Since airline catering is a capital intensive business due to high compliance costs, Sagar Dighe, chief operating officer, TajSATS, in conversation with Akshay Nayak underscores their strategy to reduce their high fixed monthly outlay and conserve cash to ride out the downturn, while also exploring the ghost kitchen segment as an opportunity, being a reputable brand with strong technical and culinary know-how
With the devastating impact of the pandemic on the aviation industry, how are the allied industries, importantly the air catering services segments facing the brunt?
While the Covid-19 pandemic has affected all industries adversely; the aviation industry has been significantly impacted. With travel, both domestic and international, coming to a complete standstill; airports, airlines and other key stakeholders, including airline catering companies have faced the brunt in varying but often devastating proportions.
Airline catering is a very capital intensive business with high safety, hygiene and security standards and therefore high compliance costs. One of the most severe challenges faced by the business today is cash flow management as airlines re-look at their own business models to conserve cash. In addition, there is a high risk of Chapter 11 restructuring of international airlines.
The focus right now for all airline caterers would be to reduce their high fixed monthly outlay and conserve cash to ride out the downturn.
How did Taj SATS sense the jolts ahead of the nationwide lockdown? What contingent plans have you considered to optimise Opex?
In 2003, while SARS didn’t affect India as much as Covid-19 has, TajSATS made use of its learnings from the impact SARS had on Singapore; the home country of SATS. These learnings and inputs from SATS on navigating such crises helped TajSATS prepare for the downturn triggered by Covid-19.
As a TATA Company, TajSATS is aware of our responsibility towards our immediate community and we are glad to assist the esteemed Taj Public Welfare Trust in providing meals to doctors and the frontline healthcare staff at government hospitals in Mumbai and Delhi, respectively. We have also partnered with BMC in Mumbai and with the Bangalore Airport Authority Limited (BIAL) to provide meals to the migrant workforce stranded in Mumbai and Bengaluru. We feel honoured and humbled to have served over 1 million meals during this crisis.
We have also been catering to the numerous repatriation flights launched by the Government of India and also the Governments of USA, Japan and Australia, respectively, to evacuate their citizens.
On the business front, our primary focus is on cash flow and cash conservation currently. Towards this end, we are dedicatedly examining our processes and business model to structurally rationalise our fixed costs. We believe that automation will be the way forward to not only drive cost efficiencies but also bring in measures for improved food handling; thereby ensuring the utmost food safety.
As a commercial kitchen, how has the pandemic impacted the other avenues of business? With Central Kitchen and other new brands, how are you looking to stabilise the balance sheet for the current fiscal?
Every crisis also brings with it several new opportunities to re-imagine the business, as well as explore opportunities for revenue diversification.
With the evolved consumer behaviour and sentiment as a result of this crisis, we foresee a major shift in consumption habits of both businesses and customers alike, which is to procure and consume food only from trusted brands. We are looking forward to serving our customers and partners with cuisine options in the healthy eating space as we have a strong culinary USP supported by our parent companies – Indian Hotels Company (IHCL) and SATS. We intend to address these opportunities under different brands, existing or new, with corresponding value propositions.
We aim to play a leading role in the cloud kitchen/ghost kitchen space, which is an opportunity for a reputable brand with strong technical and culinary know-how.
Central Kitchen, with advanced automation, is envisaged to not only help us leverage on the scale of procurement and production to optimise costs in the supply chain but also to produce hygienic, safe and quality products with minimal handling.
This will allow us to diversify into adjacent opportunities in QSRs, hotels, cafés and allied F&B space in India, as well as grow in Tier II/Tier III cities.
While brick and mortar eateries are already devising strategies on contactless dining, what measures are you at TajSATS taking to reinstate consumer confidence in airline catering kitchens?
Due to the COVID-19 crisis, the focus on food safety and hygiene has increased multifold. International agencies such as QSAI have established stringent guidelines for handling food and locally, FSSAI has also come up with similar guidelines. Consumers would be wary of consuming food from the kitchens that do not adhere to these guidelines. We are closely working with our partners to communicate the additional steps taken by us on safety and hygiene.
We have quickly adapted to the new ways of working that this crisis has brought about and are ensuring that we build the confidence of travelers and consumers to consume the food on-board, as well as on-ground.
We also believe that the procurement guidelines of businesses will undergo a re-think to procure services from reputable players. TajSATS is the market leader in airline catering in India and a leading brand in institutional catering, and is immensely trusted by its partners for the safety, compliance, hygiene and quality of its products and services.
TajSATS already follows a robust Food Safety Management System and ensures that standard procedures for food safety and quality control permeate the entire value chain, including employees and vendors across all its facilities.
All the TajSATS facilities are certified by the internationally recognized standards such as British Standards Institution, (BSI), QSAI and ISO 22000 (Food Safety Standards). These certifications further provide assurance and confidence of the conformity of stringent standards of food safety.
TajSATS has already implemented a detailed list of measures ensuring employee health and facility sanitation that is being followed and monitored with strict diligence.
Future roadmap for TajSATS in the post-COVID era?
The company is committed to achieving its long-term goals as outlined in IHCL’s five-year strategy –Aspiration 2022. We had charted our future when TajSATS embarked upon an aggressive growth plan under Aspiration 2022 to expand the portfolio and diversify into non-aviation catering. Aspiration 2022 also envisaged non-aviation revenue contributing to around one-third of our consolidated top line and conceptualised different brands to address the needs of different market segments.
We remain committed to the plan and this crisis has accelerated our plans to execution as the current economic situation as well as the post COVID-19 scenarios and consumer expectations lend greater validity to our strategic direction and plans.
Post COVID-19, this would be addressed in three phases: Resilience, Re-imagination and Rise.
- Resilience: For TajSATS, a key success factor is Resilience. From strategy to operations and execution, building a sustainable, resilient business has been key – and now, it is more important than ever. With the support of our shareholders, associates and partners, our immediate priority would be to navigate this crisis with a focus on cost rationalization and enhanced business processes.
- Re-imagination: The Senior Leadership team has demonstrated agility in devising strategies and plans for a re-imagined business model and enhanced SOPs. To adapt to the re-imagined business objectives, we will have to reallocate resources accordingly. These developments will be structural in nature and the core of this phase will require a clear focus on execution and implementation.
- Rise: TajSATS will rise out of this crisis as a much stronger company. With the invaluable support of our team, we will drive the new operating model with differentiation, durability and cost-effectiveness. The associated shift will be to an environment of technology, automation, digital, data, analytics and cost resilience.