Cutting Ground Handling Costs Without Cutting Service
IN CONVERSATION
In this series of articles, ‘In Conversation’, Miles Aviation Consultancy Managing Director and Owner, Simon Miles offers an inside look into the world of aviation consultancy; who consultants are, what they can do for you, the value that they can add, and what to watch out for.
Over the years, like many of us, I’ve been part of teams tasked with reducing costs. Armed with a mandate and targets from senior management, we start identifying potential savings and construct an action plan for our teams to deliver.
Very quickly, ground handling almost always rises to the top of the list for review.
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.”
The Complexity of Ground Handling Procurement
From our experience, many organisations don’t take the time to fully understand:
The cost drivers behind ground handling
How to manage them effectively
Or how to drive real service improvements.
Ground handling procurement is complex, and far more nuanced than many corporate equivalents. The devil is in the detail.
It’s easy to sign off on ‘bog-standard’ agreements that you may later regret, but crafting multi-station, global deals that truly deliver value requires time, focus, skill, and expertise.
One of the biggest challenges in cost-reduction exercises is starting from a weak and poorly executed baseline.
When we analyse a client’s existing costs, the root causes are often obvious:
Poorly negotiated, vaguely worded contracts
Outdated standard templates riddled with loopholes
A lack of consistency across contract portfolios frequently results in conflicting terms, unnecessary services
And agreements that haven’t been reviewed in years, often allowing significant costs to leak out unnoticed or unchallenged.
However, with a focus on simplification, clear specifications, closing loopholes, applying leverage appropriately, and engaging the right expertise, much of this can be avoided. Costs become more predictable, controlled, and aligned with budget expectations over the contract’s lifespan.
With the right approach, significant benefits can be unlocked quickly. However, whilst a new baseline can be set to a high level, it’s up to the operator (in particular) to provide an internal infrastructure to maintain the same level of focus throughout the life of the agreements.
The Challenge of Global Agreements
An associate recently told me, with a wry smile, that negotiating global agreements is “a waste of time.” He added, “We tried it, and it didn’t work.”
It’s true that getting a single entity to adopt standardised terms across multiple locations isn’t easy. However, I can testify that, with the right approach, clear ground rules, and a shared objective, the ‘impossible’ becomes possible, delivering significant benefits for both parties.
As I’ve mentioned before, one of this industry’s recurring challenges is the slow adoption of technology and new ideas. Many of the processes and attitudes I encountered 40 years ago remain unchanged. Ground handling procurement is no exception, no wonder change is so difficult.
SLAs: A Major Barrier to Improvement
One of the biggest risks in cost-cutting exercises or procurement reviews is the impact on service. But ironically, one of the biggest barriers to great service is often the Service Level Agreement (SLA) itself.
To be blunt, most SLAs we encounter are ineffective and, frankly, unfit for purpose, yet they continue to be used. If you get the chance, take a close look at one; you may be surprised at just how bad some of them are.
Many SLAs are cluttered with a wide variety of inconsequential requirements and unrealistic penalties. Pursuing a $50 fine? Tracking down who damaged a ULD? Measuring queue times at check-in without a reliable system? These clauses often verge on the absurd.
Research suggests penalties are rarely enforced, those that are encounter resistance, and there’s little evidence that any of these arrangements ever genuinely improve service. Plus, enforcing them properly would require an army of clipboard-holders and endless meetings to determine whether penalties even apply.
A Better Way Forward
Much of our recent work has focused on re-engineering SLAs; introducing meaningful, measurable performance criteria, reliable digital data sources, and a structured approach to incentive-based service delivery. An SLA should be at the heart of the ground handling relationship, driving great service, not gathering dust in a drawer.
But when it comes to SLA’s, less is definitely more.
Yes, it can be complex, it requires infrastructure and, most importantly, realistic corporate commitment. But when implemented correctly, with the right data, effort and resources on both sides, it can be highly effective.
Ultimately, any procurement exercise should aim to create a fair, balanced, and mutually beneficial partnership, and definitely not a reinforcement of rigid parent-child dynamics.
With careful thought, expertise, and commitment, it is entirely possible to optimise costs, create added value, and deliver excellent service.
The industry requires change and an honest conversation.
Simon Miles is the Managing Director and Owner of Miles Aviation Consultancy Ltd, a UK based Ground Operations and Ground Handling specialist providing consultancy, audit, documentation and training services globally to the commercial, business and military aviation industries.
Feel free to make contact with Simon by clicking here.
Need Help with Ground Handling Procurement or SLAs?
At Miles Aviation Consultancy Ltd, we specialise in helping aviation organisations:
✅ Strengthen and renegotiate ground handling agreements
✅ Re-engineer ineffective Service Level Agreements
✅ Unlock real service improvements and cost control
Find out more about our Ground Handling Contracting & SLAs Consultancy Services here, or contact us directly — we'd be happy to share our experience.