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A new deal is the only option for Gate Gourmet and BA

25 August 2005
A new deal is the only option for Gate Gourmet and BA

Airline caterer Gate Gourmet, the T&G Union and British Airways (BA) may have no choice but to settle the current industrial dispute, according to a leading industry figure.

Peter Jones, a travel catering expert from the University of Surrey, said that given the size of Gate Gourmet's £130m-a-year Heathrow contract with BA, no other in-flight caterer was big enough to step in.

"The only other global player is LSG Skychefs, but they have just won a contract at Heathrow for Virgin airlines. They simply wouldn't have enough lorries or kitchens to take over," Jones said.

LSG, owned by German airline Lufthansa, has about one-third of the global market, while Gate Gourmet covers a quarter. The only other airline caterer with a strong presence in the UK is Alpha Airports, but Jones believes it is too small to take on the BA deal.

Jones added that British Airways would prefer not to outsource its catering to more than one company. "LSG and Gate Gourmet dominate the global market because airlines prefer to deal with one contractor for logistical reasons."

Any suggestion that the airline could buy back the catering operation was dismissed by its chief executive, Sir Rod Eddington, in BA's staff magazine last week. "We are not prepared to buy a catering company when we are trying to drive out cost and complexity."

But Gate Gourmet upped the stakes by setting the airline a deadline of 5pm on Tuesday to revise its supply contract. After that, it said, it would call in the administrators.

As Caterer went to press, BA and Gate Gourmet had reached a verbal deal to extend the contract and inject more money into the catering operation.

The airline caterer rejected allegations that it was exploiting its position to ensure a deal with BA. "Regardless of our size and production capacity we have to run at a profit, which we have not done for the past five years," a company spokesman said.

BA represents 80% of the in-flight caterer's business and has tremendous leverage over Gate Gourmet, he added.

"It is because they squeezed so hard during negotiations that we are in the current situation where we make a loss on every first-class meal we serve."

BA resumed serving hot meals on long-haul flights from Heathrow on Monday, but continued to offer only a limited service for short-haul passengers. Gate Gourmet is providing "minimal catering provisions", a BA spokesman said.

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