For a pie in the sky

Flight catering companies are on a new high

Post 9/11, when several international airlines curtailed their operations and air traffic was at an all-time low, flight kitchen companies had to look at other institutional catering businesses to keep themselves afloat.

Not any more. With increased number of foreign airlines winging their way into India and improved passenger load factors in the domestic circuit, their business is poised to take off.

Early last year, the SARS scare and the Iraq war led to a 60 per cent drop in the passenger load factors (PLF). The numbers have bounced back with the PLF having jumped from 72 per cent in October 2003 to 79 per cent this month.

Needless to say, the flight catering business in India has also bounced back. Companies packing meals for air travellers report a growth of between 5 per cent and 12 per cent in the last six months.

"Our business has witnessed a 12 per cent growth in the past year," admits Arvind Saraswat, corporate chef at Taj Sats Catering.

Taj Sats, a 51:49 joint venture between the Taj Group of Hotels and the Singapore Airport Terminal Services (Sats), serves 40, 000 meals a day from its kitchens in Delhi, Mumbai, Kolkata and Chennai.

Taj Sats services 22 airlines and has clinched deals with new players such as Eva Air and Myanmar Airways. But Taj is not alone in flying high on new business. Its rival, Ambassador's Sky Chef, has also managed to bag contracts with Turkish Airlines, Air Canada, Air Slovakia and Ethiopian Airlines recently.

Interestingly, the new airlines are also targeting the secondary market in India and planning flights into cities like Amritsar, Bangalore, Chennai, and Hyderabad. Consequently, the flight catering companies are also gearing up to open new catering units.

Says Dennis Ong, director, Taj Sats at Delhi, "We are working out the plans to set up bases in Bangalore and Hyderabad in the next two years."

The Ambassador's Sky Chef, promoted by Mumbai-based The Ambassador Group and Mars Enterprises' Sky Gourmet are also planning to open new kitchens. The Ambassador handles 20,000 meals a day and has kitchens in Mumbai and Delhi. Sky Gourmet, which started operations two years ago, serves 7,000 meals a day on Jet Airways flights from Mumbai.

The airline catering business has also grown thanks to increased domestic tourism, which is said to have grown by 17 per cent in 2003-2004 over the previous year. With the abolition of inland air tax and decline in the air turbine fuel prices, air tickets are more affordable.

Says Leslie D'Gama, vice president, Mars Enterprises, "Reduced air fares have pushed volume growth." Adds Subhash Goel, chairman of Delhi-based Stic Travels: "The LTA for government employees has been restored and will add to passenger traffic . Airlines are expanding operations, driving business volumes in the process."

The growth in the aviation sector notwithstanding, the airline catering companies are complaining about their margins getting squeezed. They say that increased competition has forced the airlines to keep their air fares low.

"Gone are the days when airlines paid Rs 300 per meal to the catering company. Today, most airlines pay an average of Rs 150 per meal, excluding drinks and prefer to pass on the benefit to the consumer," says an airline industry source.

The trend towards no-frills airlines may further erode the margins of the catering companies. For instance, Deccan Air serves a no-frills "sandwich and a drink meal" on board, while some other air carriers are choosing to bring their own non-perishable items from the countries of their origin.

Says Kishore Butani, vice president, (operations), Ambassador's Sky Chef. "Though the volumes have gone up, the business may actually be shrinking," he complains. "To keep the ticket prices low, airlines extract discounts from us," he adds.