Published January 13, 2009

Swissport packs its bags, says goodbye to Changi

European ground services player to pull out of S'pore by end of March

By VEN SREENIVASAN

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(SINGAPORE) It was an experiment in open market competition which did not take off at Changi Airport.

Some three years after starting operations as Changi's third ground services player, European multinational Swissport International is pulling out of Singapore, bruised and battered.

In a statement issued through its European head office, the world's leading provider of aviation ground services said it would be ceasing its ground handling operations in Singapore at the end of March this year 'for economic reasons' and would be 'focusing its activities on other Asian markets.'

Swissport added that it had ensured business continuity for its customers during the transition period and 'fair severance arrangements' for its 300 employees here.

While the announcement may be disturbing for observers who would have liked to see rivals Singapore Airport Terminal Services (SATS) and Emirates- controlled CIAS face some competition, it would be hardly surprising for many industry insiders.

It was widely known within local aviation circles that Swissport was struggling here with just four customers - Swiss International, Northwest, Tiger Airways and AirAsia - and huge overcapacity.

As early as March last year, a leading company official told BT that it was not enjoying sustainable growth in business. He blamed it on 'political influences' and massive undercutting in ground services by its two rivals. One of its rivals, SATS, which controls 80 per cent of the business in Changi, dismissed any suggestions of undercutting when asked by BT earlier.

Swissport was the sole entrant into Singapore's airport ground services businesses after the industry was liberalised in 2005. In early 2006, it invested in a new $15 million warehouse with a throughput capacity of 250,000 tonnes.

Owned by Spain's Ferrovial group and headquartered in Zurich, Swissport is a major global player, specialising in low-cost airline ground services at 25 airports in Europe.

It started off in Changi promisingly in 2005 when it pulled off a huge coup by snatching Singapore Airlines associate Tiger Airways away from SATS, and became the sole operator at the Budget Terminal.

But the going has been tough since then.

But in its statement yesterday, the company blamed the failure of its Singapore operations on both the 'state of the airline sector' and 'the fact that Swissport's local operation is not of sufficient size to ensure its sound profitability.'

'Swissport deeply regrets this development, and will be doing its utmost over the next few weeks to ensure the smoothest of transitions for its customer airlines and fair severance arrangements for its own personnel,' the company said.

Meanwhile, Tiger Airways's spokesman Mathew Hobbs said the airline was reviewing the situation in the light of the latest development.

'We obviously will need ground handling from April 1, and we are currently examining the options,' he said. But he declined to say if the airline would opt for Singapore Airlines-controlled SATS.

In a separate statement, the Civil Aviation Authority of Singapore (CAAS) termed as 'unfortunate' Swissport's decision to cease its ground handling operations in Singapore.

'Swissport's entry into the ground handling market at Changi Airport in 2005 has clearly benefited airlines operating here. Based on the feedback CAAS has received from airlines, ground handling rates have reduced by an average of 15 per cent since Swissport started operations,' noted CAAS's director-general and chief executive officer, Lim Kim Choon.

'It is unfortunate that the size of Swissport's local operations, as well as the timing of the global economic downturn, which has affected the airfreight business in particular, has pushed Swissport to withdraw from Singapore.'

Globally, Swissport gets over half of its 1.9 billion Swiss franc (S$3.2 billion) revenue from Europe and almost a third from the US. Asia, Middle East and Africa account for under 4 per cent.

Nevertheless, it has made some headway around this region. Three years ago, it announced the takeover of Japan-based ground handling company ShinMaywa Ground Services Pte Ltd, which did ramp handling and line maintenance at the key airports of Tokyo, Osaka, Nagoya and Fukuoka.

The company said it would now be focusing its attention in Asia even more strongly on the Japanese and South Korean markets, where it is well and successfully established at five airports already.

China, too, along with other emerging markets, remains firmly on Swissport's 'wish list' for further business expansion in the medium-term future.