The grounding of private airline Jet Airways and overall uncertainty in the aviation space is pushing partners to diversify and look at other streams of revenue. Tata Group's Indian Hotels Co Ltd (IHCL) is planning an operational restructuring of its air catering arm Taj SATS.
With about 39 percent market share in the airline catering space, Taj SATS, a joint venture of IHCL and SATS Ltd, caters to a chunk of domestic and international carriers and a lion share of revenue comes from the sector at present.
Air India, Air Asia, Go Air and SpiceJet are among domestic partners of Taj SATS, while British Airways, Emirates, etc. on the international side. Jet Airways was also a major client for Taj SATS, with a ‘decent’ contribution to its topline. The grounding of Jet Airways has impacted revenues of all associated partners, said analysts.
Taj SATS is looking to diversify into new streams of businesses in order to increase non-aviation revenues from 18 percent at present to 40 percent over the next five years, sources told CNBC-TV18.
In the non-aviation catering space, Taj SATS is exploring opportunities to increase catering to corporates, food and beverage outlets, and education institutions.
To help build this overall non-aviation catering portfolio, CNBC-TV18 has learned that Taj SATS is working on building three central kitchens in the medium term. These will serve as touchpoints to F&B outlets as well as institutions on a pan-India basis.
The company is also planning to hire consultants who can help organise the operational restructuring and supply chain.
"Taj SATS has formulated its growth Strategy aligned to ‘Aspiration 2022’, which aims to achieve sustainable growth and profitability," Taj SATS told CNBC-TV18.
"The growth strategy calls for an operational restructuring of Taj SATS with the intent of making it more cost-efficient and nimble by leveraging economies of procurement and production thereby reducing cost in the overall supply chain."
On the aviation front, Taj SATS is looking at a larger presence in smaller cities as well. CNBC-TV18 has learned that the company is looking to increase the number of kitchens catering to aviation from six to 15 over the next five to seven years.
"While we grow in the non-aviation space, we will also look at strengthening our market leadership in the aviation catering space by establishing presence in the top 10-15 airports in India by passenger traffic growth over the next 5-7 years," said Taj SATS to CNBC-TV18.