Improving KLM Customer Ground Handling's Competitive Market Position

Abstract

The national pride of the Netherlands in the aviation industry, KLM Royal Dutch Airlines, is not only an airline but also a ground handler at Schiphol airport. After landing at Schiphol, the Ground Services (GS) and Customer Ground Handling (CGH) departments of KLM will provide all services that are needed to make sure an aircraft can take off for its next destination. Not only KLM’s own aircraft are being handled, 21 other airlines flying at Schiphol are handled as well. Because of the open ground handling regime at this airport, the companies Aviapartner, Swissport, and Menzies also provide ground handling services to airlines. These companies have ground handling as their core business, and operate on multiple airports. As in almost every industry, companies have to compete on quality and pricing in order to ensure a competitive market position. However, the relatively large amount of ground handling parties at Schiphol, combined with the effects of the economic crisis, have made this business focus on competitiveness and price even more. For KLM as a ground handler, the shift towards a focus on price has been hard to deal with, as the biggest cost for any ground handling party is the salary of its employees. Ground handling employees at KLM enjoy favourable working conditions that were given to them in the uptimes of the aviation industry. It is very difficult to change these working conditions, and therefore it is believed that KLM will not be able to compete with the other ground handlers on price in the near future. The other aspect of a product or service, the quality, is in case of KLM perceived as superior by customer airlines. However, making a ‘fair’ comparison between ground handlers is a near to impossible mission as the customer airlines of each ground handler have very different specifications. The time of arrival, amount of transfer passengers, amount of passengers and amount of baggage are just a few of the many specifications that will determine the difficulty of handling an aircraft. This leaves KLM as a ground handler in a very difficult position, having a higher price while offering a superior quality which is not objectively decided on. The raison d’être for both GS and CGH is the strong transfer product they offer. With Schiphol having an estimated total of 70 percent in transfer passengers, who have no further interest in being in Amsterdam, this transfer product is an important aspect of the ground handling. This Unique Selling Point (USP) consists of many services that ensure that an airline can offer its passengers a lot of connections to other aircraft. Also the time a passenger has to spend at Schiphol is minimized, and aircraft are on the ground for a shorter time. The transfer product may be the USP for CGH and GS, but customer airlines see this transfer product less and less as something that is really differentiating the KLM ground handling from other ground handlers at Schiphol. The challenge is thus to strengthen the transfer product offered by KLM as a ground handler and differentiate the ground handling once again. Within this thesis this is done by ‘making the chain longer’, looking at the passenger of the customer airlines (and not just the customer airline itself), and by not focussing on cutting down the price of the operation but on enabling a lower price in a different way. The new baggage tracking applications and program targeted at KLM, and more importantly customer airlines, do so by giving real-time information to passengers, cabin crew, and ground handling agents. Passengers obtain real-time information about the baggage handling process, making them feel assured while transferring at Schiphol. Besides, the passengers are entertained and educated by providing them with videos of the baggage handling process. KLM and customer airlines cabin crews are informed by messages in case of any disruptions in the baggage handling process. Actions like providing the passenger with an upgrade in case of missing baggage can be taken. In this way, the negative experience can be turned into an appreciation for the airline, approaching the passenger pro-actively. The baggage tracking program for ground handling agents enables them to have a quick overview of the baggage handling process. Problems can be solved faster by combining real-time information from different sources. As a result, the amount of mishandled baggage will drop. In this way, making use of real-time information, the transfer product of GS and CGH is strengthened, a big step in differentiating the ground handling once again and improving the competitive market position of KLM ground handling.