Trouble on the tarmac

posted on 6th June 2018

Ground handlers at Brussels Airport have been locked in a complicated and bitter dispute since June over the awarding of the main handling licences at the airport, and the legality of the tender process. The dispute is focused on the five ‘limited’ ground handling categories, which at Brussels are restricted by law – or ‘Royal Decree’ – to only two handlers per category: ramp handling for full-freighter aircraft; ramp handling for passenger aircraft; freight and mail handling; baggage handling; and catering transport. Self-handling and the different forms of ground handling within the ‘free’ categories – including check-in, aircraft maintenance, in-flight catering services, and de-icing – fall outside the scope of the recent tender.

With the current set of licences set to expire on 31 October, the airport last November began what it says was a “rigorous, stringent and transparent tendering procedure” to decide who should be awarded the licences for the next seven years. It says a careful evaluation was made according to the selection criteria, including factors such as reliability of the company, economic and financial strength, expertise, way of working, price positioning, organisation, and business plan.

In the catering transport category, the board of directors of The Brussels Airport Company (TBAC), un-controversially, awarded the licences for the next seven years to the current licence holders: LSG Sky Chefs Belgium and Gate Gourmet Belgium.

It was in the other four categories that the problems arose when the new licences were announced on 8 June. While one of the two incumbent licence holders, the Belgian company Flightcare, was re-awarded licences for all four categories, the other incumbent, Aviapartner, lost its licences to Swissport in all four categories. In fact, Swissport is understood to have come top in all of the categories, with Flightcare second, Menzies a close third, and Aviapartner a distant fourth.

Despite this, Aviapartner launched a complaint soon afterwards to the Brussels Commercial Court, claiming that aspects of the tender process were flawed, in which it said it submitted to the judge “a lengthy dossier, with numerous mistakes, shortcomings and irregularities observed during the awarding procedure”. Menzies subsequently also raised objections.

Some observers commented that it was extraordinary for Aviapartner to object when its tender submissions were judged to be so far behind those of its rivals, believing it might be more understandable from Menzies, which is understood to have only lost out by a few points in the tender. Others commented that the objection, in hindsight, by Aviapartner was understandable on one level, because Brussels is its most important station, while another claimed that Brussels is Aviapartner’s only profitable operation.

However, the ruling of the court on 29 June took most people by surprise, when the judge ruled in Aviapartner’s favour, concluding that there was sufficient doubt about the fairness of the tender process to halt the signing of the new licence agreements with Swissport and Flightcare “until the court reaches a decision on the merits of the case”.

Responding to the decision, Aviapartner called for the board of directors of TBAC, and Belgium’s transport minister, to review the decision, and claimed that it “would be in the interest of all parties concerned to proceed with a new licence tender as soon as possible, in full compliance with the applicable legislation”.

But TBAC and others involved in the tender are adamant that it was in full compliance with the applicable legislation, with TBAC appealing immediately against the injunction. Nathalie van Impe, head of communications at TBAC, says: “The procedure was approved by the Directorate General for Aviation and was carried out with the support of external procedural and legal experts. It was extremely stringent and transparent. For example, if any of the parties requested additional information, the information was provided to all of those tendering.”

She says TBAC presented documents providing evidence for this to the court, “but the court failed to take into account the evidence it had presented, and hence a decision for appeal was instantly made”. She says that in order to support its appeal and to demonstrate the thoroughness of its tender, TBAC has voluntarily brought in external auditors to audit the process.

It appears that Aviapartner is not disputing the re-awarding of the licences to Flightcare, but is focused on those won by Swissport. Some close to the case suspect this is because Aviapartner believed it would have a better chance of gaining support from politicians and employment unions by challenging a non-Belgian company like Swissport, especially if it emphasises its own Belgian credentials. Aviapartner is part-owned by private-equity group 3i, and part by Belgian investors, including its CEO Laurent Levaux.

The decision by the Brussels Commercial Court was seen by some observers as so unlikely and unexpected that they have questioned whether the court’s decision was influenced by political pressure. One politician said to have links to Levaux briefed the Belgian media prior to the court hearing, stating that he believed that there appeared to be errors in the tender process and that the court should suspend the signing of the licences.

