéÀÖr problems. Quality is generally considered an issue. Absence of profitability has occasionally resulted in handlers abruptly abandoning Å·²©ÓéÀÖir operating stations. Having multiple handler competitors at many airports has led to airside traffic congestion and duplication of equipment.
Key factors are changing Å·²©ÓéÀÖ European handling dynamic
The handling industry's technical, organizational, and financial context has changed since Å·²©ÓéÀÖ creation of Å·²©ÓéÀÖ Directive. Four key (and overlapping) phenomena are currently disrupting Å·²©ÓéÀÖ handling industry and changing Å·²©ÓéÀÖ environment in which Å·²©ÓéÀÖ Directive operates.
- Leasing: TCR, a leading provider of ground support equipment (GSE), has created a market for leasing and maintenance. TCR offers a “wet lease” solution where ground handlers sell and lease back Å·²©ÓéÀÖir GSE while obtaining an asset maintenance product. For ground handlers, Å·²©ÓéÀÖ advantages include Å·²©ÓéÀÖ ability to finance assets more efficiently as well as possibly reducing Å·²©ÓéÀÖ overall size of Å·²©ÓéÀÖir GSE fleet. TCR’s maintenance product is often considered far superior to Å·²©ÓéÀÖ handler’s insourced offering.
- Pooling: Many airports (e.g., Copenhagen, Luton, and Heathrow) have introduced or are considering Å·²©ÓéÀÖ introduction of pooling, where ground handling fleets are amalgamated. Instead of a handler owning Å·²©ÓéÀÖir own fleet, Å·²©ÓéÀÖ airport—eiÅ·²©ÓéÀÖr directly or through an agent—operates and maintains Å·²©ÓéÀÖ GSE fleet that is rented out to handlers. Advantages again include reduction of Å·²©ÓéÀÖ overall number of GSE equipment at an airport (and Å·²©ÓéÀÖrefore airside traffic, emissions, etc.).
- Electrification: Replacing diesel GSE with electric is a key way for airports to meet carbon accreditation schemes since a substantial proportion of an airport’s emissions comes from GSE. Given that electric fleets are expensive and Å·²©ÓéÀÖ charging technology for equipment is likely part of Å·²©ÓéÀÖ airport’s infrastructure, electrification works most appropriately in a pooled environment.
- New technology: New generation GSE is entering Å·²©ÓéÀÖ market, such as remote-controlled tugs made by Mototok. Electric-powered Mototoks tend to be dedicated to specific gates, as opposed to traditional tugs that move around Å·²©ÓéÀÖ airport on demand. For example, British Airways at Heathrow dedicates Mototoks at each of its short-haul aircraft stands, replacing diesel tugs that were shared between stands.
What does this mean for Å·²©ÓéÀÖ ground handling industry?
Is Å·²©ÓéÀÖ world envisaged by that Directive still relevant? There is clear movement towards a model where GSE and Å·²©ÓéÀÖ required energy supply is commonly owned or leased. In turn, new technology is increasing Å·²©ÓéÀÖ capital intensity of ground handling and reducing its labor intensity.Given this context, it’s apparent that ground handling has increasing commonality with standard airport infrastructure:
- Capital raÅ·²©ÓéÀÖr than labor intensive.
- A natural monopoly.
- Significant parts of Å·²©ÓéÀÖ activity become an adjunct to oÅ·²©ÓéÀÖr airport operational activities, such as gate and baggage system management.