NEW YORK--(BUSINESS WIRE)--UNITE HERE’s Airport Group has released a report (LINK) on the airline catering industry and the potential private equity buyout of Servair in particular. The report focuses on possible price and operational pressure that will result from continued dependence on Air France-KLM and the widespread uncertainty Servair faces in its U.S. network.
On February 6, 2015, sources announced that Air France-KLM (EPA: AF) intends to launch a sale of Servair, with first bids due before Easter (April 5th). The Airport Group’s report intends to provide private equity firms considering purchasing Servair information about the airline catering industry and Servair in particular.
The report finds that TPG Capital’s prior, troubled buyout of airline caterer Gate Gourmet demonstrates the potential pitfalls of a private equity purchase of Servair. Like Gate Gourmet’s dependence on British Airways at Heathrow at the time of its buyout, Servair’s dependence on Air France would give a single airline immense bargaining power post-sale. This dynamic could negatively impact price and margins at Servair’s core French operations. Like Gate Gourmet under TPG’s ownership, Servair is susceptible to both to internal issues like labor disputes and external problems originating with airline clients.
Servair’s purchaser would also inherit uncertainty facing the company’s U.S. network, including:
- New company leadership following the sudden passing of its founder and CEO of 32 years;
- A pending, legally complex and publicly undisclosed move to a new ownership structure;
- An intensifying labor dispute and related legal challenges;
- Increased competition from new market players, which has already resulted in lost contracts, for example to Do&Co for Etihad in New York City.
The full report can be viewed here:
http://airportgroup.info/documents/Servair.pdf
UNITE HERE International Union represents 35,000 airport workers in North America, including a majority of all airline catering workers in the United States and employees of Flying Food Group, Servair’s sole U.S. partner.
