Flight caterer sees strong growth

PUBLISHED : Wednesday, 15 September, 2004, 12:00am
UPDATED : Wednesday, 15 September, 2004, 12:00am

LSG Sky Chefs says the mainland is key to its expansion plans in Asia-Pacific

The world's largest provider of in-flight service yesterday forecast double-digit growth of its business in China as part of its aim to more than double its market share in the Asia-Pacific.

Executives of LSG Sky Chefs, a Lufthansa unit, were speaking at a trade show of the Atlanta-based Inflight Food Service Association in Shanghai.

'We see double-digit growth in passengers in China over the next five years,' Asia-Pacific chief operating officer H.K. Cheung said.

'The food culture is important in China, with meals offered even on flights of 21/2 hours. That means good business for us.'

The company has nine joint ventures in China, including Hong Kong, which last year posted annual revenue of Euro90 million (HK$858.8 million) to Euro100 million, out of global revenue of Euro2.7 billion.

'The supply chain is not so mature in China and hygiene standards can be different,' Mr Cheung said. 'Carriers want a security of standards.'

He said the company was allowed to run wholly owned operations in China but preferred to have local partners.

LSG Sky Chefs has 15 per cent of the Asia-Pacific market, compared with 35 per cent in Europe, the Middle East and Africa and 40 to 45 per cent in the Americas.

Chief commercial officer Herman Anbeek said it aimed for a 40 per cent market share worldwide. In Asia, many carriers had their own catering companies and the market was more fragmented than elsewhere in the world.

LSG Sky Chefs last year posted a loss of Euro660 million, accounting for more than half of its Euro1 billion record loss, because of extraordinary losses caused partly by the impact of the September 11 terrorist attacks.

Mr Anbeek said in-flight services had been the biggest victim of airline cuts after the attacks.

'They account for 3 to 5 per cent of total costs and are the easiest to cut since they do not involve unions or flight safety,' he said.

'In the United States, flights of up to four hours have no service and in Europe up to 90 minutes. The US market for services has shrunk by 35 per cent since [September 11] and the European market by 20 to 25 per cent.'

He said the firm would focus on its core business of in-flight service and related business and dispose of non-core assets.