Delta ground personnel at YUL, YYZ, and I think a total of 5 or 6 Canadian airports are union, represented by the United Steelworkers Local 1976. These were former Northwest stations originally represented by the Brotherhood of Railway Clerks since the early 80s.

I have worked in airline contract services, putting out RFP and selecting vendors for stations. In the case of union representation, it's very easy who is insourced and who is not: it's whatever the CBA stipulates. That can vary from airline to airline... there are some airlines where there are seemingly really small stations completely insourced while much larger are outsourced and it quite frankly comes down to the union rep on the negotiating committee added their home station to those protected from future outsourcing. There are airline stations in the US with 3-4 flights a day that are fully insourced with full time union employees while the same airline has 15 flight a day stations run by a vendor. It often comes down to different work groups in same location represented by different unions, so you will see some employees as direct payroll and others outsourced. American and Southwest are examples of this split.

Fun fact: You know why Southwest always has two people at the gate for every departure? One at the gate boarding and one at the customer service desk? They are in different unions. In some stations (customer service has more grandfather rights), one may be a vendor while one is a WN employee. They cannot perform each others jobs, or even access each others computer systems.

Most cases of outsourcing vs direct payroll, in my experience, fall into one of two buckets: financial or "intangible." Intangible is easy: airlines want protection from a workforce joining or forming a union. Or want greater flexibility in changing flight activity. It's harder when they are your own employees and you decide to drop a station from 20 to 5 flights a day and then have to deal with furlough/lay-off, displacement, etc. With a vendor, you just tell them and all the HR problems are their problem. An example could be a highly seasonal station like a RSW. Make it someone else's problem to have to hire and then attrit (or maybe the vendor can do so easier because they may have multiple contracts with different airlines that flex at different times). As far as financial.... like anything else in business: run the numbers. Generally above a certain point it's cheaper to do it yourself with direct payroll, especially if a good number of stations are as such. But outsourcing, think about not only all the cost savings that may involve wage difference but also you don't have to have the very labor-intensive recruiting department hiring hourly workers, fewer HDQ payroll/accounting/HR/benefits folks, savings from having all of those high-risk-for-injury physical positions out of the workers comp pool.

Selecting a vendor/business partners/ground handler/whatever you call it: Obviously financial, safety, and service considerations. Cheapest doesn't always win. The folks who evaluate these for airlines know all the players in the industry well, and tend to be fairly intelligent (if I say so myself). They know how the vendors construct their bids and also can tell within a few percent what kind of margin they are planning to get. There's such a thing as too cheap to be a good deal. Also have to look at their safety programs and whether they have things in place that satisfy what the FAA wants for that air carrier. Also, if they mess up badly in one location that may impact business elsewhere or gaining future business. Vendors can get on the naughty list sometimes for a decade. Airlines will frequently bundle stations together as one bid package: let's say two mid-size locations and one small one which wouldn't make financial sense as a standalone. Think about any business going into a new location... start-up costs, capital costs (equipment ain't cheap... bag carts may only be $2000 each but a pushback unit can run you $100k, and you'll see the risk for the vendors on this in a moment...), etc.

Most rate-making in the past was on a unit cost: Charge $xx per flight plus adhocs. That's where a fun story from a friend at Delta comes... with DGS when they were wholly owned, they direct billed Delta and it was automatic payment without much review (internal charge). Lesson to DL managers was always to be cautionary of a DGS manager offering to clean out the breakroom coffeepot. And then bill it as 2 hours out of scope labor. Obviously with a unit cost and fixed income from each flight, the vendor is going to try to do it with as little resources as contractually possible because the less they spend, the higher their margin. In the last decade or so (pioneered mostly by LCCs), contracts have switched to cost-plus/pay-sell/whatever. Hourly wage rate paid to vendor employees is set in the contract. Vendor bids the wage rate plus a mark-up percent (let's say anywhere from 40-70%) to cover fringe, overhead, equipment amortization, etc. That way the airline gets the staffing number they want, while guaranteeing a positive margin for the vendor (if they had their ducks in a row). Also incredibly important in the last few years as it allows adjustments to the wage rate (like the airline agreeing the vendor can bump pay by $5/hr due to market conditions in one specific city) without reopening the whole contract or prompting a re-bid. There's also a third scenario that US Airways used... since they had their own folks almost everywhere until 9/11/01 and later downturns, they had a glut of ground equipment (much amortized to zero) all over the place when they began outsourcing en masse. They put out RFP that included use of their equipment so essentially they were only buying staffing. Made it VERY easy to swap out vendors and gave US a lot of leverage.

Why capital costs and such are important... Most contracts don't have a fixed duration in the US with US airlines. Foreign carriers, and most locations around the world, tend to be a unit cost, fixed duration (usually 3-5 year) contract. In the US, almost any recent handling contract is evergreen. It has no end date, but has an out period (be it anywhere from 30 to 90 days... usually in the 60-90 time frame) where either side can give notice of need to change rate or terminate or re-bid. Some contracts I've worked on have lasted with a vendor for a decade. Some have barely made it 6 months where a vendor with a pretty good nationwide reputation fell on their face in one particular city and it was so bad the airline re-bid it, selected someone else, and told the incumbent to heck with 60 day notice, we'll just pay you out to go away.

Unifi does not always bid the lowest, but they are able to frequently offer lower bids because of their size and established presence in many markets. If they are handling a Delta station on the ramp with 25 flights a day, they're paying for their equipment and admin staff and such on that easily. They can pick up incremental business like a 2 flight a day Sun Country or something for very little additional cost since they've already got the equipment.

I can tell you from experience that vendor doesn't necessarily equate to worse than direct airline-payroll employees. In many cases, some of an airline's best performing stations on on-time/baggage/customer service metrics is better at a contract station than insourced ones. It all depends, like always, on local management, job market, etc. Also with the cost-plus model, sometimes the pay on the starting end isn't really all that worse than what the airline would pay directly. It's common to see vendors paying $16-20 an hour starting... nowhere near minimum wage. Some contracts even have escalation built in as the vendor agents gain seniority their billing rate goes up. Supervisor qualifications and pay differentials are also usually spelled out in the contract by the airline.

And in your example, as fun as it may be to bash on Spirit, your scenario actually isn't really possible. Spirit mandates that the customer service agents on its contracts only work Spirit in the vast majority of cases. Same is true on the ramp in a lot of places because it's cost-plus and Spirit is paying by the hour by head and the vendor has to provide local Spirit management how many billables hours by employee name every day. Consequences for seeing one of those employees touching a non-Spirit airplane can be contractually severe. Spirit also has provisions where its local managers (and Spirit puts its own station manager and usually some duty managers in every location to oversee the vendor... Delta, United, Southwest sometimes do not) can go to the vendor and say "I want employee X off my contract effective right now" without having to provide a reason (actually providing detail to that probably crosses a line of co-employment).

Sorry for long-winded but questions were asked and I thought I'd try to be thorough. There are a lot of misconceptions on FlyerTalk about direct payroll versus contract agents, both positive and negative.