Counting the true cost of safety and quality

posted on 5th June 2018

When it comes to shopping for airline ground handling services, Airline Ground Services editor Ian Martin Jones discovers from a long-time airline professional that the price tag is way down the list of relevant items you should be taking into consideration

US-based Marsha Rivera-Ragusa is Director, Contracts, Ground Operations Procurement at British Airways for Northern Americas including the Caribbean and Bermuda, Asia Pacific, India and Pacific Rim. She is responsible for buying “everything that touches the aircraft” when it approaches or is parked at the terminal gate with the exception of fuel, food and engineering services – and these essential services are all provided by outsourced third-party suppliers across BA’s global network.

This is a long list of essential services that includes de-icing, cleaning, loading and unloading of cargo, security, cargo warehouse handling, towage and pushback, and everything else that ensures that the aircraft arrives on and departs from the ramp on time. The process ensures that the aircraft functions effectively and will fly safely providing its passengers with the service level they expect from one of the world’s leading airlines.

Ragusa also oversees the buying of the services that look after the airline’s customers inside the terminal; from check-in to departure, as well as those that prove comfort and convenience to the airline’s premium passengers when they are in the airport lounges.

Her responsibilities entail looking after the airline’s network covering about half of the world, with her counterparts in London overseeing the procurement of BA’s outsourced ground handling services in Europe, the Middle East, Africa and South America.

It just makes no sort of commercial or operational sense for any carrier to handle its own ground services operations across all the stations it maintains around the world. The capital outlay to acquire the equipment involved, the staffing costs in many areas often on a 24-hour basis just do not add up – looking for an outsource supplier is the only viable option when self-handling is not competitive.

At its main London Heathrow hub – where it operates hundreds of domestic, regional and intercontinental services every day the airline self-handles through its own ground services staff, while at the UK capital’s secondary Gatwick gateway the process has recently been awarded to an outsourced ground services provider. Ground services at regional gateways in the UK are also outsourced.

Having with been with British Airways for 36 years, and in her current post for 16 years, Ragusa states: “I believe that I do things differently from many of my counterparts in other airlines. Coming from a business and operational background in my earlier career, I approach buying ground services from an operational perspective. I am focused on buying the highest standards of safety and quality available from providers who will strive to get it right each and every time. At BA our standards are high – it’s as simple as that, and anything else is unacceptable.”

The airline buys its ground handling services on contracts that have a life of “longer than a year; three years is a typical length of contract for ramp and passenger services”, Ragusa notes. “Top of my buying strategy is to determine exactly what I will get for the money I pay – and from that you can calculate the true cost of the price you are being asked to pay.” She cautions: “Buying at low cost becomes much more expensive when the operation goes wrong”

Ragusa goes on: “I can negotiate price and specification: I will not negotiate on quality. At British Airways safety and quality are synonymous with the airline and they have to be joint number one in any assessment of a potential ground services supplier.”

Assessing a provider

Ragusa explains the method by which she weighs up a ground services contract, “There are four main areas to be reviewed, and in descending order these are: firstly quality, then productivity and efficiency, cost transparency and then finally the price. I don’t consider it at all surprising that price is at the bottom of the list in this assessment. Yes, costs have to be tightly controlled – but not at the risk to our passengers or our staff.”

You can differentiate cost from price, Ragusa observes. The principal is to rely on an aggregate of costs and quality – then you can calculate the true cost you are being asked to pay.

She maintains that the general perception of cost seems to be driven by an obsession with price and that low cost and low price are not to be regarded as the same thing. “If you look at surveys on UK airlines, some low-cost carriers may do well on price, but British Airways and Virgin will always top the poll when it comes to the question about quality.”

Explaining how she weighs up the operational capabilities of a potential ground handling services supplier, Ragusa obviously has a well-honed appreciate of what makes the clock tick to her timescale with a potential supplier, but she points out that sometimes selection “is as easy as taking a quick trip around the airport ramp. If I see a ground services provider that is mistreating its own equipment, then I ask myself what can I expect for my customers, and our aircraft, if I choose that supplier.”

Transparency

When it comes to the question of price, Ragusa observes that those potential ground services demonstrating the maximum efficiency in their own operations should be those also able to produce the most competitive price. She remarks: “Cost transparency from a supplier is absolutely essential; that gives me a clearer view of what I’m buying.”

Contingency planning is also important. She continues: “Contingency is not something you put in place after an incident, it should become part of your normal working culture that the right contingency plan is in place long before any incident happens.”

Ragusa observes: “When assessing quality ISAGO (IATA Safety Audit for Ground Operations) accreditation is the minimum standard, and that is always a good starting point. We do look at providers who are not ISAGO qualified, but we tell them if they don’t have it then go and get it. Many of these suppliers have applied and they are waiting for audit. BA then carries out its own complete audit on the applicant and we call on the knowledge of our local management on other ground handling agents – and that is an essential part of the process.”

She notes: “If possible we try to bundle several stations together in a region when buying services, rather than rely on a separate supplier for each location. A recent cargo RFP covered 18 locations. It’s a question of assessing what’s best for our business in each particular location.”

Ragusa argues that it is a misconception to believe that driving a lot of volume into any single location is going to lower the cost. With the ground handling services supplier at any location having to cope effectively with schedules, delays and peak periods “efficiency and productivity should drive the most competitive price”.

For those suppliers who are selected to provide ground handling services for British Airways: “We work continuously to develop strong relationships with all our local and regional suppliers. I am not just worried about today, I am concerned about the supplier’s performance for the whole life of the contract. We identify any bad practice and we work to rectify it long before it has the chance to become normal practice.”

Security

Modern day security requirements have affected how every airline around the world buys its ground handling services, Ragusa concurs. But BA’s standards have always been higher than the requirement, she points out. “This helps us pre-empt security changes and to be there ahead of the deadline anytime there is a change in compliance. I don’t see it as being a challenge.”

Ragusa observes: “Yes, there are airports around the world that are not as well run as others and there are there good ground services providers and some who are not so good. You have to choose the best available and work to improve that level.

“How an airport is run is not going to stop BA from achieving the leve ls of safety and quality that it requires,” she states. Ground service suppliers in these locations will have to work harder to raise the quality to our expectations in any area that is lacking.

Ragusa remarks: “If you accept bad service, you get bad service. At BA we do not accept that response. We work to raise the bar with our suppliers – and if we don’t get that sort of response, then we’ll go elsewhere.” She concludes: “The best value is the highest level of service, quality and safety that I can obtain for the money that I pay.”