Conflict of Interest?

Earlier this year it was the main topic of discussion at the first annual Ground Handling Initiatives Workshop held by the Aviation Ground Services Association, an affiliate of the American Association of Airport Executives. There are various reasons why airports are considering the move in this direction. Whether it be opportunity, need or level of service; currently most of the airports opting in are small regionals.

“At the Quad Cities International Airport in Moline, lll., Bruce Carter, director of aviation, set up an independent LLC to provide airline refueling when the previous provider pulled out of the market and local FBO, Elliot Aviation, declined to enter the business,” asserts Infanger. Carter is now exploring baggage handling opportunities. Knoxville, Ky., Binghamton, N.Y., and Daytona International have all entered the ground handling business as well.

As many reasons as there are for airports choosing to enter airline services, there are just as many reasons ground handling and GSE service providers cite they should not. “Obviously this is a disturbing trend and one that our Airlines Services Council members are concerned about,” opines Eric Byer, National Air Transportation Association’s vice president, government and industry affairs. “We maintain that aviation service providers are a more efficient, economically viable and safer route to go when it comes to providing ground handling services.”

In addition, other industry experts believe that citing these airports as a first step towards a larger trend is probably a stretch and Infanger’s case is based on several small airports that are getting into the ground handling business. “In each case, the airport was reacting to an airline threat of withdraw,” Ryan Gibson, GSE product manager, Aerovironment says. “Using that scenario, as an example, I could see some small airports getting into the ground handling business as large ground handlers pull out of small markets. To conclude that there is now a trend that would extend to the larger airport market is not sound thinking. Large airports like ORD, ATL, LAX or DFW would never get into the ground handling business as they would not be able to, nor would they want to, compete with their customers, the airlines and the large ground handlers.

“Consider the European model. Over the past 10 years we have seen countless airports divesting of their ground handling business and/or opening the airport up to competitive ground service contracts. An airport providing ground services has a limited application in the North American handling market based purely on a competition model. If the airports that are doing ground handling begin to make money at it, it will attract the attention of a small ground handler, regional airline, or FBO. All they have to do is price slightly lower than the airport and the airline will make the change leaving the airport with little or no work.”

Others emphatically believe that airports’ getting into the ground handling business is a direct conflict of interest and will result in severe inefficiencies. “Airports that want to own the revenue stream and will force all to use their service only,” comments Dewey Kulzer, GSE program director, ELS, “… the odds are that unless the airport sub-contracts it to another company, the employees will be airport (government) employees with the result that their efficiencies may not be the highest and their incentive questionable, all resulting in higher prices.”

As of this writing, NATA was drafting a letter to the managers of the 500-plus commercial airports indicating that there are indeed many qualified service providers in the aviation industry that are plenty cabable of providing ground handling services to airports. “We will provide a link in the letter that will direct airport managers to a Web site of all ASC member company Web sites. They can review each company and the service they provide,” Byer says.