Toll Holdings' airport services offshoot has ditched a large contract with Virgin Australia after suffering "significant losses" on the deal, which involved baggage handling and passenger check-in services.
The end of the contract raises the possibility of job losses at Toll Dnata, which has a 1200-strong workforce in Australia. The airport services firm is a joint venture between Toll Holdings and Dubai's Dnata Group.
Toll Holdings has revealed that the airport services provider sank into the red in the year to June largely because of "significant losses" on the Virgin contract. It said it expected Toll Dnata's performance to improve in the new financial year, once the Virgin contract ends next month.
Toll Dnata also incurred costs this year from the construction of facilities in Sydney and Melbourne.
The ground-handling industry is known for its slender margins. The Virgin contract involved Toll Dnata doing baggage handling, check-in and other customer-service roles for Virgin's international flights, including short-haul services to New Zealand and the Pacific islands. The work was at Sydney, Melbourne and Brisbane airports.
Now Virgin will do a large portion of the work, including passenger check-in. The rest of the work for international flights, including ramp handling, will be outsourced to ground-handling company Aerocare.
The return of a large part of the work to Virgin defies an industry trend whereby airlines have increasingly turned to cheaper third-party operators like Aerocare and Menzies Aviation for ground-handling services.
A Virgin spokeswoman said the airline was "constantly looking for ways to improve our customer experience while maintaining a low-cost base".
Toll Dnata recently signed a deal with Air New Zealand, Virgin's biggest shareholder, for passenger and ramp-handling services.