Cargo iQ member Swissport has had to respond to the COVID-19 pandemic to meet new challenges and changing demands.
The ground handler's Vice President of Global Operations Cargo, Hendrik Leyssens, who is also on the Cargo iQ board, explains how Swissport is dealing with the crisis and the new normal that is coming.
Q) How has Swissport responded globally during the COVID-19 pandemic?
The first priority has been the health and safety of our staff. Right from the beginning, Swissport has taken the necessary steps to make sure our staff is safe and healthy. Additional safety precautions have been taken, extra personal protection equipment (PPE) was made available to our staff, and communication was increased.
On the business side, the pandemic has a massive impact on Swissport due to the near total collapse of the global aviation market with most airlines grounding large parts of their fleet, which meant passenger business has temporarily disappeared along with baggage numbers.
As a consequence, our revenue in April this year is down 80%, compared to the same period in 2019; it is likely to be a very challenging rest of the year for Swissport.
Our air cargo business has also been severely impacted. There is some extra business at airports with large freighter operations like Amsterdam, Basel, East Midlands, Liege, and London Stansted.
However, that is only a thin silver lining in the face of so much belly capacity on passenger aircraft gone. Some 50% of global cargo volumes is normally flying in the bellies of passenger aircraft.
Q) Have your ground handling operations and business changed much since the start of the pandemic?
Dramatically. Cargo makes up 20% of our revenue and the other 80% are from airport ground handling services like check-in, baggage handling, refuelling, ramp, pushback, and other handling services.
We are seeing an unprecedented collapse of business volumes in both sectors. To make it tangible: In Switzerland, 95% of all flights scheduled for April were cancelled due to the COVID-19 pandemic.
In April, Swiss International Air Lines operated just five to ten daily flights on average instead of the normal 400 flights per day at Zurich Airport. For Swissport, it means that we are doing almost no passenger service, baggage, or ramp handling.
In May, it may pick up a little, but the forecast is still minus 90% of flights compared to May 2019. We are hopeful that by the end of year, we will be back to 70% of last year’s volume, but there is a long way to go.
Q) How great has it been to see how your employees have responded during the crisis and the industry as a whole?
Our employees are our most important and most valuable asset. They make the difference for our customers, day-in, day-out. The truly tragic part is that personnel costs also makes up for about 70% of Swissport’s total cost and so we had no choice but to rapidly reduce our headcount across the Swissport organization.
By the end of April our pre-crisis workforce of 64,000 was down to less than 15,000 on active duty. Thankfully, we were able to enrol 40,000 of our colleagues in state-supported furlough and short-time work programs. It allowed us to keep qualified and security-cleared staff on board, preserving their skill and availability. Sadly, some 10,000 had to be let go nonetheless.
It has been fantastic to see how our teams across the globe have joined forces to withstand the pressure that this crisis has brought on our company. Additionally, this crisis shows the flexibility of our industry.
In a matter of days, our industry had to adjust to this new reality and I am proud to see how we are still serving even just a few passengers and flights of our customers across the globe based with Swissport’s trusted high quality standards.
No surprise, the #weareallinthistogether hashtag seems to be very relevant for many passionate employees in the aviation industry – be it airlines, ground handling, or air cargo handling staff. Everyone wants to be back rather sooner than later, and we are certainly hoping we can recover and rebuild soon.
Q) What have been the biggest challenges since the pandemic started?
We moved early, and we moved fast, in implementing drastic measures. As early as February, Swissport put a stop to global investment and a hiring freeze. 70% of our total cost is personnel cost.
Swissport entered the crisis with 300 million EUR in pro-forma cash at the end of February. This would have left us in a very strong position cash flow-wise under normal circumstances.
However, if air traffic remains factually closed down for a longer period, ground service providers and cargo handlers will not be able to stay afloat without support. We have done an impressive job at reducing costs fast, but you just simply cannot keep up with an 80% revenue drop without severely damaging your structure.
We think it is in everybody’s interest to protect the larger aviation system. Once this highly interdependent system starts to unravel due to failing businesses, it will become costly and complex to re-start it. There is no on-/off switch. When structures are broken, they are broken for a while.
Swissport is exploring all avenues to secure additional liquidity by early summer. We are currently working with our lenders and investors. State aid and government relief programs are important pillars, too.
We appreciate the support provided by governments so far. It provides “additional runway” and helps protect the system-critical airport ground handlers. It is still a lot of work, but we are confident we will be able to raise the necessary liquidity.
Q) What will be the new norm in future for aviation and ground handling?
In cargo, the initiatives we have started such as digitization, Bluetooth technology for tracking shipments, pharmaceuticals, and temperature-controlled equipment will continue. Also, the construction work for our new state-of-the-art facilities in Frankfurt and Brussels goes on.
Additionally, we are still increasing capacity at several airports by investing in equipment. More than ever, investments need to be carefully prioritized to make sure we are prepared when our cargo activities recover, but without wasting resources.
Overall, we need to continue focus on supply chain transparency, quality, temperature control and digitization. Under the umbrella of Cargo iQ, Swissport had joined forces with several industry partners to work on these exact topics.
On the passenger side of the business there maybe changes with new rule books coming into effect, for example regarding the physical distancing we all had to get used to. Airlines and airports may introduce new queuing rules or check-in processes. The protection of our own staff is of critical importance too. At check-in, for example, where our staff come in closer contact with airline passengers.
At this point in time we don’t know exactly what will come into effect, but I am sure we will be ready and capable to fulfil the needs and expectations of our airline customers in the future in different areas of cargo and ground services. We will be ready to implement what is needed.