The Hindu Business Line : Taj SATS looking at newer revenue streams

Mumbai, June 13 Faced with a grim outlook in the aviation industry, Taj SATS, the air catering arm of Indian Hotels Company owned by the Tata Group, is looking for means to step up revenues from ancillary activities and is investing significantly to expand its presence as well.

“In the last three years as the airlines started decreasing fares, the margins of air catering companies have come down by 30 per cent. Couple of years back a ticket to London would cost Rs 50,000, it’s about Rs 24,000 now,” Mr Sunil Taneja Director of Marketing and Business Development, Taj SATS told Business Line.

Currently, the catering arm maintains inventory of custom-bound products for the airlines (liquor, syrups, sauces and so on), but wants to grow its client base for getting laundry contracts for napkins, pillows and blankets given in the aircraft, and some related areas such as staff uniforms. It is also exploring the business of providing catering services in airline offices.

The revenues of Taj SATS for the year 2007-08 stood at Rs 300 crore and expect to clock Rs 350 crore in the financial year 2009 and ancillary revenues contribute around 10 per cent to the total revenues, he said.

In line with the airport development work, the joint venture company of IHCL and Singapore Airport Terminal Services recently added kitchens in Goa, Bangalore and Amritsar. It plans to add Ahmedabad, Kochi, Kozhikode and Thiruvananthapuram also by this year end.

“We plan to invest around Rs 50,000 a meal in a kitchen with the number of meals ranging from 5,000 to 10,000, excluding the cost of land. We are also looking at a footprint in the overseas market by the end of the calendar year in Mauritius, Sharjah and Abu Dhabi, where the investment would be in the range of Rs 70,000-75,000 a meal. The kitchens would have the capacity of 8,000 to 20,000 meals,” Mr Taneja said.

While airlines in India have been indicating a cut down on meals as a measure for cutting costs and improving bottomlines, Mr Taneja denied any such move taking place. He said that the airlines are looking at optimising cost by making changes in food presentation and so on and not by cutting on meals.

“For example, instead of two tomatoes on an omelette, there will be one! It does not impact the passenger because most of them might not even have it, but it really helps the airline on an overall basis,” he said.

Onboard meals served by airlines contribute around two per cent to the operating cost on the domestic sector and about five to six per cent on the international, said Mr K.G. Vishwanath, Senior General Manager, MIS and Investor Relations, Jet Airways.

Of the actual fare, a meal on domestic route costs between Rs 120 and Rs 150, international is around Rs 225 to Rs 250 a meal depending on how elaborate the menu is, said Mr Taneja. He added that on foreign airlines the meals are priced between Rs 250 and Rs 300 each.

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