Cranky wrote just earlier today about the web of airlines owned by China’s HNA group, parent of Hainan Airlines. But he only casually referenced the other aviation-related businesses involved in the company’s operations. There’s now one more to include: Gategroup. Gategroup is the second largest catering company in the world (Gate Gourmet, among other operating names) and will be added to HNA’s portfolio, allowing it to import expertise in catering and cabin services while hopefully bringing the operation back into the black; Gategroup lost more than 60mm Swiss Francs last year on sales of 3bn francs.
This is not HNA’s first foray into catering. The company will keep the two operations separate for now according to reports. But buying in to the company gives access to certain expertise and scaling opportunities for HNA. At its core airline catering is all about driving margins lower and lower to be able to secure contracts and deliver to the airlines while still eking out a profit. Gategroup has struggled with that recently while HNA has been successful, albeit in the Chinese market where things tend to run differently. Still, the cross-pollination of ideas and operations should help out both sides as they move forward.
And Gategroup seems to need the help. Other major catering companies have outperformed the Swiss company by a significant margin of late. There is also competition on the niche/boutique side, as smaller operators spring up to serve a couple airlines in specific cities, often for premium routes/cabins where margins are more generous. That said, catering operations appear to be all the rage in the aviation M&A world right now. Servair, an Air France/KLM subsidiary is reportedly set to be sold to a private buyer as well.
Separate from the catering side of the operation, Gategroup has several other businesses which are part of the transaction. These other businesses represent a smaller part of the overall operation but are generally less pressured when it comes to margins. On-board retail and passenger service are areas where HNA will likely transition and grow the product offerings more quickly than catering.