Battling for the high fliers
BA bets fat cats will opt for better food
FORMER AMERICAN AIRLINES CEO Robert Crandall’s boast nearly 20 years ago – that he saved the airline US$40 000/year by removing a single olive from passengers’ dinner salads – is legendary in the sector and set the tone for struggling airlines worldwide. Ever since then, airlines have been looking for innovative ways to cut costs in one of the world’s toughest industries.
Joint Comair CEO Gidon Novick says news that consultants to SA Airways were advising it to radically cut back on its meals service to all passengers came like “manna from heaven”. Details of the report came as Comair announced it was ramping up its business class meals offering on its domestic British Airways franchise.
Cost-cutting is part of a global airline trend. Those at the back of the aircraft are already used to limited legroom and queuing for the toilet considerably longer than the well heeled up front. Increasingly, they also have to pay for what they consume at the rear. Those at the sharp end pay the big bucks and as a result get better service.
Northwest Airlines in the US recently eliminated a free half-ounce bag of braid- ed pretzel sticks from its offering. They only cost a few cents each – but the airline, which carries 40m passengers/year, is saving $2m as a result.
SAA, which made an attributable loss of R652m in the six months to end-September 2006, will have to do considerably more than remove an olive from passengers’ dinner plates to turn a profit. US consultants Seabury Airline Planning Group have handed management a proposal they say will save the airline R2,7bn. Among the proposals is a planned saving of R171m by cutting out food in economy class and limiting the options for higher paying business class passengers. The proposals are scheduled to go to SAA’s board in May.
Novick doesn’t expect SAA to implement the proposals fully, as it would cost the national carrier passengers. But the timing couldn’t have been better for the domestic BA franchise, which coincidentally (it insists) has been planning an upgrade of its meals service for months.
About 12% of Comair’s passengers travel business class. The newly launched menu will see the cost per passenger rise from about R60 to R90/head, adding about R4m/ year in additional costs. “We only need to add three new business class passengers a day across our network to cover the cost,” says Novick, who is confident the new strat- egy will pay off handsomely.
Part of that strategy is to strike up alliances to get better pricing. For example, Brandhouse supplies top end whisky Johnnie Walker Black at a preferential rate, as does the US ice-cream brand Häagen-Dazs, which has been recently introduced to the South African market.
Low-profile carrier Nationwide revealed in January that it would be scrapping the concept of complimentary meals in economy on its domestic routes and replacing them with a new “Buy-Onboard” product. It strenuously denies it’s following the budget airline model. About 7% of Nationwide’s passengers fly business class – and the airline is planning to upgrade its menus at the front end of its aircraft.
Nationwide financial director Peter Griffiths says catering in economy class was costing the airline around R30m/year and it estimated about a third of the food served was wasted. However, the cost cuts don’t mean price reductions on tickets. Says Griffiths: “This saving has in effect been passed on to customers, as our fares are comparable with the other carriers, including the socalled low-cost carriers.”
Budget carriers kulula.com (owned by Comair), 1Time and SAA-owned Mango offer limited in-flight catering at an additional cost to their customers.
SAA’s advice is “manna from heaven”. Gidon Novick