Airlines unhappy with new ground rules

Private airport operators, along with the government, are working on an offer which they hope will end the opposition of airlines to outsourcing their ground-handling operations, as mandated by a new policy effective from January 1, 2009.

Currently, airlines, including Jet Airways and Kingfisher Airlines, undertake their own ground-handling. But under the new policy, they will not be permitted to do so.  

Carriers have said that at least 8,000 employees working in these companies will need to be given the pink slip if the new policy is implemented. They have also argued that outsourcing will dramatically increase their overall costs, especially at a time when airlines are reeling under losses.

To get out of the impasse, airport operators of two of the biggest airports in the country -- Mumbai International Airport Ltd and Delhi International Airport Ltd -- have awarded ground-handling contracts to specialised ground-handling agencies, but have decided not to take any revenue share from them on domestic flights. Under normal circumstances, they were looking at taking at least two-thirds of the revenue earned from carriers as their share.

Both the airports will have a revenue share in the earnings from international flight operations -- 13 per cent for DIAL and 15 per cent for MIAL. The move, they hope, will help the ground-handling companies to pass on the benefit to domestic airlines in terms of cheaper ground-handling rates in the domestic skies -- one of their main grouses.

This move is likely to be followed by the intervention of the civil aviation ministry, which is likely to direct the mandated ground-handling agencies to absorb a large part of the current ground-handling staff employed with private carriers into their fold, ministry sources said.

"The policy stands and it is unlikely that the ministry will look at a revision to the same because the security reasons for which the policy has been formulated are real and serious. But we might look at a win-win formula for both airlines and operators," said a ministry source. This will ensure that huge numbers need not join the unemployed list. 

The new ground-handling policy mandates that ground-handling be serviced only by three agencies -- National Aviation Company Ltd or its subsidiary company in a  joint venture partnership, the airport operator (like GVK and GMR) and a third party that will be allowed to provide ramp as well as the passenger-handling services at the airports.

The airlines have reportedly been informed of the appointment of the new ground-handling companies. While most of the airlines, including Kingfisher, are willing to accept the new formula, it is understood that Jet Airways, which does its own ground-handling for both the terminal and the ramp sides, has reservations on outsourcing it to a third party.

"Jet Airways has always maintained that it would want to handle its flights as well as the passengers at the terminal," said a Jet Airways spokesperson.

According to sources, Kingfisher Airlines, which recently announced an alliance with Jet Airways, in which one of the points was substantial cost savings on account of having common ground-handling, has decided to go with the commissioned agencies at these airports. "We were not able to work out sharing of ground-handling with Jet Airways and we have decided to go with the agencies at the Mumbai and Delhi airports. Moreover, the contractual parties have offered reasonable rates to the airlines," said a Kingfisher executive, not wanting to be identified.

Some other airlines, like Jet, SpiceJet and GoAir, have maintained in the past that the implementation of the new ground-handling policy from January 1 next year will render at least 8,000 people jobless, a sticky issue in the current economic environment. Airlines earlier locked horns with Hyderabad International Airport operator GMR, citing steep charges as the reason for not cooperating with the commissioned parties at this airport.

What makes ground-handling contracts lucrative at Delhi and Mumbai airports is an average of 650-700 air traffic movements daily. Mumbai has awarded its estimated Rs 700 crore (Rs 7 billion) ground-handling contract to UK's Menzies Bobba Ground Handling Services in partnership with Mumbai-based Cambata Aviation and Turkey's Celebi Ground Handling in partnership with Nova, the latter being overseas bidding partners. Cambata has been providing airport services at the Mumbai airport since 1967.

Currently, there are 40-odd local agencies involved in ground-handling in Mumbai, besides the airlines.

The contract for the Delhi airport has been awarded to a US agency based in Texas, World Flight Services, along with Bird Group, which is India's first licensed private third party ground-handling company. The others two concessionaires at the Delhi airport are Menzies and Bobba, and Cambata Aviation. The size of the contract awarded at the Delhi airport was not disclosed by the operator.

The airlines had been lobbying for a compromise solution -- that they are allowed to do passenger-handling and let the ramp-handling and aircraft-handling be done by specialised agencies. However, this proposal has not been found acceptable by the government.