FOOD FOR THOUGHT

Saudi Arabia 2014 | TRANSPORT | VIP INTERVIEW

TBY talks to Gerhard Marschitz, CEO of Saudi Airlines Catering, on strategies of the company, expansions, and dealing with competition.

You are the first Saudia affiliate to launch an IPO. Could you talk about the results of this process and the strategy that has produced it?

We had a fantastic IPO and have experienced significant development in our share price over the past two years. A share price always represents a market assumption of the future development of the company. We believe that we have a solid strategy that has convinced our investors of Saudi Airlines Catering's value. Today, we are an in-flight catering company. We generate about 80% of our total revenues from the airline business. When I joined the company in 2012, we produced a top-level strategic review and worked out a five-year growth plan. The main components of the growth plan are all factors of the KSA airline market, including Saudi Airlines' aggressive fleet and passenger development plans, the in- vestments of the General Authority of Civil Aviation (GACA) in airport facilities, and our diversification strategy. We were proud to announce in early 2014 that we renewed our exclusive contract with Saudi Airlines to the end of 2019. Besides the airline business, we want to expand our activities in our Support Services Division, which includes business and industry catering, remote site and camp management, the industrial laundry business, and our catering activities for Hajj and Umrah pilgrims. Our strategic partnership with Newrest offers Saudi Airlines Catering both the expertise and corporate reach to back and support our diversification, ensuring such an activity is supported by a leading global service organization.

How do you plan to maintain your market share as the country liberalizes?

Today, we have an estimated inflight catering market share of 98%; however, we know that this kind of monopoly position will not last forever. Our 2017 growth plan includes the assumption that an inter-national in-flight caterer will enter the Saudi market. We simply have to continue to provide high-quality services in competitive conditions—then we don't have to be afraid of any competition. Currently, we do not do much business with other Middle Eastern airlines, because when they fly from their hubs into Saudi Arabia, they practice back-catering, meaning they bring the meals for their back flights with them. This is the industry standard for flights up to about three hours and also Saudia's common practice; however, as soon as foreign airlines start domestic operations, their aircraft will stay over- night in the Kingdom, and consequently will need a local catering service provider. Being the number one in-flight catering service provider in Saudi Arabia, I am confident to be able to establish a fruitful co- operation with any airline that enters the domestic market.

“We simply have to continue to provide high-quality services in competitive conditions."

How do you expect the government's infra- structure investment will impact the long-term aspect of your business?

One major growth factor for our in-flight division is the huge airport infrastructure investments of the GACA. It plans to more than double the capacity of Riyadh's air- port, increasing passenger numbers from 15.3 million in 2012 to 35.5 million in 2017. Another project is the new airport in Medinah, increasing passenger numbers from 3.6 million in 2012 to 12 million in 2015. And of course the new airport in Jeddah is also significant, increasing passenger numbers from 23.6 million in 2012 to 30 million in 2015 (Stage I) and up to 80 million in Stage III by 2035. In addition, there are plenty of expansion projects ongoing for smaller airports, such as Jizan, Abha, and Qasim, to name a few. All these expansion projects will massively drive the growth of our company.

How will you meet the growing demand?

We are in a constant process of adapting our resources to future market demands. We are constructing a kitchen facility at the new airport in Medinah; two years ago we opened a state-of-the-art central production unit in Riyadh with a capacity of 18 million meals. This production facility will double its capacity by just adding two production tunnels. We are convinced we are ready to cope with the huge growth rates the Kingdom provides us in our business activities.

© The Business Year - July 2014