Gate Gourmet International AG

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Gate Gourmet International AG

Balsberg, P.O. Box QV
CH-8058 Zurich-Airport
Switzerland
Telephone: ( +41) 43 812 54 80
Fax: ( +41) 1 810 91 75
Web site: http://www.gategourmet.com

Private Company
Incorporated: 1992 as Gate Gourmet Management AG
Employees: 22,000
Sales: CHF 2.3 billion ($1.9 billion) (2003)
NAIC: 722110 Full-Service Restaurants; 424820 Wine and Distilled Alcoholic Beverage Merchant Wholesalers; 541990 All Other Professional, Scientific and Technical Services

Gate Gourmet International AG is a leading supplier of in-flight food service for the global airline industry. A spinoff of Swissair, the company has grown to become one of the two largest caterers in the industry. Gate Gourmet's 120 flight kitchens in 30 countries prepare 530,000 meals a day. Gate Gourmet pioneered the direct-to-customer in-flight meal concept after airlines cut back catering services on domestic flights following the September 11, 2001 attacks on the United States. Gate Gourmet also offers supply chain management, inspection and validation services, and in-flight equipment sourcing through its e-gatematrix, Gatesafe, and FiveOceans enterprises.

Early 1990s Origins

Gate Gourmet Group was formed in 1992 as Gate Gourmet Management AG when Swissair made its catering operations, including ICS International Catering Services, a separate company. It was owned by Swissair Associated Companies Ltd. (also Swissair Participations SA or Swissair Beteiligungen AG) along with the much smaller Nuance Trading AG (duty-free sales) and Restorama AG (staff canteens). The company's president and chief executive was Wolfgang Werlé, formerly director of customer service and business development at Deutsche Lufthansa AG's LSG Sky Chefs catering unit.

Gate Gourmet was then the world's eighth largest airline caterer, with 34 locations and 5,300 employees. It had annual revenues of CHF 780 million and supplied almost 130,000 meals per day to 30 airlines. According to Le Temps, Gate Gourmet was spun off in an atmosphere of intense competition among caterers due to the global recession. It had to streamline its operations as a result.

The newly independent company grew quickly. Papadacos Catering of Athens was acquired later in 1992. Gate Gourmet ended the eventful year by opening a new $7 million flight kitchen in Johannesburg, South Africa, in a joint venture (called Air Caterers Johannesburg) with the Fedics industrial catering firm.

Gate Gourmet acquired a majority (80 percent) interest in airline catering company AERO-CHEF from Denmark's Sterling Airways in late 1992. This brought Gate Gourmet into the ranks of the world's top five caterers. Turnover was CHF 800 million and the company had 44 units. In March 1993, Gate Gourmet opened a joint venture with Abela at London's Heathrow Airport.

SSP Acquisition in 1994

Gate Gourmet doubled in size through the August 1994 acquisition of the airline and railway catering operations of Sweden's SAS Service Partner (SSP), which had annual sales of SEK 4.8 billion and 32 catering operations in 13 countries. The CHF 250 million buy made Gate Gourmet the third largest caterer in the world, with 13,000 people working at 64 locations in 21 countries. Total sales were about CHF 1 billion a year.

In 1995 and 1996, Gate Gourmet acquired far-flung operations, buying flight kitchens from KLM in Thailand and VARIG in Brazil. Catering operations were also acquired in Portugal. In 1996, the company upgraded its facilities at Heathrow, Geneva, and Amsterdam airports.

In January 1996, company president Wolfgang Werlé moved on to head Swissair Associated Companies (SAC), which included Rail Gourmet, Swissôtel, Nuance, Restorama, and Restosana. Werlé was succeeded as Gate Gourmet president and CEO by Henning Boysen. SAC was renamed the SAirRelations division in December 1996. Swissair Group was renamed SAir Group at this time.

Two South American acquisitions were made in 1997. Gate Gourmet bought Santiago's La Marmite flight kitchen in July and the Lima-based Aeroservicios Peruanos flight kitchen in March.

In October 1997, Gate Gourmet acquired the Heathrow-based long-haul catering operations of British Airways for £65 million. During the year, Gate Gourmet also entered into a joint venture with Manila Integrated Airport Services and Malaysian Airlines System Berhad for a new facility in the Philippines.

In 1998, Gate Gourmet opened operations in Hong Kong (March) and Manila (December). Its revenues for the year were CHF 1.7 billion ($1.2 billion).

Gate Gourmet entered the Iber-Swiss Catering venture at Barcelona Airport in January 1999. It reached an agreement to buy out the remaining 70 percent of Iber-Swiss it did not own five years later for EUR 23.5 million.

Gate Gourmet bought Australian catering operations from Cathay Pacific Catering Services in March 1999 and Ansett Australia in November 1999. Catering operations were also acquired in Ecuador in March. Italy's Ligabue Catering S.p.A. was acquired in December 1999. The company also obtained catering operations in Mexico.

Dobbs Acquired in 1999

An important buy was the $780 million acquisition of Dobbs International Services, Inc. from Phoenix-based Viad Corp. in July 1999. Memphis-based Dobbs had 1998 revenues of $891 million and 60 flight kitchens, all but five of them in the United States, where Gate Gourmet had been conspicuously absent. It was tops in the U.S. train catering market. The company also had five flight kitchens in Great Britain. Dobbs had been founded in Memphis in 1946 as Dobbs House, a spin-off of the Jack Sprat Corp.

