Ground Services: To Have and To Hold?
by Richard Rowe
With cost always a major driver, there can be few airlines that have not deliberated on whether to turn existing ground services divisions into separate profit centers or outsource them altogether. Richard Rowe reports on a decision that is rarely straightforward.
In the "us-and-them" game played between the airlines, the customers, and the ground handlers and service providers, nothing gets the blood pumping quite like an airline analyzing whether or not to outsource its ground services. On the airline side, unions bristle; on the handler side, there is a rush of contract fever.
For an airline, it is a question of price, performance, and personnel, often in that order. The ground handling community encourages analysis as best it can, suggesting that airlines should no more dirty their hands with ground services than ground handlers should start up an airline.
While airlines busy themselves on seductive marketing campaigns and the pursuit of in-flight excellence, there is a host of less glamorous services that nonetheless have to be performed on the ground. Aircraft maintenance, ramp handling, cleaning, and catering will not go away. The question is how should an airline approach them?
There has already been a genuine shift in the industry from the established practice of major airlines performing their own services to contracting out. It is a theme matched only by the establishment of so many specialist ground service providers. Competition on the ground is moving to another level, with the result that certain ground services have become separate, global industries.
Even in the relatively niche market of GSE maintenance, the industry has seen the arrival of companies such as Ryder Ground Fleet Services, KLM Equipment Services, the new Mecanix GSE maintenance business from Menzies at London Heathrow, and Pan Asia Pacific Aviation Services (PAPAS) operating in Hong Kong.
The arrival of such professional organizations could prove persuasive to some airlines. For the first time, carriers can genuinely evaluate how successful outsourcing of ground handling can be.
That’s not to say that the presence of so many options for airlines is doing anything to simplify the process. The pros and cons of outsourcing can be different from airline to airline. One carrier’s meat may well be another one’s poison.
"One of the major pros [of outsourcing] is that airline managers can concentrate on their ‘core’ activity, that is selling seats in a very competitive market and reduce costs by entering into long term contracts with their ‘non core’ service providers," José María Pérez Llonch, head of Iberia’s handling division, told GSE Today.
"Another big pro is that airline managers can concentrate on their pilot and cabin crew issues and forget about all other union problems. After all, it is very difficult to manage an airline when any concession made to pilots means a concession to ground handlers, and again any concession made to mechanics means a concession to cabin crew."
Jukka Rahko, VP Ground Services at Finnair picks up the baton, albeit with a word of caution: "The first goal of outsourcing is naturally the savings that it would create, while the other main benefit is the relief in administrative work. However, after having been in this business for nearly 30 years, I have grown a bit skeptical about the quality everybody is talking about so much. Unfortunately, many of those promises are just thrown in the air and too often only a very close supervision by the carrier guarantees you the quality that has been agreed upon by the service provider."