Aviation: Partners On The Ground
Opening up several airports to private ground handlers via competitive bidding will mark the next growth story for the civil aviation market
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There is some good news for private ground handling operators. The government run Airports Authority of India (AAI) is in the process of appointing ground handling operators, through a competitive bidding, across several of its airports. AAI, as is known, controls nearly 125 airports in the country. Private operators including Turkish firm Celebi Aviation Holding and veteran Bird Group are cautiously optimistic. Why? There are multiple reasons. First, only a third of the overall ground handling business (domestic and international) is available to private operators. That is because domestic airlines like Jet Airways, IndiGo do their own ground handling. So does Air India via its subsidiary. As a result, virtually 90 per cent of the total domestic ground handling business in India rests with Jet, IndiGo and Air India leaving companies like Celebi and Bird to rely on international carriers outsourcing their ground handling business. Of course, recently domestic operators like the Air Asia and Vistara have begun outsourcing their ground handling, but between the two, the fleet-size of aircrafts is significantly low.
There are other reasons too. In 2017, the government came out with the new regulations for ground handling called the ‘Ground Handling Services Regulations 2017’. According to the new regulation, airports handling 10 million or more passengers annually are required to have three ground handling agencies. This includes a ground handler belonging to airport operator/its joint venture or JV/its wholly-owned subsidiary or a JV or a subsidiary of Air India or any other agency. Also, all appointments of ground handlers need to be confirmed through a bidding process. Airports with less than 10 million passengers (annually) can hire “up to” three agencies.
Further, domestic airlines are allowed to do self-handling with the condition that they will not engage staff from third party. This means that airlines who chose to do their own ground handling will have to put all the staff on their payrolls.
So far, there are almost a dozen or more airports where the ground situation is contrary to what the regulation says. An industry insider says, there are virtually 19-20 airports (major and smaller included) where third-party ground handling continues via multiple agencies. “AAI knows the situation. It is allowing the situation to continue as some influential airlines have sought extension before the new rules are implemented in letter and spirit and that is what is bothering the private ground handlers,” he says.
What constitutes ground handling service? Ground handling services include baggage-handling, aircraft cleaning and servicing, loading and unloading of food and beverages and movement of cargo, among others. The ground handlers get paid by the airlines on the turnaround of an aircraft (from the time the aircraft lands till it takes off again). So, the more flights an operator handles, the more they get paid with better margins. With AAI inviting bids for private ground handlers, companies like Celebi, Bird Group and others are expected to bid for airports at Chennai, Kolkata, Ahmedabad, Goa and Pune among others as these ones attract the next maximum number of flights after Delhi, Mumbai and Bengaluru. From an estimated annual size of Rs 2,500 crore-plus, the ground handling business is expected to double in next 3-5 years once most AAI airports engage specialised operators, experts say.
Private ground handlers
Bird Group provides the most comprehensive portfolio of aviation services at India’s three busiest airports – New Delhi (Terminal 3), Bengaluru and Kochi, and other airports like Mumbai, Gaya, Ahmedabad and Goa and other airports such as Mumbai, Gaya, Ahmedabad and Goa.
Globe Ground India, a 100 per cent wholly owned venture under Bird Group is the designated Ground Handling service providers at the Bengaluru International Airport (BIAL) handling more than 2,200 flights per month.
With a legacy of 60 years since its inception and 10 years journey in India, Celebi Aviation already has a strong presence in the India market and is providing ground handling services in the key gateways of Mumbai and Delhi. It was recently awarded the Ground Handling license (for 10-year period) by BIAL. The company also has operations in Kochi, Ahmedabad and was recently awarded the license by Kannur International Airport, which is slated to start operations later this year. The company plans to invest $7-9 million in this airport.
Says Murali Rama-chandran, CEO, India, Celebi Aviation Holding, “This partnership is an important step towards strengthening our presence and commitment in the India market and comes on the occasion of the 10th anniversary of our India operations.” Bengaluru’s Kempegowda International Airport is the largest airport in southern India, and the third largest in the country. Besides these, there also are other players like the Air India-SATS JV, which operates at five airports. Then, there is Menzeis, Bhadra International and Indo-Thai.
With the upcoming rollout of new policy norms, Ramachandran expects India business to triple as more domestic airlines will choose to outsource their ground handling services to third-party agencies. Celebi recently signed with IndiGo in Kochi.
“That is one of our major domestic contracts. We have handled Jet Airways international flights in Mumbai as a national airline and we hope to expand this relationship further with other carriers,” he says. In the past 10 years, Celebi says it must have invested around $200 million. “In this year itself, I would be further investing another $25-30 million on various things like refurbishing equipment, bringing in new equipment, etc.,” adds Ramachandran.
The ground handling business is very capital intensive and therefore not everyone can enter it, says Ramachandran. It requires a minimum of $7-8 million just to set shop at an airport for ground handling. Then there are more investments that goes into buying equipment’s like high loader, he adds.
“For a wide-body aircraft, the High Loader alone costs Rs 3 crore. A Push Back can cost Rs 4-4.5 crore. Each galvanised trolley (at the airport) can cost up to Rs 1 lakh and one requires a minimum of around 200 trolleys. Step can cost around Rs 18-20 lakh easily,” says Ramachandran.
Agrees the Bird Group’s spokesperson. “There is a significant investment that goes in as a lot of machinery and equipment comes in from overseas as there are no manufacturers in India. Our breakeven for any size airport happens after 7-8 years,” says the spokesperson.
Why this makes sense
Ground handling is a specialised job world over. For airlines the core business is aviation; managing on-time performance, keeping operational costs in check and flying profitably. “Globally ground handling is a specialised job. Outside India, we do ground handling across 40-plus airports. In India, it makes sense for airlines to outsource the ground handling part of the business to specialized operators. And that is why we see opportunity with AAI inviting bids for its 90-odd airports,” says Ramachandran.
For Bird Group, the ground handling business is “one pillar of multiple offers” that it has for airline customers. “We have been in this for the last 18-19 years and it has become one of our core businesses to be in to grow. It is a strategic business unit that adds value to our other business segments for any prospective airline,” says the spokesperson. In coming months, private ground handlers at AAI airports will mean faster arrival of baggage, cleaner aircrafts, seem less service leading to a win-win for all stakeholders.