Monday, March 1, 2010

India's Airports Aiding The Growth of Food Franchises with Low Cost Carriers Gaining Momentum

One industry doing well even in the current difficult times is the food and beverage franchise at all domestic airports. With the cost-cutting prevalent today, more travelers are opting for the LCCs (Low Cost Carriers) rather than the full service airlines.

Since food is not part of the ticket price at these airlines, passengers are opting to eat their fill at airports before boarding flights. In the last couple of years, the proportion of flights flown by LCCs has increased from 45:55 to 60:40 at present, and is expected to go up to 70:30 by the end of the year. Especially since all the LCCs including Spicejet, Indigo and Go Air are adding capacity. In these flights, food is available but the options are fairly limited with exorbitant rates sometimes charged.

As a result, the volume of business done by the retail chains and food outlets that have licensed or leased space has increased by over 30%. Cafe chain Barista that has outlets across metro airports in the country says it has seen a significant growth in F&B sales, with their outlets at the Bangalore and Mumbai airports registering 30% growth over the last year. This has also become a source of innovation. For example, BIA’s F&B partner, HMS Host, created a food offering called ‘Grab n fly’. This included a variety of light and easy packaged food products, at prices starting from Rs 50 that a passenger could carry onto the aircraft.

The business offers interesting options in terms of how airports as well as F&B outlets might shape the airport location as a retail destination in future. Pizza Corner for example has a concept called Pizza Corner Express which it offers at malls and has extended the same to its airport franchises as well.

Possibly a combination of retail lounge as well as coffee hangout might be possible in future, or a combination of coffee shop and bookstore as well as wi-fi center as is found in some of the Crossword outlets today. The possibilities are endless and only need initiative.

With airports working on the PPP model now, airport managements will be looking at alternative revenue sources to ensure adequate returns. This might be one of foodcustomers.