ITCA Update
Joint Ventures PETER JONES
ITCA chair of production and operations management, School of Management, University of Surrey.
The Travel Catering Research Centre here in Surrey is currently looking at what the flight catering industry might look like in 2020. To do this we have looked back at trends and developments over the last few years. One of the interesting areas to emerge has been the role of joint ventures (JVs) in developing and managing flight kitchens. We calculate that in 2003 there were 350 fully- owned large flight kitchens operated by the top ten, or so, operators, which had fallen to 333 by 2010. However, in 2010 there were a further 181 kitchens that were joint ventures, almost exactly the same number as there were seven years earlier. This would seem to suggest that very little had changed with regards JVs in those seven years. But in reality there were some very significant changes in ownership and partnerships. For instance, in 2003 Aerococina owned and operated 15 of its own kitchens, but in 2010 it became a JV owned by LSG Sky Chefs and Grupo Sarabina. Likewise the ownership of Servair Airchef changed during this time. Perhaps of more interest is the role that JVs play in
each of the three major regions of the world. Less than 7% of the 180 JV kitchens identified above are in North America. These are predominantly operated by Flying Food and Servair. This is because Servair’s business model is clearly based on JVs, with only 10 out of its 34 kitchens being fully-owned and operated in 2010. In Europe the number of JVs fell from 58 in 2003 to just 46 in 2010. Two companies clearly made changes in their strategy. Gate Gourmet operated 22 JV kitchens in 2003 but only two in 2010; whereas DO&CO had no JV kitchens in 2003 and nine in 2010. In Asia Pacific the opposite has occurred. The
number of JVs has grown from 53 in 2003 to 67 in 2010. Much of this growth can be explained by SATS who own and operate two kitchens at their home base, but now in addition have 22 JVs. They have expanded into China in JV with BAIK to operate 11 kitchens, and into India through a 49% share in Taj
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SATS, where it operates seven kitchens. The strategy of some firms is to have a strong
partnership between the same two stakeholders across a significant number of kitchens. Servair and Alpha’s joint ownership of Servair Airchef would be an example of this, whereas other firms have a wide range of different partners. For instance, LSG Sky Chefs operates 17 kitchens in South East Asia with different partners in Beijing, Gansu, Shanghai, Bangkok, Seoul, and Kuala Lumpur. Two obvious questions arise from this brief
analysis. First, why are there few JVs in one part of the world and many in others? The answer probably lies in the level of economic development, the maturity of the market, and any legislative constraints in each specific country. Second, why do some firms have many partners, some have one or two, whilst others have none? Here, I suspect, there is a more interesting answer…
..no reason. In the field of management, it is often the case
that both practitioners and researchers look for ‘best practice’. They assume that one way of doing something is always going to be better than any other. This is a ‘one size fits all’ solution. However, I am a firm believer in contingency management. That is to say, that one way of doing something is right in one set of circumstances, but a different way of doing it is best in other circumstances. I suspect a firm’s JV strategy is highly contingent. And there is nothing wrong with that. NOTE: All data here is based on analysis of the Momberger Flight Kitchen database.
IMPORTANT MESSAGE!
Calling All European Members Of ITCA
VAT Regulations (Europe): Through ITCA, the European Commission’s directorate for taxation and customs union is asking members for feedback, comment and opinion on VAT regulations as they may apply to the supply of goods and services aboard trains, ships and aircraft. It is particularly interested in comments on difficulties with the rules as they are currently applied, problems foreseen for the future, and eventual solutions suggested against this background. Among aspects covered is the question of types of transactions: supply of goods, intra- Community acquisition of goods, supply of services, importation of goods. Depending on the nature of the transaction, different rules to determine the place of taxation will apply. Any members and/or industry colleagues
wishing to contribute to this debate should send comments to itca@associationservices.
co.uk and ITCA will collate a reply to Brussels. This is your chance to have an influence on
this major topic facing the industry today. Replies are required in advance of September 5 2010.
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