Korean Air keeps Asiana's $140M catering supplier after merger
What's the deal? Korean AirDealroom has a profile for this one. Try Dealroom → will retain Asiana AirlinesDealroom has a profile for this one. Try Dealroom →' in-flight catering supplier, Gate Gourmet Korea (GGK), after the two carriers merge, leaving the combined airline with two meal providers. Gategroup Holding AG, GGK's Swiss parent, said it would continue supplying meals, extending its Asiana relationship to the merged carrier.
Why now? Korean Air had moved to bring catering in-house ahead of the merger. In March, it bought an 80% stake in Korean Air Catering & Duty Free Services (KCND)Dealroom has a profile for this one. Try Dealroom → from private equity firm Hahn & Co. for about US$651.1M, reversing a 2020 sale made to raise cash during the pandemic.
The numbers: KCND reported US$550.5M in revenue and US$79.6M in operating profit last year, a roughly 14.5% margin that includes its duty-free business. GGK, smaller at US$167.3M in revenue, posted a 29.6% operating margin.
What's the catch? Folding Asiana's volumes into KCND would have spread fixed costs and boosted earnings. But a 30-year exclusive contract Asiana signed in 2018 runs to 2048, and ending it early could cost hundreds of billions of won.
What could go wrong? The airlines have not said how catering volumes will be split or whether the exclusive contract will change. Asiana's current volume is expected to stay with GGK, according to industry sources.
The signal: The dual-supplier setup limits the scale benefits of Korean Air's costly KCND buyback. "The dual-supplier arrangement could limit the earnings and cost-saving benefits of Korean Air's KCND acquisition, with profitability depending on future catering volume allocations and contract adjustments," said an industry source.
Read more: n.news.naver.com
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