Peter Bluth
Aviation services consultant
The aviation industry is facing its worst crisis ever. Worlwide economic recession, terrorism attacks and threats,
SARS, Iraq war and increasing oil prices are a number of external factors which led to a situation where airlines
lost more money in the two years than they ever earned in history.
On top of this severe situation the traditional aviation industry is faced with the growing success of the low
cost carriers. Their success is primarily based on substantial structural problems of the established airlines
(like high labour cost, complex product design, inefficient processes).
Therefore the aviation industry will see in the next few years a number of changes:
• Airlines concentrating on core activities and outsourcing non-core functions.
• Redesigning the product to meet passengers requirements.
• More point-to-point connections – desired by the passengers – will reduce the number of hub airports and consequently increase competition among airports.
• Overcapacity and financial constraints will lead to further consolidation of the airline market.
• Decreasing yields will put permanent pressure on supplier and airport service companies for price reductions.
But overall IATA and other organizations are forecasting a longterm growth of 4-5-% of the airline market.
Ground handling companies may benefit from the restructuring process of the airline market by:
• Participating in the market growth of the low cost carriers as they usually do not perform ground handling themselves.
• Benefitting from outsourced ground handling services from the established airlines.
To participate in these market opportunities handlers permanently have to streamline their cost base as the aviation
services market is volume driven on low margins. Main focus points are:
• Competitive and market related labour cost.
• Efficient planning tools to increase staff- and equipment-productivity.
• Using all synergy potentials of the given network.
In my opinion service networks are an essential success factor for ground handling companies in participating best
in the growing outsourcing trend of the airlines. Networks are important in building service partnerships
with the individual airline customer instead of just fulfilling a supplier function.
Franchise concepts like the Aviance business model may be an innovative idea and when properly managed, they may become as successful as the airline alliances..
Overall the ground handling service companies may be the winner of the present aviation industry crisis if they
clearly follow a customer focused strategy.
Peter Bluth
Aviation services consultant
May 12th,2004
This is our guests opinion and does not necessary reflect the alliance viewpoint.
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