The New Synergy Between Airports, Airlines and Ground Handlers
With the streamlining of airport and airlines operational costs and customers looking for the best deals possible, airports are increasingly looking towards new ground services providers to assist day-to-day operations. The norm not so long ago was that Ground Handling operations were largely dominated by airlines and airport handling supplier monopolies. These days competition is fierce so it is more about low cost versus full service and the streamlining of operational costs. Things have changed in the airport, airline and ground handling service markets.
The ground handling business has grown to enormous proportions with over 1,000 players worldwide, all competing for their piece of the US $80 billion per annum ground handling business pie. These numbers will only get bigger as the demand for higher safety, increased service levels and most especially leaner costs continue to drive customers and providers alike. A large number of airports still use just one ground handling supplier, however, this is not the case all over the world. There is strong evidence to suggest that by introducing more choice to customer airlines, overall costs reduce and quality increases as the market becomes more competitive.
As a former Area Manager for Jazz Aviation in Kelowna BC, I have worked with several ground handling companies and I really valued our working relationship. The RFP (Request for Proposal) process was exciting for new ground handlers breaking into the market but very stressful for existing ground handlers who had to put in RFP's for existing contracts in order to remain competitive. I saw the occasional situation where a ground handler had to operate at a deficit for the length of their contract because they omitted some critical element in their RFP. I recently came across a blog post written by Ricardo Aitken and Stuart Matheson, from IATA, who profess there are Seven Golden Rules when preparing a ground service Request for Proposal. I think they are brilliant and worth sharing.
Ask your stakeholders
An essential first step in RFP process management is to ask stakeholders (airlines, staff) what they want. Although this sounds very basic it is an aspect that is often neglected. The granting of operating licenses is one thing, but will the airlines actually sign a commercial deal? Will the introduction of a new supplier interfere with settled existing relationships? Will the market become so cut-throat that the overall level of safety and quality is sacrificed on the altar of profitability? Do the airlines actually want another supplier? These are important questions ground handling service providers need answering and will go a long way towards achieving transparency.
Conduct a thorough inventory of infrastructure and Ground Operations Management(GOP) and Standard Operational Procedures (SOP) requirements
A thorough inventory of airport infrastructure and assets is a must. Any entity considering running a ground handling RFP needs to appreciate that having the appropriate equipment and infrastructure makes the difference in achieving high operational efficiency and reducing environmental impact. A ground handling RFP provides the perfect time to upgrade and encourage new operators to invest in positive change. Both airports and airlines need to take into consideration what equipment they would like to see introduced into their operations as their new service provider begins to operate, and if it fits well with their strategy going forward, as well as what is already in place.
Provide the right data for proper business case development
Developing the right business case will attract the top-tier ground handling service operators to your RFP project. You have to make it worth their while and effort to actually participate. One thing to understand is the importance of providing the right annexes to the main RFP document. Too often the random, high-level statistics provided by airports do not provide an adequate picture of the current business environment. The RFP annexes should include detailed traffic statistics, traffic forecasts and current facility and equipment inventory in a summarized and easy-to-read format that helps potential suppliers accelerate their initial decision – whether to participate or not.
Conduct in-depth applicant due diligence
When choosing suppliers, it is imperative to carry out thorough due diligence on the applicants to ensure they can meet your organization’s handling needs and are a trustworthy, viable business partner for the future. The use of benchmarking and a system of internationally recognized safety and quality certification, such as IATA’s ISAGO accreditation, is great for confirming the ability, safety record, and viability of the bidders.
Have a realistic expectation of RFP management resources
The management of any RFP project will take up valuable time and resources. This can be strenuous given that airports and airlines are already running a complex business. Questions must be answered by asking the appropriate stakeholder or internal expert/decision maker; the current (or projected) operational deficiencies or needs must be carefully examined; the appropriate data must be collated; documentation must be prepared and reviewed... these are just a few of the areas that require expertise and resources to compile. As such, this is a strong reason for engaging a third party expert to run the project.
Think about life after the RFP
Once a new license is awarded, there will be a change in the old order. This could mean yet another supplier to manage or the handover from ‘old’ to ‘new’, in the case of replacement. Both will have infrastructure, organizational, resourcing and human effects for all parties involved. A ‘bedding in’ period for the new supplier as they begin operating will be inevitable so it’s important to consider how that will be managed and a contingency plan should be put in place with increased oversight applied accordingly.
Consider the use of Independent Experts
Based on specialized expertise, independent experts can help identify weak areas, improve the feeling of partnership with clients/providers and successfully manage expectations. They can ensure successful integration with existing suppliers and stakeholders and streamline communication within airport operations and along the entire airport supply chain.
There will inevitably be a change in the dynamic - and the resources and support required will need to come from the new supplier, you and your stakeholders. The trick is to have run a stringent RFP which enables you to understand what is being offered by bidders and also how they plan to reduce the impact of change as they start operations. From this, you can plan your actions and resources accordingly.
Finally, do also consider the people who will be affected by your decisions. As humans, we are all a little frightened of change and it is important to accentuate the positives and ensure they are delivered. A holistic and comprehensive approach is needed and can best be delivered on time, in a dedicated and professional way, and within strict budgets, by a proven and recognized expert in the field of both aviation and RFP management, such as IATA.
I would like to thank Ricardo Aitken and Stuart Matheson from IATA for writing such a detailed, informative and comprehensive guide for today’s ground handling service companies, airports and airlines.
Photo Credit: Ironman Holdings Ltd. in Kelowna, BC, Canada. Ironman Holdings Ltd provides Ground Handling Services to West Jet/West Jet Encore, Pacific Coastal, Central Mountain Air, Horizon Air, New Leaf, Canadian North Airlines, North Cariboo Air, Itinerant and Charter Aircraft.