Offering food in the sky for decades, Thai Airways International‘s catering business is bringing these renowned first-class experiences to the ground — in restaurants.
The first is slated for opening in Bangkok’s Soi Nana next year, as part of the business unit’s plan to explore new revenue-generating opportunities, revealed Suraphon Israngura Na Ayuthya, managing director of THAI’s catering department.
“The conventional business — to supply meals to airlines — faces stiff competition that results in low margins,” he said. “Thailand’s tourism industry is flourishing with a continued increase in the number of arrivals, but a legacy airline like THAI sees thinning profits. It’s time to reach out and cash in on the burgeoning trend.”
A new team is being formed for the restaurant, which will compete head to head with boutique outlets like Greyhound Cafe. Suraphon has high hopes that younger consumers’ yearning for experiences beyond taste will ensure success.
He says it will be totally different from the three restaurants operated by THAI at provincial airports under an old business model, as sitting lounges for passengers and people who send them off. “Consumer behaviour has changed.”
His unit is now catering 70,000 meals to 60 airlines on a daily basis, 80 per cent to THAI, generating 70 per cent of total revenue. Growth prospects are dim as potential clients do not include low-cost airlines. This year, it secured deals from two more airlines. Aside from an increase in raw-material costs — 20-30 per cent for some items — the margin is further squeezed by the minimum-wage increase.
Though the unit has relied on worker outsourcing for 10 years, which brings the number of outsourced workers to half of the 4,000 total, the new wage boosted human-resource costs to 28 per cent of the total. Meanwhile, raw-material costs have risen to 40 per cent. To grow this business, THAI now plans to provide catering service from Vientiane, Kathmandu and Myanmar.
But a bigger potential lies for the on-ground business, which now generates about 2 billion baht (US$64 million) in annual revenue.
Expecting 6.8 billion baht revenue this year, the unit forecasts only 650 million baht in net profit — or below 10 per cent in profit margin compared with 20 per cent in the past.
“Airline catering will be maintained but we will expand on-ground business — bakery, restaurant and event catering,” Suraphon said.
Its bakery business, Puff & Pie, is in the rebranding process to strengthen the catering unit’s image. So far, five outlets have been opened in PTT fuel stations in Bangkok and peripheral provinces and the number will hit 150 in three years. While retail sales should generate some new revenue, the outlets will open wider opportunities to generate more from the catering business.
With 2 billion baht in annual revenue now, there’s a high chance this figure will double, the executive said.
“With a proven track record for some time, we should be able to list on the Stock Exchange of Thailand — to become a new profit-making unit for THAI.”
(c)2013 the Asia News Network (Hamburg, Germany). Distributed by MCT Information Services.