For more than two decades I have been serving the air transport industry – many will say that this industry is the engine of the world, enabling global trades, global communication, interconnecting people, opening our eyes to different cultures, different food, setting up benchmarks for other mission critical industries.
Outsourcing is not a new concept for the air transport industry; it has been implemented in varying degrees by most carriers and airports. Historically, airlines and airports have outsourced a variety of functions ranging from check in, to cargo handling, to information technology and even to flying itself.
Today no airline will be able to be competitive – and survive – without outsourcing. The management teams of all airlines are confronted with this loathsome mix of unwanted and unwelcome challenges. In response, airline executives are battling internally to devise ways to reduce costs and create a more variable and flexible operating model. With these challenges, these teams have no choice but to explore every avenue to generate cost savings, and outsourcing opportunities have been high on the list.
Outsourcing for the airlines has been an opportunity to unlock the value of their current operations to set the stage for long-term profitability, allowing top management to focus on a rigorous redefinition of their core enterprise without having to initiate long and painful cost-cutting exercise.
Outsourcing in the airport industry has come a long way from the low-end services undertaken in the early 1990s where facility management was only considered. Today core activities and mission critical system – such as baggage handling systems, command and control centre – are regularly outsourced by airport authorities. The introduction of managed services in airport enabled the authorities to think outside of box in generating non-aeronautical revenues while improving the level services.
Long before anyone in this industry airports and airlines understood that their mission is to “transport” passengers in the best and safest conditions. And not to manage IT or real estate, or design equipment, specialized companies or service providers are doing it much better.
Outsourcing has provided many benefits to airports and airlines:
- Ability to leverage a service provider’s scale, expertise and systems
- Lower labour and capital cost
- Control CAPEX and OPEX
- Higher quality and more stable processes
With a proven track record and the promise of these benefits, outsourcing would appear to be a potent tool for confronting the cost pressures plaguing the air transport industry.
Resistance to outsourcing may be a bit like shaking a fist at the sky and telling it not to rain, even as you stand soaked by the downpour already in progress. Previous concerns about outsourcing and any perceived loss of control must be reconsidered now in the harsh light the current operating environment.
Airlines and Airports that have current outsourcing experience will be analysing potential opportunities with a practiced eye, and converting viable opportunities into real savings — and bottom-line success.
As others, less experienced with outsourcing, are forced to take another look at it, they will be playing catch up with their competitors.
During those two decades, I did witness many changes and transformation in this industry – except one: the provision of managed services for the air traffic management.
It is now time!
Next Chapter: Air Traffic Management – Outsourcing Model