After more than 14 years of struggle against the crippling restrictions on ground handling, the government appears to have finally relented
Under the existing regulations pertaining to operations by Indian carriers, one of the activities that constitutes a significant part of the total expenditure incurred on operations of an airline is that of “ground handling”. Currently, the Indian carriers are not permitted to set up their own ground handling organisation and employ dedicated ground staff for this purpose. Instead they are required to mandatorily use ground handling services offered by companies approved by the Airports Authority of India (AAI). As the number of AAIapproved ground handling agencies is limited, ostensibly to ensure remunerative volume of business, this segment is not internally competitive. The Indian carriers have always been opposed to this system as they are of the view that they are prone to be exploited by ground handling companies as the fees charged by them for the services provided are unreasonably high. As per an estimate by the Centre for Asia Pacific Aviation (CAPA), ground handling accounts for around 2.5 per cent of an airline’s operating costs. The Indian carriers feel that given the freedom to set up their own dedicated ground handling system, they will be able to cut cost of operations significantly.
The issue whether ground handling can be carried out by the private airlines in India came to the fore with the liberalisation in the Indian airline industry that paved the way for them to emerge on the scene. The first wave of liberalisation was witnessed in the early 1990s, but was considerably weakened by the end of the decade. By this time, a number of newly established carriers closed down or were acquired by the bigger players on the scene. The second wave that began in 2003 was a more determined one and was marked by the ushering in by Captain GR Gopinath of the low-cost airline concept with the establishment of Air Deccan. Very soon, a number of other low-cost carriers forayed into the rapidly growing Indian airline industry. Although some of the new entrants could not survive in the highly competitive and unfriendly business environment, a few managed to sustain operations and continue till today.
With the rapid growth of the Indian airline industry in the private sector, the number of airports where civil airliners began to extend their operations too, increased substantially. This raised serious concerns at the level of the Ministry of Home Affairs about the possible security hazards that may begin to affect airports if individual airlines were permitted to hire their own staff to provide ground handling services at airports across the country. In an effort to tighten security at civil airports, in May 2003, the Ministry of Home Affairs (MHA) promulgated orders that all ground handling at airports were to be carried out by government-owned companies providing ground handling services that were set up and controlled by the state-owned Indian Airlines and the national carrier Air India as also the AAI. This hit this segment of the Indian airline industry in the private sector very hard as there were more than 40 ground handling companies already in operation across the Indian airline industry employing more than 20,000 personnel. What was a matter greater concern for the Indian carriers in the private sector was lower efficiency levels in turn around, poor work culture and quality of service associated with employees of government agencies and the huge losses the private carriers had suffered on account of the investments already made by them in ground equipment and training of personnel. The worst affected were the low-cost carriers that could benefit financially from their own ground handling which would come at a lower cost and would be a critical factor in their operating economics. Besides, their own ground handling system would definitely be far more reliable and would provide greater efficiency in managing turnaround of aircraft. The airline that benefitted most from this arrangement was Air India.
The private carriers in the India airline industry were always opposed to this restriction in ground handling imposed by the government and quite understandably, they collectively approached the courts time and again in different parts of the country for relief. After more than 14 years of struggle against the crippling restrictions on ground handling, the government appears to have finally relented. As indicated in the National Civil Aviation Policy unveiled in June 2016, towards the end of last year, the government removed restrictions and has permitted the domestic private carriers to undertake ground handling at airports, thus providing a level-playing field to all operators in the sector.