Tim Ornellas
Attention all carriers. Coming to an airport near you - a liberalised ground handling industry. Eventually…
Are the following statements familiar?
‘Whereas ground handling services are essential to the proper functioning of air transport; whereas they make an essential contribution to the efficient use of air transport infrastructure; Whereas the opening-up of access to the ground handling market should help reduce the operating costs of airline companies and improve the quality of service provided to airport users;’
They are, in fact, points 4 and 5 from the COUNCIL DIRECTIVE 96/67/EC of 15 October 1996. So, almost a decade on, where are we now?
Well it seems that the new commissioner and his team are sharpening their pencils in readiness to take on the mighty US government regarding the definition of ground handling as a separate market and not a market linked to traffic rights. This latest fight is a result of the US government’s attempt to redefine our industry and to take ground handling outside any GATS/WTO agreement. So why is this important? Well, if the US Government wins, the commission will have a much bigger problem in its pursuit of a more liberalised market because those protectionist countries/airports within the EU will be able to resist the pressure from the EU to come into line with the 96/97 Directive.
Now, there is an interesting term ‘resist the pressure’. The dictionary defines the word pressure as “a force applied by pressing”. I wonder if airports such as Milan, Oporto or Lisbon feel ‘pressed’ by the commission? They should be, because the minimum competition rules should have been applied since 1 January 1999, but up until now, none of these three airports has even organised the necessary public tender to allow market access. So what exactly is the commission doing?
Well, perhaps they are sitting on their hands and watching the calendar because from 1 May this year the EU antitrust law enforcement will be primarily in the hands of the Member States. Don’t hold your breath waiting for a sea of litigation to start flowing over the perpetrators because, with the exception of the case against Bologna airport (June 2003) in which they were found to be guilty of delaying and disturbing the business operations of the new handler (resulting in a fine of Euros 880,000), few antitrust authorities have shown any interest in pursuing cases.
So where does this leave the carrier? With industry margins continually being squeezed, good quality, cost aware handling is bound to be a popular product. But that is not on the menu where the handling markets are not liberalized, so the carrier is forced to pay a higher price. No surprise there but when the same carrier operates from a price competitive, liberalised airport, nobody is surprised either when the carrier squeezes the ‘lucky’ handler who wins the contract at the liberalised station to compensate for the high cost of handling at the other station. After all, the carrier has his margins to consider. So who are the winners? Not the carrier – he has to balance the high and low handling costs. Not the independent handler – he always has to be price flexible and struggles to improve his margins. So that only leaves the monopolistic airport operator. So if you flout the law you are a winner and that doesn’t appeal to my sense of fair play. But then again, this is the aviation business.
With the EU ground handling model often copied outside of the Member States because it represents, in theory, the best possible choice of handling services to the carrier at market driven prices, it is fundamental to the long term survival of a strong independent handling community that the EU commissioners start acting like the industry’s police force now and do not let all the criminals out of jail! If they don’t act now, the European handling industry will become an industry dominated by a few large independent handlers unwilling or unable to offer niche handling where required, with the net result being higher handling costs to the carrier.
Now, if you are a carrier, is that your preferred choice?
This is our guests opinion and does not necessary reflect the alliance viewpoint.
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