Airlines Drag Govt to Court Over Ground-Handling Fiat

The petition has been filed by Federation of Indian Airlines, along with private carriers; the case is scheduled to be heard on September 7

Ahead of the inauguration of the Chandigarh international airport by Prime Minister Narendra Modi later this month, private airlines have dragged the Ministry of Civil Aviation and the Airports Authority of India (AAI) to court for not being allowed to handle ground operations at the airport.

AAI has awarded the ground-handling contract for Chandigarh International Airport Ltd (CIAL) to Air India Air Transport Services Ltd (AIATSL), an Air India subsidiary. This has irked private airlines such as IndiGo, Jet Airways, SpiceJet and GoAir, which have filed a petition in the Punjab and Haryana High Court to halt the move.

CIAL is a joint venture between AAI, the Punjab government's Greater Mohali Area Development Authority and the Haryana Urban Development Authority.

"We have given the ground-handling contract to an Air India subsidiary. They will share 21 per cent of the revenue with AAI," Suneel Dutt, chief executive officer of CIAL, told Business Standard.

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The petition, which challenges the ground-handling norms, has been filed by the Federation of Indian Airlines, along with private carriers. The case is scheduled to be heard on Monday. Sources said AAI planned to hand over ground-handling operations to third-party handlers or AI subsidiaries at other airports, too.

According to a copy of the petition, reviewed by Business Standard, the government has "orally informed" airlines that their ground-handling staff won't be permitted to enter the airport from next week. The airport entry permits of the airlines' staff are valid till the second week of September. The petition says these won't be renewed by the government, as "only AIATSL would be allowed to undertake ground-handling functions for all airlines operating out of" the Chandigarh airport. In their petition, the airlines have alleged various airports operated by AAI have written to them, seeking flight operations be handled through their nominated agencies alone.

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Ground-handling services are an essential part of an airline's operations and include check-in, luggage handling, aircraft cleaning and servicing, loading and unloading of food and beverages on aircraft, along with cargo handling.

Airlines handle flights on their own at most airports, including the one at Chandigarh, as this helps them cut costs and improve on-time performance.

Airlines say they have made significant investments in procuring ground-handling equipment and training staff to carry out these functions.

GROUND REALITY

The issue Air India Air Transport Services Ltd, an Air India subsidiary, gets ground-handling contract for the Chandigarh international airport; to share 21% revenue with AAI The argument Airlines say they have made significant investments in procuring equipment and training staff to carry out ground-handling functions Ruling awaited CAPA says if the apex court rules in favour of the government, ground-handling business could increase by $130 million a year. India “could become a $1-billion ground-handling market by FY23”, the report says Global practice Major international airports such as Newark and John F Kennedy (US), Heathrow (United Kingdom) and Melbourne (Australia) allow airlines to handle ground operations on their own

At some airports, airlines give contracts in this regard to the airport concerned, or handling agencies. Foreign airlines aren't allowed to handle such operations; third-party handlers carry out these functions in such cases. Major international airports such as Newark and John F Kennedy (US), Heathrow (United Kingdom) and Melbourne (Australia) allow airlines to handle ground operations on their own.

The Centre for Asia Pacific Aviation (CAPA) Ground Handling 2014 report estimates ground handling operations for domestic services account for 2.5 per cent of an airline's operating costs.

This is the second instance of airlines moving court to protest such a move. In 2007, the Union government had released a new ground-handling policy to restrict the number of service providers as well as self-handling by aircraft operators at six major airports. The rule was for the private airports at Delhi, Mumbai, Bengaluru and Hyderabad, along with the AAI-run airports at Chennai and Kolkata. According to the rule, domestic flights could be handled by the airport operator, subsidiary units of Air India and third-party service providers (selected through competitive bidding). It also stated that at all other airports, an "airline shall also be permitted to undertake self-handling".

Following this, the private airlines had moved the Supreme Court in 2011. Though the apex court hasn't pronounced a decision on this yet, it has directed an interim order in this regard be followed, allowing airlines to self-handle their aircraft even at metro airports. "Such a move impacts the efficiency of turnarounds, deteriorates the quality of service airlines offer and poses a threat to the huge investment made in ground-handling equipment," said one of the petitioners, on condition of anonymity.

The CAPA report, however, said if the apex court ruled in favour of the government, ground-handling business could increase by $130 million a year. It estimated India "could become a $1-billion ground-handling market by FY23".

Reference - http://www.business-standard.com/article/companies/airlines-drag-govt-to-court-over-ground-handling-fiat-115090400035_1.html