Baltic Ground Services: eventually the only remaining companies will be those operating according to the one stop shop principle

Due to financial instability and steadily increasing fuel prices the aviation sector is forced to further minimize expenditures.  This could be done by outsourcing some of the business processes – a practice often exercised in ground handling sector thus contributing towards the expansion of airports and airlines. The thorough analysis of main trends has lead Baltic Ground Services experts to arrive at the conclusion that eventually the aviation ground handling services providers will be impelled to choose between the following two business models: either to turn global by diversifying activities, including smaller airports due to the risks related to dissolving business; or remain as a company servicing a single larger market.

‘Although the steadily increasing air transportation flows naturally contribute to larger ground handling services providers’ profits, many companies wishing to enter or survive in this competitive market are faced with problems related to expansion, market demand for high quality services at extremely low prices, investment issues and prognosis of business perspectives in the nearest future.’, - commented the Head of Sales and Marketing Department of Baltic Ground Services Vitalis Dudys.

The current aviation market is dominated by companies operating according to three distinct business models allowing to identify aircraft ground handling services providers. There are companies that belong to airlines and serve airlines only, then there are airport companies and independant ground handling services providers. In the meantime, the ever changing aviation industry and increasing competitiveness may lead to the following sector growth tendencies: liberalisation (de-regulation), privatisation, commercialization and globalization.

‘The ground handling services sector will be highly affected by the globalization process. The service spectrum will significantly expand geographically and companies will be forced to increase their capabilities by adding new airports and services, even such that are not directly related to flights (security, terminal maintenance and cleaning, etc.)’, - noted V.Dudys.

Ground handling services providers will be also compelled to adapt to new generation airports’ requirements. For quite a while now airports have been adjusting and renewing their infrastructure to suit aircraft such as A380 and B787. These changes will call for additional input from ground handling companies too. Not only will they be pressured to adjust to the new model aircraft, varied infrastructure, different technical and personnel management but also very large investments. Higher effectiveness and productivity will positively effect the levels of quality in ground handling services.

Baltic Ground Services experts have pointed out that in 2001 airlines’ ground handling companies accounted for 59% of the entire ground handling services market while in 2003 the percentage dropped to 50%. Currently independent ground handling services providers already occupy more than 40% of the market and are expected to expand their dominance by employing the one stop shop principle.