Government defers ground handling policy for third time

Written by fe Bureaus | Mumbai | Updated: Jan 1 2010, 03:49am hrs
The government has, for the third time, deferred the new ground handling policy, which prohibits private airlines from managing their own ground handling at various airports across the country.

In the original policy, the government had envisaged removing airlines from ground handling and entrusting it with three agenciesairport operators, national carrier Air India and specialised service providers selected through a bidding process.

Ground handling includes general administration, baggage, freight and mail handling, loading and unloading of aircraft and transport of crew, passengers and baggage, fuel and oil handling and catering services. Just a month ago, all the airlines joined hands and said they would oppose this policy, which was actually supposed to come into effect on January 1, 2010. Analysts say that outsourcing ground handling would have been expensive for carriers.

Currently, a low cost carrier has to incur Rs 4,500 on ground handling per aircraft. A full service carrier incurs nearly Rs 9,000 per aircraft. However, if the services are outsourced, airlines will have to shell out nearly 20-30% more per aircraft.

The industrys annual spendings on ground handling activities is nearly Rs 2,000 crore annually. An industry insider adds that in the past two years when the new ground handling policy was proposed by the government, carriers have frequently protested against the new policy because they do not want their image to be impacted. Good airport services can differentiate their product from competitors. Most importantly, airlines also fear the shutdown of their ground handling operations will result in job losses. Airlines collectively employ over 30,000 employees as ground staff.

Following the governments approval of the policy, an unpleasant battle ensued between airlines and airport operators. While airport operators were keen that the policy be implemented at the earliest, airlines had opposed to the move tooth and nail. In fact, the Federation of Indian Airlines (FIA), an association of all the carriers in India had submitted representation to the ministry. Reeling under losses, airlines are concerned about higher costs if they outsource ground handling and loss on account of equipment and other capital costs incurred already.