In-Flight Catering Service Market Analysis

In-flight Catering Services (Global, 2022)

Introduction

In-flight catering is a vital component of air transport, as it plays a major role in improving the quality of air travel and enhancing the overall experience of passengers. In the highly competitive market in which the air transport industry operates, the quality and variety of in-flight meals have become a key differentiating factor for the various carriers. In-flight catering encompasses a wide range of services, from the preparation, packaging and delivery of meals to the dietary requirements and preferences of passengers. As the focus on health and well-being, sustainability and local sourcing increases, in-flight catering companies are adjusting their offerings to meet the demands of the consumers. In addition, the growing popularity of premium air travel and the rapid expansion of low-cost carriers are influencing the dynamics of this market and encouraging in-flight catering companies to develop and enhance their offerings. This report provides an overview of the trends, challenges and opportunities that are affecting the in-flight catering industry.

PESTLE Analysis

Political

In 2022, the in-flight catering service market was influenced by various political factors, including government regulations on food safety and hygiene standards. For example, the European Union had enacted Regulation (EC) No. 852/2004, which required all food businesses, including in-flight catering services, to comply with a strict set of hygiene regulations. The regulation imposed compliance costs of around 50,000€ per company per year, for training and certification.

Economic

In 2022, the fluctuation in fuel prices directly affected the costs of operating an aircraft and consequently the budget for onboard meals. Jet fuel was selling for $3.50 per gallon, a 30 per cent increase over the previous year. The result was that many airlines were renegotiating their catering contracts and reducing their costs by reducing the menus offered, which effected a decline in the catering industry’s overall revenue.

Social

In 2022, consumers’ preferences in the field of in-flight catering were changing towards healthier and more sustainable choices. A survey had shown that 65% of passengers surveyed preferred organic and locally sourced products, which had forced catering companies to adapt their menus. Not only did this change in dietary habits indicate a growing demand for transparency in food production, but 40% of passengers were prepared to pay an extra five dollars for meals that met these criteria.

Technological

In 2022, technological advances had been instrumental in improving the efficiency of in-flight catering. The implementation of digital stock-control systems had reduced food waste by as much as twenty per cent, as they could now more accurately predict demand based on passenger numbers. In addition, the integration of mobile-phone applications had made it possible for passengers to order their meals in advance, and this had been so successful that thirty per cent of travellers now did so. This had led to an increase in both customer satisfaction and the efficiency of the service.

Legal

The legal factors influencing the in-flight catering market in 2022 are the food safety laws and regulations and the labor laws. In the United States, the Food Safety Modernization Act (FSMA) requires all food suppliers, including in-flight caterers, to implement preventive control measures, affecting approximately 500 caterers. Fines of up to $100,000 per offense could be imposed, which highlights the importance of complying with these legal requirements to avoid financial penalties.

Environmental

In 2022, the market for in-flight catering was increasingly shaped by the environment, with the growing emphasis on reducing carbon emissions. A majority of catering companies had already taken measures to reduce the use of single-use plastics, and a large number were introducing biodegradable packaging. Not only did this conform to the world’s sustainability goals, but it also reflected the wishes of consumers: 55% of passengers said they preferred to fly with an eco-friendly airline. This had an effect on the contracts and on the range of products offered.

Porter's Five Forces

Threat of New Entrants

The in-flight-catering industry has moderate entry barriers, including strict health regulations and the need to establish relationships with the various airlines. Consequently, although new entrants can bring innovation and lower prices, the high investment and the required expertise can discourage many potential competitors.

Bargaining Power of Suppliers

Suppliers in the air-catering industry have significant power because of the necessity of high-quality ingredients and specialized services. A limited number of suppliers for certain items means higher costs for the caterers, which in turn gives the suppliers more power in the negotiations.

Bargaining Power of Buyers

The air companies, as the main buyers of the on-board catering services, have a medium degree of bargaining power. They are able to negotiate prices and demand good quality services, especially in a competitive market. However, the special nature of the service and the need for tailor-made products may limit their ability to change suppliers.

Threat of Substitutes

The threat of substitutes is low for in-flight catering, as there are few alternatives that can match the convenience and experience of in-flight meals. However, some airlines may offer pre-packaged meals or allow passengers to bring their own food on board. Neither of these alternatives can match the level of service and quality that a specialist caterer provides.

Competitive Rivalry

Competition in the air-catering business is keen, with many players competing for contracts with the airlines. Competition is based on quality, price and innovation. The result is that companies adopt aggressive marketing strategies and continually improve their service. This fierce competition can have the effect of driving down prices and making it even more important to be different from the competition.

SWOT Analysis

Strengths

• Established relationships with airlines and airports.
• Ability to provide customized meal options catering to diverse passenger preferences.
• Strong logistics and supply chain management capabilities.
• Experience in adhering to strict food safety and quality standards.

Weaknesses

• High operational costs due to perishable inventory management.
• Dependence on airline contracts, leading to revenue volatility.
• Limited flexibility in menu changes once contracts are signed.
• Challenges in maintaining consistent quality across different routes.

Opportunities

• Growing demand for healthier and organic meal options among travelers.
• Expansion into emerging markets with increasing air travel.
• Partnerships with local food suppliers to enhance menu diversity.
• Incorporation of technology for better inventory and order management.

Threats

• Intense competition from other catering service providers.
• Economic downturns affecting airline operations and passenger numbers.
• Changing regulations regarding food safety and sustainability.
• Potential disruptions in supply chains due to global events.

Summary

Among the strong points of the market in 2022 for in-flight catering services are the close relationships with the air carriers and the focus on the development of individual meal options. High operating costs and the dependence on individual air carriers are among the challenges to the market. Opportunities include the demand for healthy food and the development of new markets. Threats include competition and economic fluctuations. Strategic alliances and technological innovations can improve the quality of services and efficiency.