SAirGroup's move to buy Dynair, a major US ground handler, accelerates the market's rapid consolidation.
SAirGroup's Swissport International, which claims to have become the world's largest ground handler as a result of the acquisition, also absorbed Amsterdam Schiphol-based Dutchport and the operations of France's Air Littoral in June. GlobeGround, an arm of Lufthansa, has also spread its wings. In March it bought another US giant, Hudson General.
Airports and airlines still control 75% of an estimated $27 billion market. But Swissport and GlobeGround are among a few third party suppliers beginning to emerge as global players.
"I believe there will be a similar development in ground handling as in-flight catering," says Peter Bluth, president and chief executive of GlobeGround, referring to the dominance of SAirGroup and Lufthansa in that market. "GlobeGround and Swissport will be leading the ground handling industry in the future," he says. This is because the two have the "financial and, more importantly, the management resources".
Despite their ownership links to airlines, both have built a substantial third party business worldwide. Lufthansa, for example, accounts for 25% of GlobeGround's turnover, as do European sales. Most airline groups have left the business, however. American Airlines' sister company, AMR Services, was sold to a New York merchant bank, Castle Harlan, last December and renamed Worldwide Flight Services.
While some of the most recent deals have been in the USA - "Europe is the growth market of the future," says GlobeGround's Bluth.
A European Union (EU) directive was introduced on 1 January, forcing airports to open up ground handling for competitive tender. Despite this, liberalisation is moving slowly in Europe.
While Greece has opened its market fully to competition and the introduction of EU law in France is well advanced, in Spain the EU directive has only just been "finalised into Spanish law", while Italy is dragging its feet, says Bluth. The Dutch and UK markets are said to be the most liberalised. GlobeGround says ramp handling contracts at Manchester and London airports Heathrow and Stansted, make the country its "strongest base" in Europe.
The formation of global alliances is fuelling mergers and acquisitions.
"As airlines extend their networks and have a presence all over the world, the main focus will be on reducing the number of suppliers," says Stephan Beerli, vice-president sales and marketing at Swissport, adding that airline alliances will seek to make use of in-house expertise.
"If Star Alliance is given the chance to give GlobeGround the contract, it will go for it," he claims. Alliances are also forming joint ventures among themselves, such as the Swissport/Air Littoral Assistance and possible SAS/GlobeGround tie-ups.
By 2010, almost half the market will be open to competition, says GlobeGround.
| Ground handling: leaders 1998 | ||
| Handler | Parent | Sales ($ m) |
| GlobeGround | Lufthansa | 383 |
| Swissport Int'l | SairGroup | 355 |
| Ogden Aviation | Ogden | 310 |
| Servisair | Penauille | 305 |
| Worldwide Flight Services | Castle Harlen Partners | 220 |
| Dynair | Alpha Airports | 200 |
| Subtotal | 1,773 | |
| Total world market | 27,000 | |
Source: GlobeGround, company reports, industry estimates Note: GlobeGround sales include estimates for Hudson General, purchased March 1999.
Source: Airline Business
