Current occurrence of strikes by ground and cabin staff, the formation of strategic alliances between airlines, mergers and acquisitions of ground handling (GH) companies and the expansion of airport infrastructures dominate the actual news in the aviation sector and reveal noticeable changes and new dynamics as well as new challenges in the industry. The changes did not only start now but began with the introduction of more competition into the market through the liberalization of airlines at the end of the 1980s which was followed by intensified airport competition and the deregulation of the GH market in 1996. The introduction of competition generally leads to more efficient market conditions. Overall, prices for flights have dropped considerably in the past two decades which has led to dramatic increases in air traffic demand and a new strategic environment for all market participants. Nevertheless, ongoing strikes by airline, GH and airport staff reveal that the situation in the aviation industry is far from optimal. The purpose of this paper is to examine the developments in the GH market with regard to their origins, current trends and potential future consequences. The main focus will lie on the analysis of the effects of the deregulation of ground handling services (GHS) at Community airports assessed by the EU Directive 96/67/EC in 1996. The liberalization process of the GH market shall be observed from different angles focusing on the broadly differing stakeholders’ points of view. The thesis is structured as follows: First, an overall framework and background of developments in the aviation industry shall give an introduction to the subject. Second, the market structure of GHS in Europe with a focus on Germany shall be observed and connected to the broader framework of public regulation and deregulation. Third, the effects of the deregulation of GHS at airports will be further specified and elaborated. The analysis of the effects will be segmented into four parts: overall effects, effects on horizontal integration, effects on vertical integration and effects on the employees. Finally, the theoretical concepts and practical findings will be completed by real observations and empirical data obtained from interviews with different stakeholders in the GH industry.
Table of Contents
1. Introduction
2. Framework
2.1 Developments in the aviation sector
2.2 Airlines
2.2.1 Low cost airlines
2.2.2 Traditional Airlines
2.3 Airports
2.3.1 Role
2.3.2 Activities
2.3.3 Types
2.3.4 Competition
2.3.5 Costs and revenues
3. Market structure of ground handling services
3.1 Definition
3.2 Ground handling market
3.2.1 Providers
3.2.2 Interests
3.3 Analysis of competitive forces
4. Economic implications
4.1 Airports as natural monopolies
4.1.1 Airports as natural monopolies in general
4.1.2 Airports as natural monopolies regarding ground handling
4.2 Public regulation
4.2.1 Reasons for regulation
4.2.2 Instruments
4.3 Public deregulation
4.3.1 Reasons for deregulation
4.3.2 Deregulation methods and obstacles
5. EU Directive 96/67/EC
5.1 Background
5.2 Provisions of the Directive
5.3 Exemptions
5.4 Implementation
5.4.1 Implementation of the Directive in Germany
6. Effects of the Directive 96/67/EC
6.1 Overall effects
6.1.1 Prices
6.1.2 Quality
6.1.3 Competition
6.1.4 Centralized infrastructure and access conditions
6.2 Horizontal and vertical integration
6.2.1 Reasons for integration
6.2.1.1 Contracts
6.2.1.2 Transaction costs
6.2.1.3 Economies of scale and scope
6.2.1.4 Learning effects
6.2.1.5 Risk reduction
6.2.2 Horizontal integration
6.2.2.1 Types of horizontal integration
6.2.2.2 Need for regulation
6.2.2.3 Developments after the implementation of the Directive
6.2.3 Vertical integration
6.2.3.1 Types of vertical integration
6.2.3.2 Need for regulation
6.2.3.3 Developments after the implementation of the Directive
6.3 Employees
7. Empirical study on the position of stakeholders
8. Conclusion and outlook
Objectives and Topics
This thesis examines the development of the ground handling (GH) market, focusing on the effects of the EU Directive 96/67/EC on market structures, competition, and stakeholder relationships. It addresses how liberalization has impacted airport management, pricing, and operational efficiency, and investigates the trend toward increased horizontal and vertical integration within the aviation industry.
- Evolution of the aviation sector and the transition to a liberalized market.
- Economic implications of airports acting as natural monopolies.
- Regulatory frameworks, specifically the EU Directive 96/67/EC, and its implementation.
