Given the harsh economic conditions in the airline industry and the hyper-competitive market, it’s not surprising to find that the top US airlines have cut back the average amount of money spent on passenger meals.
According to the US Government’s Department of Transportation, from a high of almost $6 per person in 1991, to an average cost of $3.58 per passenger in 2009, the costs per person for food expenses has decreased by roughly $2.60. (NOTE: the chart above shows a forecasted figure of only $3.07 per passenger in 2010 — which would be an all-time low.)
Of course, not all airlines are created equal. Some pay a little more per passenger for food, like Alaska Air, while others invest next to nothing (we’re looking at you, Southwest). However, while not all carriers are the same, they all face the same challenge – how to manage food and service costs while at the same time giving customers what they want.
In the last few years, some carriers have been actively trying to change their airline food service while others are touting a low cost, no-frills approach; this partially explains the wide divide among carriers and the periods where spending increases.
What’s next for airline food?
Gregg Rapp, from Menu Technologies, has over twenty-five years of experience working with Casinos, the Cruise Ship Industry, and various restaurants. Rapp says:
How we present menus and healthy foods to kids from a marketing perspective can influence how our kids perceive healthy foods. Many of the airlines list their menus in the sky magazine. They could do much with the descriptions and placement to make this more appealing to kids and adults, including using the web to create characters and branding for the value of eating healthy.
Rapp recommends reading Mindless Eating from Cornell University’s Dr. Brian Wansink as an excellent way to understand how we pick up our cues on what to eat. Wansink is a Stanford Ph.D. and the director of the Cornell University Food and Brand Lab and has spent a lifetime studying hidden cues that determine how much and why people eat.
Vanessa Horwell, the Chief Visibility Officer at TravelInk’d, a PR and communications firm for the travel industry, tells us:
There are some huge developments taking place in airline food. In traditional airline foodservice, there is what is known as ‘junking’. This is the wasted food from the plane which actually costs more to dispose of than the cost of the meal itself and is a significant cost/overhead burden.
As carriers look ways to reduce costs, they are looking to technology for tighter controls on inventory, and targeting their offerings to what passengers actually want. Horwell continues:
Airlines are trying to deliver higher quality foods, and trying to shun the image of nondescript foods packaged in plastic containers. There is a lot of innovation through partnering with the restaurant industry and carriers teaming up with restaurant chains and chefs to “co-brand” their menus. This in turn has great appeal to a traveling public that is already familiar with a food or restaurant brand and can expect quality and consistency; an example is Air Canada where they serve Quiznos. It is a familiar brand and there is consistency across their network. Customers can now order their food vouchers directly in the booking path with their flight, and savvy airlines will be marketing their “celebrity chef” branded content at that time to encourage customers to book and order food ahead of time.
Airline food gets healthier, salads leading the way
Recently, Tom Douramakos, chief executive of GuestLogix, a company based in Toronto that makes the hand-held devices and software used by most North American carriers for in-flight sales, said carriers generated a net profit of only 5 or 10 cents on a $10 sale of in-flight food.
Douramakos’s Executive VP of Global Sales Brett Proud, tells Gadling, “Hand-held devices and software are making a huge difference with airline costs and customer service in the airline food industry.”
GuestLogix first started in 2006 by working with American Airlines. They used 3000 hand-held devices to use as a cash register on board, while also using the software behind the scenes to help the airlines provision the right products for each specific flight as a response to a changing trend. Since then, they have developed long term contracts with many of the domestic, European and Asian carriers.
Proud says, “About 8 or 9 years ago, services such as food, baggage, and even drinks were included in the price of a ticket, but in the last decade or so, the model has changed and the service package has become unbundled. Things like food, entertainment, and baggage are being billed separately.”
For the carriers that offer them, the top-selling item on board, is always some type of salad.
Those carriers in the top 10th of their service group are making roughly $.70 – .90 more per passenger
Currently, the Benchmarked Food product mix is about 42% fresh food items and 58% snacks, with a trend moving towards the healthier items.
By managing wastes and improving forecasting, airlines can afford to offer better quality, which is right in line with the feedback customers are giving them — they don’t want peanuts or cookies, they want a reasonably-priced healthy salad, a fresh sandwich or cheese and cracker platter.
Of the current GXI airlines, the top 10th Percentile Product Mix is 15% fresh food and 85% snacks.
The impetus to change can be seen in the last pie chart, indicating that of the 15% of the current top 10th percentile product mix, fresh food sales make up 85% of total revenues.
Today, globally, against all on-board revenues, junking costs are running 2% to 7%, making a great case for better provisioning, better in-flight cost management (where attendants can reduce prices later in the day to keep product moving), and offering the right mix of products, preferably pre-ordered that customers want.
This airline travel trend may show an increase in cost but also an increase in quality, service and more healthy options.
Data Sources:
CNN, Michelle Obama Obesity Campaign, 2/9/2010
GuestLogix
In Flight Food Tries to be Tasty“
Menu Technologies
Bureau of Transportation Statistics, Form 41 Financials
See more Travel Trends.