Catering - serving in the fast lane

Fast food may not be on the in-flight menu, but as consolidation takes hold of the airline catering business, speed appears to be of the essence. Last year saw a flurry of activity in the in-flight catering industry, including a host of joint ventures and two major acquisition deals.

The aggressively expansive LSG, owned by the Lufthansa Group, took effective control of Sky Chefs, raising its stake to an equal 48%with Onex Food Services and agreeing to take over the rest of the Texas-based company's shares in Sky Chefs by 2003. As a result, LSG cemented its leading position under the LSG-Sky Chefs brand in the USA - already enhanced earlier in the year by the acquisition of Ogden Aviation Food Services, with its 11 facilities across the USA. Globally, the supplier now accounts for one-third of the open market.

In August, SAirGroup paid $780 million for Dobbs International, the world's third-largest in-flight caterer, thus ensuring its in-flight catering arm, Gate Gourmet, a respectable second place in the global pecking order. SAirGroup also benefited from Asian airlines' withdrawal from the market.

In March it bought up facilities in Sydney and Darwin, Australia, that were previously operated by a wholly owned airline catering subsidiary of Cathay Pacific, CPFC, which still owns kitchens in Vancouver, Toronto, Ho Chi Minh City, Cebu and Taipei. Gate Gourmet also boosted its presence in Latin America, adding kitchens in Quito and Guayaquil to those it already operates in Buenos Aires, Lima, Recife, Rio de Janeiro, Sao Paulo and Santiago de Chile.

Meanwhile, LSG Sky Chefs has opened a kitchen at Zurich, the home of its Swiss rival, and the group can look to its new facilities at Hong Kong Chek Lap Kok and Bangkok to enjoy the fruits of the Far East market as it recovers.

These two suppliers haven't yet got the whole market to themselves.

UK-based Alpha Catering Services is a major supplier in the UK and across Europe and last June bought the British Airways kitchen at London Gatwick, just 18 months after BA sold its London Heathrow kitchen to Gate Gourmet. Alpha also won a 10-year contract to provide in-flight catering for BA at Gatwick and eight UK regional airports.

The funds and focus for the Gatwick catering acquisition followed the decision by the parent Alpha Airports Group to quit the ground handling sector with the sale of US giant Dynair to SAirGroup.

Air France, with its 78%-owned in-flight catering subsidiary Servair, is also positioning itself for a prominent place in the business. It is strengthening its share in Paris with two new production units, recently signed joint ventures in Macao, Dakar, Madrid, Chicago and Seattle, and will soon raise fresh capital to fund further expansion.

Servair, a fraction of the size of the Swiss and German groups, says it is in the best position to break what is rapidly becoming a global duopoly. Gate Gourmet and LSG Sky Chefs hold 85% of the US market alone and "airlines don't like that", says vice-president business development Phillipe Eydaleini.

Source: Airline Business