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BW Businessworld

On Slippery Ground

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Airlines in India are now locked in a battle with the regulator, Directorate General of Civil Aviation (DGCA), over the new ground-handling policy that the airlines have been avoiding implementing since 2007. The matter has reached the Supreme Court, which seems to have heard out the airlines' side of the story, but reserved judgement as of now.
Ground-handling services include check-in, baggage handling, cargo handling, aircraft cleaning, loading and unloading of food and beverage, providing power back-up to aircraft while they are at airports, supplying water to aircraft, ferrying passengers to and from planes, and maintaining toilets. Most airlines have their own staff or staff supplied by a contractor to carry out these functions.
Outsourcing ground handling is a system many countries follow, and there are some well-accepted arguments in favour of it. One of the strongest is that the airline sticks to its core competency (transporting passengers) and lets an outside agency handle all ground handling services. The third party, which can operate at a large scale since it handles many airlines, can offer the same services at a cheaper rate, and everyone gains.
In India, according to the new policy, main airports — the six metros to be specific — will have three ground handlers each. One is to be Air India-Singapore Airport Terminal Services and the other will be the airport operator, in alliance with a ground-handling partner. The third handler for these six airports will be chosen by competitive bidding. According to sources at the Airport Authority of India (AAI), it would mean additional revenues of at least Rs 350 crore per annum.
Airlines, predictably, are not too happy about the decision. First, they all have their own staff to do this. So if these are all outsourced, they will have little left for these staff to do. Secondly, they are also not convinced that Air India, which is a rival to start with, will do a better job than they do, especially since the carrier does not seem to be doing a better job of anything else. And third — perhaps the most important from the airlines' point of view — the new policy is likely to prove more expensive for the airlines as ground handlers will be obliged to share a part of their revenues with the airport operator who will share the additional revenue with AAI. If the authority expects to earn additional revenue, it stands to reason that someone will have to pay for it.
One of DGCA's main arguments that the new policy will improve safety, is something the airlines are not at all convinced of. They argue that the staff for these new ground handlers would come mostly from their own staff or from those contractors who currently supply them labour. All these people are security-cleared to start with so they are unable to understand how the overall airport security would improve.
 According to DGCA and AAI, ramp safety would improve. But airlines say ramp safety is affected by ramp congestion and that third-party handling will not reduce the number of people needed to turn around or service the aircraft. It is just that it would be a different set of people, perhaps. Also, if the policy is aimed at greater security, it should be applicable to all airports in India, not just the six metros. Surely, the security risk is high and relevant at any airport in the country.
And as the airlines see it, Air India is hardly an option for them to turn to. To start with, Air India at present outsources a lot of its own ground handling to third-party labour contractors. Besides, being in the state that it is in, Air India has not invested at all in equipment, machines and technology for ground handling, which is what brings in the cost efficiencies. As one airline official put it, the airline is struggling to keep its aircraft in the air; it is hardly in a position to invest in ground handling. Airline sources say that the whole new policy has been tailored to benefit one or two private parties who are keen to take over this business and also to benefit AAI, which wants to augment its own revenues.
But in my opinion, from a passenger's point of view, too, there is an argument in favour of the airlines being responsible for check in, baggage and other such services. Who wants to chase up after a ground handling agency for lost baggage especially since the agency will not care if the passenger refuses to fly that airline again? In a country like India, where efficiency is still at a premium and where fliers face enough problems already, I would like the airline to be responsible for my experience. Similarly, with check-in, it is perhaps better for airlines to handle their own check-in and cargo handling and face the blame for delays rather than point fingers at someone else.

(This story was published in Businessworld Issue Dated 18-04-2011)