07 March 2011

SriLankan Catering Sees Surge in Demand as More Tourists Visit Sri Lanka

07th March 2011, www.lankabusinessonline.com

Sri Lanka's sole inflight caterer says it is experiencing a surge in demand as the end of a war is drawing more tourists to the country and is also actively chasing and winning new business from airlines which did not buy from Colombo.

Though SriLankan Catering, a unit of the national carrier SriLankan Airlines is the monopoly caterer at Sri Lanka's Katunayake international airport, it does not get business on a platter.

"Nowadays it is a modern world, they can do double catering to get food from their base," says SriLankan Catering chief executive Sarath Fernando.

"I think it is not sheer necessity, also the fact that we have to be flexible, customize their menus and always look at their needs."

Last year SriLankan Catering had brought on board Saudi Arabian Airlines, an airline that has not picked up of food from for over a decade.

"Since 1995 Saudi Arabian have not taken food, after many months of negotiations doing the right thing by both parties I think we managed to get them and we are happy," says Fernando.

"There are airlines looking at Colombo as a destination and when they come, we ready to talk to them and go after them to get their business."

Fernando says attractive pricing and quality food and doing exactly what the customer wants in a close partnership is essential in airline catering.

"The food we them is their reputation in the end," he says. "We have to do justice that."

But the airlines it already caters to, including its parent, Sri Lankan airlines which gives 60 percent of its business is expanding. Loads are now higher in almost all flights.

"I think the loads have been good, the frequencies have been increased by many airlines," says Fernando.

"A year ago we did 6,500 to 7,000 meals a day. Now we are averaging about from April 01 to end December about 11,400 meals a day. You can see the increase of the number and it is on the way up. There are days we do 16,000 meals a day."

In the nine months to December 2010 revenues at the caterer rose 26 percent to 2.4 billion rupees from 1.9 billion but profits grew at a faster 38 percent to 640 million rupees. Sri Lankan catering has a tax holiday which runs till 2021.

The firm caters to 11 airlines, with the national carrier making up 60 percent of the business, followed by carriers such as Emirates, Qatar, Malaysian, Etihad, Oman Air and Royal Jordanian.

Rising food costs are a concern for the firm which can adjust prices only quarterly.

The firm says it is buying about 80 percent of the food locally, from about 20 percent two years ago, but suppliers and growers have been guided to give produce to exact specifications.

The firm's flight kitchen can produce up to 25,000 meals a day. As business grows Fernando says it can ratchet up production by increasing staff without the need for any major new investments.

But a key cost which it has less control is energy with rising electricity prices.

The firm is looking to diversify business. It has just started managing a 24 room transit hotel at Katunayake.

A laundry initially started to items like clean blankets and airline seat covers is now attracting business from nearby hotels. A bakery initially started to provide food for people working in Katunayake is doing well.

"It has been very successful that model we would like to take out in a bigger scale," says Fernando.

Non catering business now makes up less than 10 percent of revenues, he said.

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