Cutting Catering Costs
Should airlines continue spending money on catering - is it an essential part of branding?
Cost pressures are forcing airlines to review inflight catering strategy. Fine wines and fine dining are giving way to the fine line between profit and loss.
Each year airlines spend about 2-3% of total expenditure on catering. However, this cost center is declining as airlines divest non-core activities in an effort to save money.
“Following the steep drop in traffic after 9/11, many airlines were forced to cut costs, and meal service was one place to do it,” says John Bronson, spokesman for Gategroup, parent company of caterer Gate Gourmet. The cuts have been most visible in the economy cabin and were made deeper by the current global recession.
The growth of low-cost carriers has also influenced passenger expectations regarding catering, says Bronson. Many network airlines have subsequently dropped inflight catering on short and mid-range flights.
And cost reduction is only one of the advantages. Less catering means less weight and hence better fuel consumption. Turnaround times also benefit.
But consigning catering to the waste disposal is not an easy decision. Countless surveys have shown that passengers consistently place catering and onboard service high on the list of determining factors when choosing an airline.
Arguably, catering is becoming even more important. Benoit Pilon, Manager, Airport and Inflight Services for IATA, says the rise of self-service technology means that onboard services have become the face of the airline. “Passengers may not get a real feel for the airline brand until they step on the aircraft,” he notes. “That means catering becomes an even bigger window to the brand.”
Simon Soni, Head of Inflight Services at Virgin Atlantic Airways, argues that the economic downturn has also made it important that inflight food and beverage is the best it possibly can be. Soni believes catering is a key differentiator and describes it as “a very tangible expression of our brand”.
TAP Air Portugal (TAP) reports that its surveys also indicate catering is very important for a strong and reliable brand. It sees any reduction in inflight meals by competitors as an opportunity to attract new passengers.
There is even a trend to enhance catering, particularly in the front cabins. “A number of carriers have engaged celebrity chefs to design meals for their premium cabins,” says Bronson. Gate Gourmet personnel frequently work alongside these celebrity chefs to translate menus into food that can be made in volume, and will look and taste good at 35,000 feet.
Some airlines have even turned the catering cost center into an avenue for incremental revenue by selling a limited selection of food and beverages to passengers. Bronson sees a growing trend in onboard retailing as part of the inflight catering mix.
Many airlines have unbundled the product, and now simply sell onboard refreshments. The likes of BMI, for example, have gone from providing refreshments to only providing them to frequent flyers, and now only to frequent flyers on certain fare types.
Another version is supplementing the free meals. For example, All Nippon Airways (ANA) recently introduced its new “My Choice” option in economy class, says Mika Hayama, Assistant Manager, Products and Services Innovations. “Economy class passengers still receive free meals, but they can also purchase additional a la carte items,” notes Hayama.
This makes an important contribution to ANA’s bottom line, according to Hayama. “My Choice” also includes elements such as economy passengers paying for lounges, and has added around $11 million to ANA coffers in the current fiscal year.
Get out of the kitchen
Irrespective of inflight catering decisions, airlines are equally split about kitchen ownership.
Virgin Atlantic uses third-party caterers, believing this is the best way to achieve quality and affordability. “We work with some of the top catering companies in the world,” says Soni. “We are an airline not a caterer.”
Royal Jordanian Airlines divested 80% of its interest in the airline’s catering operation when the airline went public in 2001. That catering operation is now part of Alpha Flight Services, which continues to cater Royal Jordanian flights from Amman, according to Hasan Kabariti, Head of Inflight Services and Product Department at the airline.
ANA’s Hayama observes that, in contrast, the Japanese carrier owns its kitchens at Narita Airport but outsources elsewhere. Cathay Pacific goes further and even has kitchens in some outstations. In the US, Continental Airlines and Northwest have kept kitchens while United and American Airlines are aligned with the Virgin philosophy of total outsourcing.
“Certainly the trend is towards outsourcing,” confirms Pilon. “Some airlines prefer their own kitchens, believing it gives greater control, but others prefer the black and white of service level agreements.”
The catering sector will undoubtedly benefit from technical innovation in the years ahead. One important feature is new, lightweight catering trolleys. These have really shed the pounds, going down to 10kg from almost 60kg before. Considering a fully loaded Boeing 747 would hold around 100 trolleys, that is a significant saving in weight, fuel and CO2.
Pilon also points to the rise of prepackaged meals, a trend that started after 9/11 and has continued ever since. “There are hidden costs in using real dishware and cutlery,” says Pilon. They need to be washed, stored, retrieved and repackaged. This takes time and money.”
Prepackaged dining can simply be thrown away. Because much of the packaging can be recycled, the environmental impact is minimal, and may even be less than using real dishware and cutlery, which require the use of detergents and dishwashers.
“Importantly, prepackaged meals are significantly lighter,” adds Pilon, “again meaning fuel and CO2 savings.”
Much like decisions about whether or not to keep inflight catering or kitchens, including prepackaged meals will be a decision for each individual airline. The key point is that catering can have a significant impact on cost, branding and even the environment. It should be a main course on any airline agenda.