In the hands of financial investors

It has Switzerland in its name and is based at Zurich Airport. That’s it with Swissness. The flight handler is managed by a South African and owned by six US and British private equity investors. What does this mean for the further GAV negotiations, which again remained unsuccessful this Friday?

The loading and unloading of the aircraft is one of many Swissport services.

Alexandra Wey / Keystone

The statements of the Swissport management sound contradictory: “Swissport is ready to support the recovery of the global airline industry as a reliable and financially stable partner.” Warwick Brady announced this in August 2021 in their in-house image brochure. On the occasion of the 25th anniversary from Swissport last August, the South African, who has been Swissport CEO since March 2021, is brimming with confidence: the company has a solid balance sheet, a strong cash position and financially very strong owners.

At the same time, the flight dispatcher in Zurich is at odds with the unions. And to them it sounds like this: “Swissport has been writing minus figures in the tens of millions since the pandemic to this day.” This is currently the only statement on the financial situation of Swissport. There is no more precise information.

The staff associations complain that the management leaves them in the dark both with regard to current business figures and the planned strategy at the Swiss location. Swissport contradicts this: “We have continuously informed the associations in detail about the financial situation and the strategic plans of Swissport Zurich, also as part of the current GAV negotiations. In addition, the associations and Swissport have jointly defined the procedure for viewing files, to which Swissport adheres.»

Financial investors saved Swissport from bankruptcy

On Friday, the sixth round of negotiations for a new collective labor agreement also remained without result. The talks won’t get any easier. Because Swissport is in the hands of six Anglo-Saxon financial investors. They have in December 2020 took over the majority of Swissport.

They had previously provided the ailing company with loans to save the ground handler over the duration of the pandemic and finally bought the company from the former Chinese owner HNA. The new owners reduced the debt burden by swapping debt for equity (debt for equity swap) by 1.9 billion euros and injected an additional 500 million euros into the company. It is not the first time that financial investors have called the shots at Swissport.

Swissport: Again and again in the hands of financial investors

Change of ownership at Swissport since it was founded in Switzerland in 1996

The signatures under the purchase agreement with the Anglo-Saxons were hardly dry when an additional agreement to the current collective labor agreement came into force in Zurich on January 1, 2021, on which the flight handler had agreed with the unions and the commercial association. The “Crisis-GAV”, as the employee representatives called it, contained in particular financial adjustments for the 1,650 employees in Zurich. One percent wage increases: cancelled. Weekly working time: plus one hour to 40 hours per week. Holidays: minus three days. Supplement to the health insurance contributions: minus 50 percent.

The associations unilaterally terminated this “Crisis CLA” on June 22, with reference to the significant increase in flight activity at airports worldwide. The next day, they called for a return to the GAV 2019 with a protest at Zurich Airport. The Swissport management On the other hand, in a written statement at the end of July, only two scenarios are conceivable: “Either a joint agreement on a new CLA valid from January 1st, 2023 or the issuance of individual employment contracts by Swissport”.

Zurich location still not profitable

Swissport rejects the unions’ demand to return to the original GAV 2019 and to adjust wages to the increased inflation, pointing out that the overall demands of the unions cannot be financed and that the current circumstances in aviation with extreme production peaks and irregularities are not sufficiently taken into account deceive. «Swissport will clearly miss the pre-crisis operating profit at Zurich Airport in 2022. The crisis definition jointly defined and signed with the unions will remain fully valid in 2022.”

As is typical for financial investors, the new Swissport owners have one thing in mind above all: to increase the profitability of the company as quickly as possible. As a rule, private equity firms want to sell their holdings profitably to another financial or strategic investor after five to seven years. Another option to monetize the investment is an IPO. The sextet’s first milestone: to bring profitability back to pre-crisis levels by the end of the year.

A look into one shows what that means Company presentation compared to the American stock exchange supervisory authority SEC from the year 2020: Swissport is said to have achieved sales of almost 3.2 billion euros and an operating profit before depreciation and amortization (Ebitda) of 272 million euros in 2019. This corresponds to a profit margin of 8.5 percent.

Swissport does not announce sales and profit figures

How close the ground handler has come to the interim goal by the end of the year cannot be said. The company is not listed on the stock exchange and is therefore not obliged to disclose details of the current course of business. When asked by the NZZ, Swissport simply said: “The company is not currently publishing any earnings figures or business results. Basically, however, we can say that demand and sales are gradually recovering worldwide.» The company provides a few details about its customers and airports where it operates.

Swissport generates revenue when planes take off and land. This also includes checking in passengers and operating airport lounges. From the current six business areas, 80 percent of Swissport’s turnover comes from passenger and ground handling. Swissport makes 20 percent of its sales with the air freight business. According to its own statements, Swissport is the market leader with a market share of around 13 percent in terms of sales.

No suitcase chaos at Swiss airports – others are to blame

At least since the flight chaos this summer with arrival halls full of unclaimed suitcases at various European airports, Swissport has also become an issue for flight passengers. When asked when Swissport will get the suitcase chaos under control, the flight handler says that there is no suitcase chaos at any of the Swiss airports and that the baggage situation in this country is under control, despite the higher volume of baggage being forwarded from abroad. “In Switzerland, however, we are heavily dependent on suitcases being forwarded from abroad. Some of the luggage is only sent to Switzerland several weeks later, where, after final clarification, it is usually delivered to the passenger within 1-5 days of the luggage’s arrival in Switzerland. A task force with additional employees has been set up at the Geneva site, and more night shifts are being worked in Zurich to process the baggage that has been forwarded as quickly as possible.”

The service provider for the airline industry, like the entire airline industry, is currently struggling with a shortage of staff and the flying customer with lost suitcases. In 2020, the company suffered a drop in sales of up to 90 percent in individual months due to the pandemic, and then fired around 25,000 employees worldwide.

The flight handler plans to add around 100 jobs in Geneva and 150 in Zurich by the end of the year. The company emphasizes that more than 950 jobs have already been created in Switzerland between December 2021 and the end of July 2022. Swissport currently employs around 3,500 people in Switzerland, and the location is the third most important for Swissport in terms of sales after the USA and Great Britain.

Revenue is based on the number of aircraft the service provider handles, not the number of passengers. This business model will make it easier for the company to recover more quickly from the pandemic, the SEC presentation said. Planes take off and land more every day. So things seem to be running smoothly again at Swissport. And the signs are already pointing to expansion: the flight handler announced in mid-July its entry into the Italian market: Swissport now also operates at Italy’s largest hub, in Rome-Fiumicino.

Annual increase in profit margins planned

According to the SEC investor updates mentioned, it is the management’s declared goal to continuously increase the profit margin: from as much as 9.5 percent this year to 10.3 percent in 2023, 11.1 percent in 2024 and finally 11.5 percent a year 2025. Then the operating profit should amount to 430 million euros.

In order to achieve this, according to the presentation, Swissport plans to organize the processes even more efficiently, i.e. with fewer staff, more automation, greater harmonization of processes at the around 280 airports worldwide where Swissport operates. The company calculates that these efficiency gains could amount to up to 200 million euros. In view of these plans, how much leeway is there in the negotiations about wage increases, inflation compensation and a social partnership, as is customary in Switzerland?

Marco Bötschi, Station Manager at Swissport Zurich, states: “We are confident that we can reach an agreement by the end of the year and are committed to the long-standing social partnership.”

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