Ground Services: To Have and To Hold?

Cover Story 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...

While the outsourcing of, say, GSE maintenance might be of interest in that it removes expensive items from the balance sheet, genuine obstacles still remain. "It is difficult to find organizations, at least at smaller airports, who would be interested in operating only that service on your behalf at an agreeable cost," believes Rahko. "What you need is a very efficient supplier evaluation and management. If you only trust on the promises or even written agreements on the quality issues, you are bound to fail in most cases. This is something that most airlines are still not very good at, and we have a long way to go."

Several airlines have, however, taken the outsourcing plunge. Most comprehensively, Irish national carrier Aer Lingus divested its ground handling operations at London Heathrow at the end of 1999. Swissport turned itself into a major player at the airport when it picked up the airline’s ramp business, while Menzies Transport Services, which has just added Ogden Aviation Services to its portfolio, took on the Irish airline’s former cargo handling business.

Aer Lingus was once the largest third party ground handler at Heathrow, but had lost business to Air France Servisair Limited and faced the prospect of losing Lufthansa to GlobeGround when the German airline’s handling subsidiary gained a license at the airport last year.

Significantly, this outsourcing took place at an outstation rather than at the airline’s Dublin home base. While Aer Lingus was unable to comment further at this time on such a sensitive issue, others were able to comment more generally.

"For an airline it is no big issue to self handle or to contract out at overseas stations," comments Llonch at Iberia. "The decision to go for one or the other depends normally on the local market conditions and not on industrial relations issues. However, to contract out ground handling at a home base is a very different, and generally very difficult, decision as most of the larger airlines have had their own ground handling staff for decades."

Industrial relations is clearly a central issue and one that the handling community is becoming more sensitive towards.

"The first thing we [handlers] have to do is create a situation where it [the airline] begins to get competitive rates," says Peter Smith, Managing Director, Menzies Transport Services. "What that usually means is that you have a workforce that is too large or too expensive against market rates. But on the other hand, it is skilled, often committed to the operation, and not something you just dismiss and throw away.

"You have to try and create an environment of managing your way through it. You should deliver a menu of different arrangements where there is a solution for every person you come across."

As already mentioned, outsourcing is not for everyone. An important revenue source for one airline can be an intolerable drain for another. What it boils down to is what is best for the airline in question.

One airline that looked long and hard at its ground handling operations is Qantas. In its quest for increased efficiency on the ground – primarily for its own operations, but also for third parties – and with one eye on embryonic competition in its traditionally strong domestic market, Qantas began a process of Competitive Tendering three years ago.

Qantas’ in-house ground divisions essentially had to put in a bid to retain their jobs. They were responsible for putting together the bid, identifying cost drivers, and suggesting how they could be driven down. They found out very quickly what it cost the airline to do business in certain ways.

"They owned the bid and were totally responsible for meeting the standards and outcomes that they promised during the bidding process," explains David Payne, General Manager, Airport Services Purchasing, Qantas. "It was not just a matter of driving cost down, but also a cultural impact on our workforce."

The bid was genuinely competitive and came in three phases. Each time the work stayed with the in-house team. Although bidding for their own jobs can not have been easy, the airline’s ground staff responded with vigor.

One of the most interesting points highlighted by the process was the fact that there were a lot of "sleepers" out there – employees with tremendous, untapped potential. The combination of intimate knowledge of what was required plus experience from past lives as, say, teachers and other professional positions saw plenty of useful insight, says Qantas.

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