Airport Service Providers Beware - The Changing Ground Handling Regime

IATA have produced their 2004 Standard ground Handling Agreement ("SGHA") to replace the 2003 Edition and work is already underway to introduce a new edition in 2007/8. We report on the significant changes to Article 8 (liability and indemnity) since 1996.

One of the most widely used standard contracts in the airline industry is IATA's SGHA which sets out the rights and liabilities, of airlines and airport service providers (ramp handlers, terminal services, maintenance, fuellers etc) in a standard form. Similar contracts are used by caterers.

The means of regulating the liability position between airlines and ground handling companies is the infamous Article 8. Traditionally, airlines have picked up the tab for any damage to their aircraft (or other property) or any liability in respect of passengers, employees, baggage or cargo unless these have arisen from an act or omission of the handler done with intent to cause damage or recklessly and with the knowledge that such damage would probably result. This language has a familiar ring since the words were taken from Article XIII of the Hague Protocol replacing Article 25 of the Warsaw Convention which governs air carrier liability to passengers and cargo owners.

Observers have often asked why should an airline pick up the tab for acts or omissions of its ground handling agents. One of the arguments has been that they are in a better position to protect themselves against such risks commercially and are able to purchase insurance to guard against such risks. Some commentators have argued that such a system is not only disadvantageous to airlines, it is also economically inefficient since it insulates airport service providers from responsibility for their errors and encourages a culture of carelessness.

Ground handling arrangements have, however, been evolving to the extent that it is no longer correct to argue that there is an imbalance in addressing the management of liability exposures of airlines and airport service providers.

In 1996 a significant change to Article 8 took effect, when it was agreed (Article 8.5) that notwithstanding an airline's agreement to indemnify a ground handler in respect of damage to property (except in cases of intentional or reckless misconduct), the ground handler would indemnify the carrier with regard to damaging its aircraft where such damage was caused by its negligent operation of ground support equipment. The indemnity was limited to claims above...