february2021 - 25

" While insourcing had become more
attractive for US legacy passenger domestic carriers during the growth years, the
reverse is being presently evaluated as it
typically happens during down cycles
such as the one created by COVID-19, "
Tano says.
" For the cargo business, an appetite for
carriers to invest in their own facilities is
being weakened by the long-term infrastructure costs and liabilities created by up
and down cycles, plus the lack of adequate
inside-the-airport-fence space, " he continues. " A significant amount of customers are
meeting the space challenge by replacing
it with efficiency challenges created by
off-airport warehouse operations. "
Ingrid Braeuninger, chief commercial
officer at Airport Terminal Services (ATS),
agrees that outsourcing ground handling
services has been the growing trend of
recent years.
" We continue to see a growing trend
on outsourcing. Previously, much of the
ramp functions of ground operations was
outsourced. Over time, we have seen the
passenger side of services increasingly outsourced and even full airline management
at particular locations. Outsourcing will
continue to show a solid growth trend, "
she says.
Braeuninger says that while she is not on
the buying side of the equation, she speculates that airlines consider several factors
when making decisions, including:
* Is the brand considered compromised if
direct employees, rather than contracted
employees, deliver the brand?
* Does the return on investment (ROI) on
the analysis suggest an equal to or less
than proposition than insourcing?
* Is there evidence to suggest sub-par performance when outsourcing the activity?
" The fundamental reason for outsourcing
a role comes down to several factors from
the buyside of the equation, " Braeuninger
says. " Up to now, some of the reasons for
outsourcing were cost reduction from the
perspective of wage and benefits, or redirection of company resources in order to invest
in other areas of the core business.
" In today's environment, this list could
be expanded to include risk mitigation of
exploring new markets and even enhanced

Photos courtesy of Airport Terminal Services

GROUND SERVICE
PROVIDERS

performance, " Braeuninger adds. " In my
opinion, unless a company has trade secrets
that could cause irreparable harm if shared
or exposed, I don't see a case where outsourcing doesn't have some intrinsic benefit. "
An important factor in the outsourcing
equation is flight activity, Tano notes.
The lack of critical mass due to lean
flight activity results in a lot of costly idle
labor.
Depreciation and/or leasing costs when
clustered around lower flight activity also

Unless a company has
trade secrets that could
cause irreparable harm
if shared or exposed, I
don't see a case where
outsourcing doesn't
have some intrinsic
benefit.
- Ingrid Braeuninger

results in an exaggerated or prohibited per
flight unit cost in this area.
" The more flight activity, the more productive an operation is from asset and staff
cross utilization points of view, " Tano says.
" This type of analysis is very evident by
taking into account that most international
operators with less robust weekly flight
activity will subcontract while domestic
narrow body operations carriers with larger
volume will typically insource.
" Low-cost domestic carriers have been
subcontracting to third parties with some
exceptions such as JetBlue. However, these
carriers won't hesitate to have a hybrid
business model in which they subcontract
at smaller locations while insourcing at
larger operations, " he adds.
Braeuninger adds low volume or aircraft
type can factor into insourcing due to the
ROI of an airline's investment.
" If an airline is operating fives times per
week into a city with an A380, there will
probably be a significant ROI to the airline
by not having to spend on GSE to support
that low volume of activity, " she says.
And of course, another important point
of consideration is the airport the airline
will be operating out of.

FEBRUARY 2021

AviationPros.com

25
http://www.AviationPros.com
february2021

Table of Contents for the Digital Edition of february2021
