US carriers are taking a new approach to in-flight catering, with many charging passengers for better quality refreshments in economy
Over the years, US airlines have grown used to criticism for cutting back service, but are now winning praise for taking something away - free meals. Instead of giving away the bare minimum in the economy cabin, most US majors are instead choosing to sell more appealing food. Passengers and travel writers alike are eating it up.
As they cut back to mere pretzels and sodas in the first years after the 1991 crisis, many US carriers realised they had gone too far. In response, most have tried to turn food from its usual role as a cost centre into a profit centre and turn a magnet for passenger complaints into a tool for greater passenger acceptance by improving their traditionally mocked food offerings so that people would be willing to pay for them.
The extent of the cut-backs are clear from latest figures issued by the Air Transport Association. It reckons that major US carriers spent $471 million on food and beverage service in the second quarter of 2003, equivalent to around 2.1% of total operating expenses or 0.3¢ per revenue passenger mile (0.2¢ per km). This is a sharp drop from the early 1990s, when the spend stood at around 0.55¢ per mile, representing 3.8% of total costs.
It is true that first- and business-class passengers can still expect free alcoholic drinks and a hot meal - at least on flights of more than two-and-a-half hours that that occur during traditional meal times. International flights too retain food.
But while there are few changes on the menu for the premium cabin it is in coach where the cuts continue to bite. Alaska Airlines, which prides itself on service levels, is typical of the drive to find savings from its in-flight food offering. It shaved around $8.5 million off costs in 2003 in the first round of cuts, focusing on "food presentation", the art of making food look at its best and so persuading the eater that it tastes better too. The airline now hopes to double that saving with a second round of cuts this year, which will see fewer and simpler items on offer. Wraps, for example, will be replaced with chips and salsa on some flights. Even then, Alaska believes that it should retain an edge, given the even deeper cuts being made by competitors.
Steve Mullen, global vice-president of marketing at LSG SkyChefs, concedes that such cutbacks have hit hard. Both LSG, a subsidiary of Lufthansa, and the other major world force in in-flight catering, GateGourmet, have cut large numbers of kitchen staff. GateGourmet closed two kitchens in Switzerland in October alone. There was simply no appetite for catering.
Food for sale
In response, says Mullen, LSG went directly to the end user - the passenger. "We took a number of surveys and people seemed pretty aware that it was highly unlikely that free food was ever coming back in coach," he says. But the research also showed that passengers are willing to buy meals "if they are quality products".
The concept started with America West Airlines, and days later with Northwest Airlines, and has spread to every major except one - Continental Airlines. The majors are adopting the experiment to varying degrees, but have made it clear that buying on board is likely to stay.
Almost all airlines have chosen to offer a well-known US brand name found in the airport food court or from slightly more upscale in-town eateries. The basic concept is offering a box-size package that contains a complete meal. On some flights, the food for sale is considerably more elaborate than the basic deli sandwich, freshly baked cookie, small salad and bottle of water. Although the box still does not allow for elaborate presentation, the brand name association and the freshness should make up for that.
Hector Adler, vice-president for in-flight service at Northwest, says selling food on board is the single largest change in catering for years. The meal in a box is different: here it is lighter and fresher. But Adler insists the key aim is that "we do not offer airline food. When we designed the product, it could not be airline-type food, and that was the primary goal and the primary criterion of the pricing."
Pricing was based on how much a quality meal would cost, and the primary research was done at better airport restaurants and eateries. LSG's Mullen says the price points were an important research subject, since prices had to make some sense compared to what was available at an airport. The prices are close enough that few airport merchants have seen on-board sales as a slight, he argues, "especially since so many of the partners and vendors we have are the food people in the airport". In fact, growth in sales "is straining some suppliers", says Mullen.
Most airlines are trying to manage the risk and mitigate the waste and losses that accompany this move by contracting a catering firm to run the programme, and assume the financial risk. That was the policy US Airways adopted. "The risk was theirs," says US Airways of partner LSG. In the summer the carrier adopted the sale-on-board concept, which, Mullen says pushed the concept forward into public awareness. US Airways showed that an airline with relatively short stage lengths could manage the service.
But Mullen and others agree that predicting demand is the most difficult challenge. For instance, when America West tried a pilot programme at the beginning of 2003, sales ranged from 8% to 80% of passengers, even on the same flights on different days, making planning difficult. "One day on a flight it was a wrap and the next day, same flight, same load, the demand was for salads," says the airline.
Adler says Northwest is developing software that applies a yield-management approach to food demand, and is considering a way to allow passengers to reserve their meals when they book online. Delta's Song has begun offering a reservation or pre-ordering service with a website developed through Gate-Gourmet's e-gatematrix unit. Passengers will be able to order meals as much as 12h before their flights. E-gatematrix will work in bringing down the lead time, says GateGourmet. The multilingual ordering site will soon have the ability to track a passenger rebooking and make the meal follow the new itinerary.
American Airlines has found one solution to predicting demand: the world's largest carrier is selling meals at the gate that can be carried on board. It has a pilot programme with LSG at New York JFK, one in San Juan in conjunction with local authorities, and one begun by the Dallas/Fort Worth airport itself, in co-operation with the airline.
Selling at the gate
American executives say the sell-at-the-gate food is not replacing free meal service on flights where it is still being offered. But American only offers coach meals on just over two-thirds of flights of more than 3h, while the majority of flights between 2h and 3h are also foodless. The carrier's buy-at-the-gate programme is aimed at those flights.
Dan Garton, American's executive vice-president of marketing, says: "It is far less cumbersome to sell at the gate and you have essentially no waste - it's in a refrigerator, so anything unsold can be sold on the next flight."
Still, there is yet another philosophy in the battle of the palate. As Gordon Bethune, Continental Airlines chief executive has said, cost-cutting that makes air travel even less pleasant is not the answer. His now famous warning is not to cut so much that "there's no cheese on the pizza". Continental remains the only US network carrier that still serves food at meal times in coach, and it does not intend to charge for them.
Low-cost airlines like Southwest remain committed to avoiding elaborate food, either free or for sale. Southwest, which has the leanest food budget of the big airlines, spent $17.1 million on food in 2002 - mostly on pretzels and its trademark peanuts.
At Southwest, they say they should not be selling you things on board. "We'd rather our customers pay a low fare and enjoy a steak dinner with the money they saved when they get where they are going," says the airline.
Mullen sees some interest from overseas, despite cultural differences in portion sizes and resistance to paying. He says the US experience is still a learning experience. "We've learned a lot but it's going to take a while longer to get this right, possibly a year."
Even customer research does not always reveal what passengers really want to eat on board. Adler, who has just updated eight-year-old menus on Northwest's new world business cabin, points to the healthy eating revolution. "People tell us that they want lighter, fresher meals, no red meat and so on, but when we track what they actually eat, it's steak and chocolate cake," he says.
REPORT BY DAVID FIELD IN WASHINGTON
Source: Airline Business