Although, in Belgium, temporary injunctions and appeals against them are usually heard within in a matter of weeks, the summer recess has prolonged the process considerably. The appeal will not be heard fully until late September or early October, following an initial hearing in the middle of this month to determine its schedule, leaving all parties involved in a state of uncertainty – particularly Swissport.

Swissport believes that the claims by Aviapartner are completely without foundation, that the tender process was “extraordinarily rigorous”, and that Aviapartner’s complaints are a desperate attempt to sabotage what was a fair process, in which Aviapartner had basically submitted a weak bid. The company also argues that history is on its side, with Aviapartner losing all of the recent tenders in which it has been up against Swissport, for example in France, Germany (Munich), Cyprus, and Spain.

But it says that even if a decision is made in late September or early October that allows the Swissport licences to be signed, that will be insufficient time to put the appropriate resources in place for a 1 November start.

John Batten, Swissport’s executive vice president for cargo, says: “We have suppliers, for example of handling equipment, where we have had to put orders on hold, because we cannot commit to investing in new equipment under the current uncertain situation.”

He believes the suspension of the signing is unfair on Swissport, and says it is particularly disappointing because the company put in a lot of effort immediately after winning the tender to work with the labour unions and other stakeholders at the airport, reassuring them that jobs would be safe and that Swissport would adhere to the appropriate ‘TUPE’ employee-transfer obligations.

Swissport believes the uncertainty is already distorting competition, because all of the airlines operating at Brussels Airport need to ensure they will have a contract with one of the new handlers from 1 November. “Flightcare is currently the only company that is able to be active on the market since it has both an old and a new licence,” says Batten. “They are the only company that can guarantee handling after 1 November and therefore have a significant competitive advantage. The longer the situation continues, the bigger the advantage Flightcare gets.”

Flightcare currently has around a 70% share of the market at Brussels, and in theory the Royal Decree would allow it to increase that to up to 100%, although the company is thought not to currently have the staff or equipment to manage that.

Batten believes the uncertainty also opens up an opportunity for Aviapartner to try to convince its clients to leave Brussels Airport and instead use another European gateway, such as Amsterdam, where Aviapartner can continue ground handling for them. Singapore Airlines Cargo and Saudi Airlines Cargo are already understood to be studying  the possibility of moving their European cargo hub from Brussels to Amsterdam.

Interestingly, the impasse has not stopped Aviapartner from continuing to sign up customers for its services at Brussels, and on 29 July it announced a long-term agreement with Thai Airways for all cargo services at airport.

TBAC insists that it will maintain continuity of handling services at Brussels, one way or another, but says no decision can be taken on how this will be achieved until the outcome of its appeal. The airport says it does not wish to speculate about how the continuity of services will be maintained.

Van Impe says she does not believe that there will be any migration of traffic away from the airport as a result of the uncertainty, because the timescales involved are from the airport, because the period of uncertainty has been relatively short and services have been maintained. TBAC is confident that the external audit it has commissioned will confirm that the tender process it conducted was fair, and met with the legal obligations, and that the court proceedings in October will find in TBAC’s favour, thus clarifying the situation.

With Swissport seemingly unable now to take over the leases in time for 1 November, even if the court gives the go-ahead for the signing of its licences, one option to enable continuity of handling services, and thought to be the most likely, is for Aviapartner to have its licences extended. Although it would seem a perverse solution if the court concludes that Aviapartner’s claims were unfounded, it is possible that its licences will be extended by as much as 12 months. Those close to the case see this as an unsatisfactory solution, and talks are understood to be taking place to limit any extension of its existing contracts to four or five months.

Aviapartner was contacted several times by Cargo Airports & Services to discuss the situation, but declined to respond.

Sources close to the case believe the most likely outcome is that the courts, this time, will rule in TBAC’s favour, probably in early October, but that an interim extension will have to be granted to Aviapartner’s licences. But there have been plenty of twists and turns in this tale already, and who would bet against there being more?