In-flight caterer Gate Gourmet's £130m contract with British Airways could be threatened by the recent dispute between the caterer and its workers.
The row escalated last week when Gate Gourmet staff went on strike after 130 casual workers were recruited for the peak travel season.
Talks between Gate Gourmet and the Transport & General Workers' Union (TGWU) broke down, resulting in 670 Gate Gourmet staff being sacked and sparking an unofficial sympathy walkout by BA baggage handlers.
This left more than 100,000 holiday makers stranded at London's Heathrow Airport last weekend, which is estimated to have cost the airline between £20m and £30m.
As Caterer went to press, talks between Gate Gourmet and the TGWU were continuing as the union negotiated to have all workers reinstated, not just those unfairly dismissed.
In the aftermath of the dispute, Gate Gourmet's future hangs in the balance. The company remains in serious financial trouble. It has been on the verge of bankruptcy since missing debt repayments in December and the ending of a three-month freeze on bankruptcy filing on 11 April.
Gate Gourmet has not made a profit since 2000 and is expected to make a £25m loss this year. Over the past four months, the company has been trying to negotiate new working practices, plus wage cuts and a loss of benefits, in an attempt to reduce its labour costs.
The loss of the £130m-a-year contract would threaten Gate Gourmet's survival. BA would not rule out breaking up its catering needs into smaller accounts when its provision is renegotiated in 2008.
A BA spokeswoman said: "We will review all the options when we come to renew the contract. It's important to bear in mind that it is a large contract at Heathrow, and Gate Gourmet provides a large number of services for BA."
The airline added that all issues, including the recent chaos, would be taken into account when the contract came up for renewal.
Airline catering expert Prof Peter Jones of Surrey University said it would be "difficult but not impossible" for other in-flight caterers, including LSG Sky Chefs and Alpha Flight Services, to absorb the BA contract as a whole.
But TGWU secretary Tony Woodley said that Gate Gourmet's problem was that it was not being properly funded by BA. He said: "The pressure the company has been under to drive costs down has become insurmountable."