According to IATA, aircraft servicing costs, including ground handling, typically account for around 7% of an airline’s total operating expenses, though some research suggests this can be as high as 10-12%.
When supply chain discussions begin, an early question is often:
“We can’t just cut costs arbitrarily; we need to identify where to take cost out of the business. So, what do you suggest we stop doing?”
The operator’s response? Almost always,“Nothing.”
This creates a challenging dilemma. If ground handling contracts have already been well negotiated and costs optimised, there’s often little fat left to trim. If not, there may be room for negotiation, but what does that say about the airline’s original procurement process?
Delivering Value vs Cutting Corners
Delivering high-quality, value for money, ground services has always been the challenge.
World or local events, variability between (and within) handlers, resourcing, local infrastructure, regulation and performance inconsistencies create an array of potential difficulties that often reflect badly on the operators. As a result, ground services don’t always positively complement the in-flight experience.
Airlines often define their ground service proposition around specific service levels, yet cost-cutting without considering long-term consequences risks compromising them.
It’s surprising how little correlation there often is between cost and service, both within operators and the supply chain. Airlines frequently emphasise the importance of service, yet their procurement decisions are often and sometimes foolishly driven by price alone, proving the old adage:
“You buy cheap, you get cheap.”