- Integration strategies (horizontal and vertical) among airlines, airports, and ground handlers.
- Empirical insights into stakeholder positions regarding competition and employment conditions.
Excerpt from the Book
3.1 Definition
The term ground handling has no official definition but commonly represents a number of services which are carried out before, after and in between flights. The ICAO Airport Economics Manual (Doc 9562) separates the GH function into terminal handling and ramp handling. This division corresponds to the more common differentiation between “landside” and “airside” handling and is based on where the service is carried out. This differentiation is important for the following analysis of the GH market deregulation because landside activities had been exposed to complete competition already before the implementation of the Directive 96/67/EC in many European countries whereas airside activities had often been restricted to airport operators. Landside activities are all cargo and passenger services processed on publicly accessible airport premises such as check-in, ticketing, baggage handling as well as parking and warehousing. Activities which take place on the airside are activities which are performed after security check, mainly ramp services. Passenger and freight terminals constitute the interface between the two. The following figure gives an overview of landside and airside GHS.
Chapter Summary
1. Introduction: Outlines the dynamics of the aviation industry and the purpose of the thesis, which is to analyze the deregulation of ground handling services.
2. Framework: Provides the historical background of the aviation sector, the role of airports, and the impact of low-cost carriers.
3. Market structure of ground handling services: Defines ground handling services and analyzes the market structure, stakeholders, and competitive forces.
4. Economic implications: Discusses the nature of airports as monopolies and the economic theories supporting regulation and deregulation.
5. EU Directive 96/67/EC: Details the provisions and implementation of the European Directive aiming to liberalize the ground handling market.
6. Effects of the Directive 96/67/EC: Evaluates the actual outcomes of the Directive regarding pricing, quality, competition, and integration strategies.
7. Empirical study on the position of stakeholders: Summarizes findings from interviews conducted with various stakeholders in the German ground handling market.
8. Conclusion and outlook: Summarizes the thesis and discusses potential future revisions to the Directive.
Keywords
Ground Handling, EU Directive 96/67/EC, Aviation Liberalization, Airport Management, Market Deregulation, Natural Monopoly, Vertical Integration, Horizontal Integration, Competition, Stakeholders, Service Quality, Pricing, Infrastructure, Transaction Costs, Outsourcing
Frequently Asked Questions
What is the primary focus of this thesis?
The thesis focuses on the liberalization and deregulation of the ground handling services (GHS) market at European airports as initiated by the EU Directive 96/67/EC.
Which stakeholders are considered in the analysis?
The analysis covers the three main groups in the aviation sector: airport operators, airlines, and independent ground handling service providers.
What is the core research question?
The work investigates the effects of GHS deregulation on market structure, service quality, pricing, and the strategic behavior of stakeholders, such as horizontal and vertical integration.
What methodology is employed?
The research uses a theoretical analysis of economic regulatory frameworks, combined with an empirical study involving interviews with industry stakeholders to capture diverse perspectives.
What is the significance of the "Essential Facilities Doctrine" (EFD) in this work?
The EFD is used to discuss whether monopolistic control of airport infrastructure (Centralized Infrastructure) necessitates regulation to ensure fair access for competing ground handlers.
How does the Directive handle Centralized Infrastructure?
The Directive allows airports to reserve the management of complex, non-replicable facilities (like baggage systems or de-icing) for themselves, provided they comply with transparent, non-discriminatory access rules.
How have airlines adapted to the liberalized market?
Airlines have increasingly used multi-station contracts to reduce costs, while many traditional carriers still prefer self-handling at their hubs to maintain control and service reliability.
What was the impact on employees in the GH sector?
The empirical research highlights concerns regarding increased job insecurity, reliance on temporary or flexible contracts, and downward pressure on wages due to intensified competition.
What future trends are suggested in the Conclusion?
The author anticipates further consolidation and the emergence of fewer, larger global players in the ground handling market, mirroring the trend of airline alliances.
- Quote paper
- Aline Dürr (Author), 2008, Deregulation of Ground Handling Services at Airports, Munich, GRIN Verlag, https://www.grin.com/document/117223
