In the thread on
Aviance and Aviance LGW (Merged) Call100 wrote the following:
All the GHA are struggling because of the greed of the Airlines. It will only end when the GHA all agree it's too low to continue and tell the airlines that the competition will be on service alone......Many GHA start contracts at a loss in a vain hope that something will come of it later.....It's always those on the coalface that suffer...
Having followed but NOT become involved with the threads that deal with the problems faced by front line Ground Handling Staff due to airlines appearing to demand more and more, for less and less money, I can understand the frustration and indeed anger at what is becoming an apparently vicious circle. In an attempt to make sense of what is happening in the Ground Handling Industry I have decided to start this thread. Some of the following states what appears to me to be the obvious, however I think I must be seriously missing the point!
- Airline Contract Negotiators will always try to get the best price for the Service Level they require. That isn't greed that is their job.
- Ground Handling Company Negotiators on the other hand are trying to get, or just as importantly keep contracts at a price that will meet the Service Level demanded by the Customer and still make a profit for their Company.
- This is the same process for Service Providers and their Clients in all industries.
But in Ground Handling this process seems too have 'tipped' the Airlines way and in the long run will be as damaging for Airlines as Ground Handling Agencies.
Even from my limited and none of it recent, experience of this process between Airline and GHA, there were what I assume were isolated instances where the GHA Negotiators accepted high Service Level Agreements at ridiculous prices, or in one case assumed they would get the contract by default:
- Whilst in the first case there were very good reasons for signing this contract, unfortunately the Mangement felt they couldn't explain their reasoning to the front line staff, but the fact it was below cost leeked out resulting in resentment and low morale.
- In the second case when the Airline Negotiator came back from the finalisation, there was no sense of triumph because he knew that the price that had been agreed was untenable for the GHA, but it wasn't his role to tell them that and that they would have to come back to the table after a few months. However in that few months the Airline saved a lot of money and because they had Quality Assurance people monitoring the flights , the GHA couldn't cut any corners (although they did try).
- Finally a GHA had been fortunate enough to keep a contract for a very long time. The Airline appointed a new Man to run that Airports Operations and he was stunned at how poor the service his airline was receiving. Until contract renewal he did what he could, whilst at the sametime talking to the other GHAs at the Airport. When contract renewal came up he set out the the Service Level Required to all GHAs. The incumbent GHA was so complacent they did not set out how they were going to meet the required standard and lost the contract to a slightly higher bidder, who detailed exactly their investment in the contract and made a signed Service Level Agreement as part of the contract, whereas the incumbent had offered a non-binding SLA.
In the last 10 years or so in the UK, it appears that due 'competitive pressure' some GHAs are routinely (instead of isolated misjudgements) agreeing contracts where the Service Level and Resourcing don't match, or if they do then they are under estimating the cost of achieving this and therefore the contract instead of making a reasonable profit, is running at cost, or below cost.
Whilst this sort of behaviour is unsustainable, it does appear to have been going on for years and since I have been following this forum certainly seems to be getting worse.
The question is really why has this situation got to this point?
Has the 'churn' in GHA Companies both been the initial cause and then the perpetuating effect, with new Entrant Companies offering silly pricing to get some initial contracts and the existing incumbents then matching these prices, or going even lower to survive, which then leads to a vicios circle of over competitive pricing?
To be a full service GHA requires:
For a full range of Ground Equipment and therefore either a high initial investment, or an ongoing leasing cost, coupled with budgeting for replacement.
An ongoing Maintenance cost for the above equipment
Even if initial recruitment is aimed at experiienced staff there is an ongoing basic training and contract specific training requirement cost.
Ongoing rental of Terminal and Ramp offices, facilities ranging from Check-in Desk rental through to IT.
Plus if your sensible an internal Quality Assurance unit.
So being a full service GHA with ambitions to remain in business is not cheap so why does it appear that some want to commit business suicide?
Can someone tell me what I am missing here as if even half of the above is correct, then at some Airports in the UK the competng GHA are driving themselves out of business. As one disappears from that Airport a new Entrant appears and at best continues the cycle, at worse exacerbates it. This does make sense, and yet appears to be the case!