Airport ground services: A new approach
In the area of ground services, there is a battle between the interests of airports, groundhandling agents, staff and consumers. Any legal changes in this field typically represent a compromise between the interests of numerous stakeholders.
Continuing to implement its common air transport policy, the European Union has made another effort to further open up the market for ground services at airports. A Proposal for a Regulation of the European Parliament and of the Council on groundhandling services at Union airports and repealing Council Directive 96/67/EC (2011/0397(COD)) was adopted by the European Commission in December 2011. Following work on the proposal within the European Parliament throughout 2012, the proposal was submitted to the European Parliament’s Committee on Transport and Tourism for preparation of a final report.
Debate on the proposal has been lively and has focused on several issues, first and foremost the desirable scope of liberalisation of ground services and the consequences for the labour market.
The global market for groundhandling services is estimated at EUR 50 billion annually (as of 2010), and the cost of groundhandling services represents some 5–12% of airlines’ operating costs. According to sources presented by the European Commission, groundhandling services are highly labour-intensive (with labour accounting for 75% of costs) but with low productivity (about 75%), largely due to downtime.
Competition in groundhandling services has increased in recent years, following the initial opening of the market through implementation of Council Directive 96/67/EC of 15 October 1996 on access to the groundhandling market at Community airports. Admission of new service providers did not adequately translate into greater efficiency or quality of services, however. New groundhandling agents competed on price, which did reduce groundhandling costs but also reduced the margins of agents.
In the opinion of the Committee on the Internal Market and Consumer Protection, a deepening of these trends could destabilise the market for these services, causing disruptions at airports. The result could be the opposite of what is intended, namely elimination of weaker agents from the market and creation of a European oligopoly of the stronger agents. Thus the committee called for “sustainable” liberalisation of the market for groundhandling services.
The Committee on Employment and Social Affairs went further, opposing any further liberalisation, stressing in particular the negative effects for staff employed by ground agents. The committee regarded worsening of the pay and working conditions of staff as contrary to the purpose of the regulation.
These are serious charges. Whether they are correct and who the arguments will be used against remains an open question.
The aim of the proposal is to reform European air traffic to meet future capacity and safety needs, thus effectively resisting competition by carriers from other continents. To this end, the proposal seeks to improve the efficiency and quality of groundhandling services at European airports.
Further opening of the market
The current rules provide member states the opportunity to limit competition and reduce the number of groundhandling agents to two in the case “reserved” ground services, covering baggage, ramps, fuelling, freight and post.
In the Netherlands, the UK and Scandinavian countries, as well as Poland, the groundhandling services market is fairly open. According to official figures, there are currently about 20 authorised groundhandling agents at Warsaw Chopin Airport.
But some member states eagerly avail themselves of the opportunity to limit the market. This is the case at the airports in Frankfurt and Munich, which are each served by only two groundhandling agents. The situation is similar in Austria, Belgium, Portugal and Spain. The new regulation would permit a third agent to serve those airports.
Extension of the period for which an agent is selected
Groundhandling services are very capital-intensive. Limiting the period for which an agent is currently selected to 7 years seems too short to generate the anticipated profit, particularly in terms of amortisation of equipment. Thus the regulation would extend this period to 10 years.
Restriction on subcontracting
This restriction would apply to airports performing their own groundhandling services using numerous service providers. “Cascade” subcontracting, in which subcontractors grant further subcontracts, would be prohibited entirely.
Transfer of staff
The limited period for which a service provider is selected and increased competition are tied to the problem of providing social guarantees to the staff of groundhandling agents. Competent and well-trained workers are fundamentally important for maintaining safety, overall security and the quality of ground services—in other words, achieving the purpose of the regulation.
In order to reduce the side effects of liberalisation, the proposed regulation provides that the member states may require firms winning a tender for ground services at a given airport to take on the employees of the previous operator under their existing conditions of employment.
Commenting on the proposal, the Committee on Employment and Social Affairs pointed out that the obligation to assume staff should not be left to the discretion of the member states but should be an express requirement for the new agent. The committee also proposed to exclude the possibility of dismissing personnel in the case of acquisition of the enterprise, regardless of the economic, technical or organisational situation. This would represent a fundamental departure from general principles of EU law, which does not protect employees in such cases. It would be tantamount to a permanent guarantee of employment of the agent’s staff, regardless of the actual condition of the enterprise.
The proposed regulation provides for introduction of minimum quality standards for groundhandling services. The standards would be applicable to all groundhandling agents, including airports providing their own ground services. The standards would cover many areas, including training, information and assistance to passengers, airport safety, contingency measures, and environmental protection. The standards would be set in compliance with specifications to be issued by the European Commission, which would be empowered to monitor and enforce compliance with these requirements. This is one of the reasons for using the form of a regulation instead of a directive, as is currently the case. However, the Committee on Employment and Social Affairs criticised the use of the form of a regulation on the grounds that it intrudes on the freedom of the member states.
Groundhandling services are a highly competitive field, in which the interests of airports, ground service agents, employees and consumers often conflict. As usual, the final report on the proposed regulation is expected to be a compromise reflecting the interests of many different stakeholders. The next vote on the proposal is scheduled for the summer of 2013.
Dr Ewa Butkiewicz & Lena Marcinoska, Regulatory Law Practice, Wardyński & Partners