Every time you outsource, you sacrifice an opportunity to add value to your product. Do it badly and you lose significant value add and eventually profit.
Outsource your photocopier requirements by all means. If your supplier screws up you suffer a minor inconvenience (unless you are a large legal or accounting firm). There is no "value add" to lose either if your copies are not nice and crisp.
Now fast forward to baggage handling. Once you outsource that, there goes the opportunity to ask for, and receive "extra special handling" for a prized possession. There goes the opportunity for your staff to go that extra mile for someone. The most you can hope for is that the error rate/lost baggage numbers don't increase.
The ultimate management fantasy is the "fulfillment company" model which is where Qantas is heading. This model assumes every part of the business can be outsourced and the Board and Senior management sit in their offices drinking champagne and raking in money.
The reality is that the numerous interface between outsourced parts of the business inherent with this model impose crippling transaction costs on the overall business through the extra layers of management and the burden of coordination - and of course when Two or more businesses are involved, no one takes responsibility for the look and feel of the finished product do they?