Decline of the In-Flight Meal Leaves Airline Caterers Hungry

Getting a free meal at 30,000 feet, in coach class at least, is going the way of the biplane. And that’s causing turbulence in the airline catering business.

Spending on food by major U.S. airlines has dropped by nearly 30% since the end of 1999, forcing big catering firms such as Gate Gourmet International and LSG Sky Chefs to slash operations and cut thousands of jobs to survive the drop in demand for their services.

“You could just see the air going out of the balloon,” said John Whisnant, Gate Gourmet’s senior vice president of marketing and business development. “I don’t think we see the hot meal coming back in coach.”

And even with the cutbacks, carriers are “still putting tremendous pressure on us to lower our costs,” said Travis Tanner, LSG Sky Chefs’ chief operating officer for the Americas.

Blame it on the airline industry’s four-year financial crisis that has landed three major carriers -- United, Delta and Northwest -- in Bankruptcy Court. Saddled with huge losses and desperate to reduce spending, the airlines have eliminated the trays of Salisbury steaks, lasagna and fish fillets that coach passengers on domestic flights once took for granted -- and stand-up comedians routinely mined for punch lines.

Except in first class and on long international flights, where meal service is still the rule, airborne dining has been reduced to snack boxes, sandwich wraps and salads costing $3 to $5 -- and then only if the flight is at least two or three hours long. If not, it’s just peanuts and pretzels.

At American Airlines alone, “by eliminating complimentary food we were able to save $30 million in our food and beverage budget each year,” said Tim McMahan, a food planning and development manager at American, a unit of AMR Corp.

Surveys consistently show that price and convenience are travelers’ main concerns when choosing a flight, as evidenced by the surging growth of low-cost airlines, which have never offered much more than snacks. That’s another key reason the old-line carriers have had few qualms about eliminating the complimentary meal.

A Zagat survey of U.S. airline passengers in November showed that only 2% cited “bad or no food” as their chief complaint -- “probably a sign that fliers have given up any expectation of finding decent food in the air,” the company said.

Indeed, passengers seem to be adapting rather than revolting. Before boarding a five-hour flight from Los Angeles to Newark, N.J., David and Sarah Peickert took a major precaution against a bumpy ride: feeding their 10- and 7-year-old children.

With airline meals now mostly a memory, the Peickerts ate a big breakfast before leaving their Westchester home for their noon departure on United Airlines.

“If they don’t eat, it’s going to be a rough flight,” Sarah Peickert said of her children as they waited to board. Added her husband: “Our generation was used to getting food on planes. Theirs isn’t.”

The drop in meal service has forced the caterers to retrench. Worldwide employment at LSG Sky Chefs, a division of German airline company Deutsche Lufthansa, has tumbled 29% to 29,000 in five years. The number of kitchens it operates has dropped to 190 from 205.

In the U.S. market, the number of airline meals prepared by LSG Sky Chefs fell by more than half from 2000 to 2004, the most recent period for which figures were available. LSG Sky Chefs employs more than 1,750 people at various California airports, including 1,000 at LAX.

Worldwide revenue at Gate Gourmet, meanwhile, dropped 34% from 2000 to 2004, to $1.85 billion. Gate Gourmet, owned by the private investment firm Texas Pacific Group, has cut its employment by more than 15% over the same period, to 22,000 today.

The company also shuttered nearly a third of its U.S. kitchens. And in another effort to further lower its costs, Gate Gourmet last month also secured a 6.5% cut in wages from its U.S. workforce.

Another side effect of reduced in-flight dining is a spurt in sales at airport food concessions, as passengers stock up before boarding. With increased airport security prompting travelers to arrive hours early, there’s also plenty of time for them to buy in advance.

At Los Angeles International Airport, for instance, food and beverage sales in the first 10 months of 2005 jumped 13.9% to $100.9 million from the same period a year earlier, even as passenger traffic grew just 1.7%, the airport said.

The picture isn’t all grim for the catering firms. LSG Sky Chefs and Gate Gourmet still enjoy strong demand from many foreign airlines, which set a mouthwatering table for passengers on long-haul flights.

In addition, most big U.S. carriers still spend heavily on food -- $439.5 million in the second quarter of 2005 alone -- as they cater to first-class and international passengers who pay thousands of dollars for a ticket. Those travelers are a crucial source of profit for the carriers, and serving elaborate, tasty meals is considered paramount to keeping them as customers.

Providing those high-toned meals is a lucrative business for the catering firms.

“We can actually make some money” preparing food for those travelers, said Tanner of LSG Sky Chefs. For the “front-of-the-plane” crowd, the multi-course meals include such dishes as seared salmon, rack of lamb and mocha terrine for dessert.

In addition, LSG Sky Chefs and Gate Gourmet still make some of the airlines’ sandwich wraps and assemble the snack boxes, although many of the boxes’ components -- such as health bars, biscotti, raisins and cookies -- come from packaged-food giants such as Kraft Foods Inc. and Campbell Soup Co.

United, the nation’s second-largest carrier and a unit of UAL Corp., says an average of 15% of its passengers on flights of three to five hours purchase its “buy-on-board” food, and 30% do so on longer transcontinental and Hawaii flights.

That demand held steady last year, and increased during peak travel periods and on flights that fell during typical meal times, United said.

The airlines also said many of their offerings received good marks from travelers. American’s McMahan, for example, said the carrier’s turkey, cranberry and brie sandwich wrap was a passenger favorite. The wraps are made mostly by LSG Sky Chefs and Gate Gourmet, depending on the airport where they’re prepared.

As buying food on board becomes more accepted, airlines are likely to offer a wider variety in the future, catering executives said. And that could mean a rebound in business for the catering companies, although no one is predicting a return to the free-meal heyday.

Caterers also could benefit as airlines increasingly adopt the hotel industry model of offering options such as movies and meals that can be ordered for an extra charge, said Aaron Taylor, a vice president at Eclat Consulting, an aviation consulting firm in Reston, Va.

Even the discount airlines that have always flown food-free might one day offer buy-on-board meals to help themselves stand apart from competitors, said Whisnant of Gate Gourmet.

If they do, he said, “we will be right there with them.”