Expanding into the United States was important as more airlines were seeking vendors capable of global support. The Dobbs acquisition brought Gate Gourmet's market share to 25 percent. It was the world's second largest airline catering company, with revenues of more than $2 billion a year and 26,000 employees working at 142 flight kitchens in 27 countries. Following the Dobbs buy, Gate Gourmet was restructured into three geographic divisions: Europe, America, and Asia/Pacific.

Units were opened at Shanghai Pudong International in September of the year and Paris Charles de Gaulle in October 1999. Seven Australian operations were acquired from Ansett in November 1999.

Gate Gourmet acquired in-flight catering equipment supplier Jet Logistics in January 2000. It opened a Latin America office in Miami in 2000.

A new state-of-the-art CHF 128.4 million plant opened in Zurich in 2000. It was designed upon just-in-time principles (production scheduled around aircraft departure times) to reduce refrigeration costs and improve freshness. Many processes were fully automated. In spite of its increased capacity of 48,000 meals per day, the new 32,000-square-meter plant took up 5,000 square meters less space than its predecessor. New flight kitchens were also opened in Paris and Shanghai in 2000.

Around this time, the company was partnering with Dallas-based i2 Technologies Inc. to create a new online marketplace for travel-related catering services. Called e-gatematrix, the new venture aimed to streamline in-flight food service ordering. A single flight could require 40,000 items, ranging from toothpicks to beverage carts. E-gatematrix was based in Atlanta; neighboring Delta Air Lines was first to sign a long-term contract with it.

Retrenching in 2001

By 2001, Gate Gourmet had 30,000 employees in 34 countries. However, ten percent of the workforce (mostly in North America) was laid off soon after the September 11, 2001 terrorist attacks on the United States. While they were flying fewer passengers, airlines were also scaling back their food offerings to cut costs.

Gate Gourmet's Australian operations were dramatically scaled back in 2001 following the failure of Ansett Australia. Ansett folded owing the Gate Gourmet operation AUD$26 million ($13 million).

At the same time, parent company Swissair Group was going through its own bankruptcy. Gate Gourmet was not placed in administration because it was profitable.

The investment firm Texas Pacific Group acquired Gate Gourmet in 2002. The deal had to pass regulatory muster in Switzerland and the United States and was closed in December of the year.

New flight kitchens opened at Port Columbus, Ohio, and San Diego in December 2001, Phoenix Sky Harbor International Airport in January 2002, and New York JFK in January 2003. The flight kitchen at Miami International was replaced in 2003.

Company Perspectives:

We have shared beliefs, consistent standards and common systems. Our main focus is airline catering and related business activities. We will develop new business opportunities where we can take advantage of our core competencies. Customers prefer us because our passion shines through everything we do. We are dedicated to finding new ways to generate value for our customers and stakeholders. We are a world-class team focused on Global Service Excellence, constantly learning and improving, determined to be the best in our business.

A la Carte in 2003

As airlines eliminated meal service on many domestic flights, Gate Gourmet moved to fill the void by offering à la carte food items for sale direct to passengers. A $7–$10 lunch and snack concept was tested on Northwestern Airlines flights in March 2003. This was followed by a trial of Eli's Cheesecake Co.-branded sandwiches and desserts on one of United Express routes. A similar concept was brought to Delta's Song offshoot and Swiss International Air Lines (SWISS) in October 2003.

United Airlines switched its O'Hare catering business to Gate Gourmet in late 2003. The next year, Gate Gourmet won a bid to supply the new Qantas offshoot, Jetstar, making up some ground it had lost down under in the Ansett collapse.

The operation now employed about 300 chefs around the world. Gate Gourmet opened its Culinary Academy in September 2003. Division Americas CEO George Alvord described to the University of Memphis publication Business Perspectives the challenge of retaining employees in a 24/7 flight kitchen environment versus competition from the restaurant industry.

David N. Siegel succeeded Henning Boysen as company chairman and CEO in June 2004. He had guided US Airways through its bankruptcy in 2002 and 2003. Before that, he oversaw Avis-Rent-A-Car's response to the post-9/11 travel slowdown. He also led the operational restructuring of Continental Airlines after Texas Pacific acquired a 40 percent stake in the then-bankrupt carrier during the mid-1990s.

In the winter of 2004–05, Gate Gourmet relocated its Division Americas headquarters to northern Virginia from Memphis, Tennessee.

Principal Subsidiaries

Gate Gourmet, Inc. (USA); Gate Gourmet Norge A.S.; Gate Gourmet Stockholm AB.

Principal Divisions

Americas; e-gatematrix; Europe; FiveOceans; Gate Safe.

Principal Competitors

LSG Sky Chefs; Servair SA.

Key Dates:

1992:: A majority interest in Aero-Chef is acquired.
1994:: The acquisition of SSP SAS Service Partner doubles Gate Gourmet's size.
1999:: The acquisition of Dobbs International Services adds vast U.S. presence.
2001:: Ansett collapse and the aftermath of September 11, 2001 attacks on the United States force layoffs.
2002:: Texas Pacific Group acquires Gate Gourmet.
2003:: Culinary Academy is opened; direct-to-passenger food sales is introduced.
2005:: Division Americas HQ is relocated to Virginia.