'Delay in ground-handling policy barrier for growth'

In conversation with Murali Ramachandran, CEO-India, Celebi Aviation Holding

Celebi Airport Services, a global service provider in ground handling services, has completed a decade of its presence in India. Murali Ramachandran, CEO-India, Celebi Aviation Holding tells Sagar Kulkarni of DH how the company is looking to expand its operations in the country. Excerpts:

Çelebi has completed a decade in India. How has the journey been?

It has been a spectacular journey for Çelebi in India. Realising India’s potential to become one of the fastest growing aviation markets, we envisioned massive growth prospects for the ground handling industry in the country. We entered the India market in 2008 on winning the ground handling licence for the Mumbai airport, which was followed by a win for providing services at the IGI Airport, New Delhi.

Çelebi today also provides ground handling at Kochi, Bengaluru and Ahmedabad, and is planning to expand its footprint across other major airports of the country. We will also start services in Kannur later this year. We also provide cargo warehousing services at the Delhi airport.

How do you see the future of ground handling in the aviation sector in India?

The aviation sector in India is witnessing an unprecedented growth. The increased demand for air transport, that is driving the expansion in the airport infrastructure and airlines, is expected to directly impact the ground handling industry in India. The ground handling companies will be required to expand their service offerings to accommodate the additional flight movements and associated passenger, baggage and cargo capacity. Also, with the implementation of the new ground handling policy, we predict a gradual rise in the number of certified ground handling companies in India.

What are the benefits of a ground handling company over the prevalent contractor system preferred by some airlines?

According to rough estimates, an investment of approximately $6-7 million goes into self-handling by the smaller airlines at each airport. This cost significantly comes down when the services are outsourced. Outsourcing of ground handling services costs a small percentage of an airline’s total expense- approximately 1.5-2%. In case of self-handling, the airlines buy expensive equipment and employ people on their own rolls. All these resources cannot be well utilised through the day leading to poor economies of scale and overcrowding of the congested airside space with such resources. However, as this is the core business of the ground handling companies handling multiple airlines, we can pass on the cost benefit to the airlines.

Do you see smaller airlines outsourcing ground handling to companies such as yours?

Currently, most of the domestic airlines in India are dependent on non-bonafide and non-certified contractors for ground handling. However, the new ground handling policy prohibits the airlines to use outsourced manpower taken from such contractors. Instead, the airlines are given a choice to either opt for self-handling and take this huge workforce on their payrolls or engage with certified firms like ours. Considering the implementation of the new ground handling policy and Celebi’s presence at the major airports across India, we hope to witness a significant growth in our airline partners.

What are the challenges faced by the sector?

First is the lack of interest of domestic airlines in outsourcing ground handling services to certified service providers, which is resulting in the shortage of trained staff on the ground and does not permit companies like ours to be able to present a strong business case in our favour. This is self-defeating.

Sudden rise in the air traffic and increased demand of passengers from their travel experience is also posing a series of challenges like apron congestion, pressure to provide automated terminals, hassle-free security check-ins along with efficient passenger and luggage transportation systems. These challenges are making the ground handling companies continuously re-structure their business models and adapt to changing market requirements.

The implementation of the Ground Handling Policy is delayed. How does it affect the growth in the sector?

The domestic airlines in India are taking time to understand the need to partner with certified ground handling players. The new policy will make it mandatory for the airlines to either partner with the ground handling companies or bear the handling cost themselves. The delay in the implementation of the policy is posing a barrier in the growth of the sector in India, which otherwise has a huge potential for expansion. Due to this reason, airports are not able to control and manage the utility of premium space within the airport premises. Investors like us have invested heavily into this sector and the ability to operate within a disorganised structure dissuades investors from bringing on value.

What are your expectations from the government?

We truly appreciate the initiatives pursued by authorities to boost the civil aviation regulatory framework in the last three years. The New Civil Aviation Policy (NCAP) covers all salient issues expected by airport users and sets a clear visionary guidance to all stakeholders in order to bring Indian civil aviation market to the pole position in the world arena. With this understanding, any attempt aiming to retard the implementation of new policy will hold the growth of the sector back. So, we earnestly hope that the policy which is notified in spirit and on paper is implemented in a timely manner. While doing this it’s also important to provide a level playing field to operators like us in order to keep us competitive.

What are Çelebi’s plans for the future? Any numbers on investments?

Our mission is to continue to develop high quality competitive ground handling and cargo operations in all markets we operate in. In this respect, we have devoted enormous effort to place ourselves in a unique and matchless position to create economic value for all stakeholders, particularly in India. Thus, we don’t bind ourselves towards making only financial investments. The total investment, however, made by Çelebi in India till now is over $200 million. Our plan is to target finalising our network expansion pan-India until 2021. Currently, Çelebi mostly handles international flights in India. The company wishes to have a strong presence in the domestic airlines market as well and is in negotiation for the same.

We believe that the next phase of growth in the aviation market will come from South Asia, primarily India.