Spending on onboard food service by the major US carriers is up and the trend is expected to continue this year. The fuss over food is in sharp contrast to the budget trimming the same airlines introduced two or three years ago. Some carriers are even getting celebrity chefs involved in menu planning, putting them on flights to hear what passengers have to say.
Several issues have caused this turnaround. A growing passenger complaints' list about the perceived decline in the quality of airline food - or lack of food service - has led to scathing newspaper reports in the USA. The majors have also been put on the defensive by proposed laws that would force customer service improvements. On top of that is an increasing awareness that food has become a customer loyalty issue - US business travellers point out that the only difference between flying a low-fares carrier and a major is the cost of the ticket. The no-food option is no longer exclusive to the low-cost airlines.
Cost versus benefit
Even though increased costs will dent the bottom line - and therefore will concern analysts - the airlines believe the expenditure can be offset, particularly by negotiating new contracts with suppliers. Some, however, are concluding that, even without offsets, the additional cost must be swallowed if they are to keep the customer. "I have always said that nobody flies for the meal," says Gary Franson, director of food service at Northwest Airlines. "However, if you are disappointed, you may not come back to us. It is a customer retention issue."
At its Minneapolis hub, Northwest has introduced what it believes to be a unique solution to improving food service offerings while keeping a check on costs. At the gates near the jetway from where it operates hourly flights to Chicago, it has set up a food and drinks buffet from which passengers can put together their own selections to take on board. "Last year's budget of £330 million has been increased by £20 million," says Franson. "We are upgrading first-class and adding 200 meal segments that we didn't have before."
Nick Vaccaro, executive director of the International Inflight Food Service, says airlines have also become keenly aware of what the others are doing and are competing to outperform one another. "From what I've heard, and in talking to exhibitors at our annual conference, it appears the industry is moving in that direction," he says.
Continental Airlines is aggressively stepping up its dining programme, adding food on short-haul flights and on routes where meals were not previously offered. This year's food service budget of $300 million represents an 8% increase over 1999's, but Linda Zane, senior director of dining services, emphasises that the airline cannot avoid the hike. "People expect to be fed," she says. "Good food is something we take very seriously."
Delta Air Lines was one of the majors that slashed food service bills in the 1990s. Although this resulted in annual savings of more than $14 million, it is retracting that policy. "This is definitely an issue," says Hanna Leori Perez, manager of Delta's inflight dining. "We are responding to what our customers tell us." Delta will increase its food service budget this year, although Leori Perez says the airline has found ways of minimising the impact by getting vendors to prepare meals at lower costs.
In another saving, steel cutlery and china is replaced with disposable utensils and dishes. "We find savings because we have become smarter and more efficient," Leori Perez says. On all Delta US flights this year, breakfast service will begin at 05:00 instead of 07:00, with hot and cold meals offered in first-class and economy. "Travellers have told us that this is the one meal of the day they really want," says Leori Perez.
"We've totally revamped our domestic meal service and we're adding more variety," she adds. As an example, lunch might feature a hot barbecued sandwich with fresh baked bread and soup instead of simply a salad. "We've also spruced up the service on our international flights, and we're coming up with some surprises," she adds. In economy class, passengers will be offered ice-cream snacks.
American Airlines believes it is reaping the rewards of not having slashed its food service budget. "We did not cut back as dramatically and the other carriers are working to catch up," says Rob Britton, managing director for food and beverage services at American. "We felt the market opportunity was to stay the course." Even so, his $800 million food service budget is up by 8% over last year's. He claims that, at $8.20, the airline leads all other US majors in per-passenger spending. American believes that maintaining food service standards paid off and helped it keep a competitive edge. But the airline is still willing to consider good deals that help to control costs - by switching vendors for a particular wine, for example. Britton says that such moves can save airlines thousands of dollars.
United Airlines also claims it has maintained food service standards, but is introducing improvements. By partnering with brand-name suppliers and hiring the expertise of celebrity chefs, United claims to have sharply improved first and business class food ratings.
| Passenger service costs of US majors - Domestic ($ million) | |||||
| 1995 | 1996 | 1997 | 1998 | 1999e | |
| Passenger service costs ($m) | 4.997 | 5.227 | 5.477 | 5.849 | 6.287 |
| Annual change (%) | - | 4.6 | 4.8 | 6.8 | 7.5 |
| Pax service/total costs (%) | 9.8% | 9.6 | 9.6 | 10.1 | 10.2 |
| Note: Pax service/total costs = passenger service costs for US majors as a percentage of all costs on domestic operations. 1999e = annual rate calculated from first three quarters. Source: BACK/US DoT Form 41 | |||||
Source: Airline Business
