April 18, 2024

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[THE INVESTOR] Airline catering provider LSG Sky Chefs Korea has criticized South Korea’s second-largest air carrier Asiana Airlines for setting up a joint venture with a new Swiss-based partner after “enjoying strong benefits” from the partnership with it for more than decade.

LSG Sky Chefs Korea, the joint venture formed between Asiana and Lufthansa’s airline catering division, said it strongly regrets that Asiana has signed a memorandum of understanding to launch a new catering business with Gate Gourmet Korea without any prior discussion or negotiations with its current and longstanding catering partner. 

“LSG Sky Chefs Korea suggested the best value possible to Asiana for the partnership extension multiple times, however, it was never given an opportunity to engage in official negotiations or participate in a fair bidding process,” the company said in a press release on Feb. 27.

In October last year, Asiana Airlines and Gate Gourmet launched the joint venture Gate Gourmet Korea which will provide catering and in-flight services to the Korean air carrier and its affiliate low-cost carriers Air Busan and Air Seoul.

Asiana holds a 40 percent stake in Gate Groumet Korea, a South Korean unit of global airline catering company Gate Gourmet which is part of the HNA Group, a Chinese investment Group which also owns Hainan Airlines.

According to LSG, the contract for supply of inflight catering between the two expires in mid-2018 but the lease contract for the catering facility between the companies is valid until 2021.

“LSG believes that the catering contract should be maintained until 2021 as it was signed under the clear condition that the catering contract will be valid until Asiana’s management and operation right expires,” LSG said.

An official at Asiana told The Investor that the company acknowledges that LSG raised the issue through a press release but didn’t provide an official comment.

Asiana and LSG have been working together since 2003 when the Korean firm sold an 80 percent stake in its catering business to LSG as a part of the former’s restructuring plan. Asiana still holds a 20 percent stake in LSG.

After extending their five-year contract two times in 2008 and 2013, Asiana has decided to set up the new joint venture as it has been seeking more profitable models for the in-flight dinning business.

LSG claimed that the decision is “in conflict with and contradictory to Asiana’s legal obligations and obligations as LSG’s shareholder.”

It said that continuing the partnership with LSG, which serves 25 other international airlines beyond Asiana, has a much bigger business potential than working with Gate Gourmet Korea, which will focus on Asiana’s business.

“LSG will rigorously defend its rights and take whatever steps are necessary to defend its business in Korea,” it said.

By Park Han-na (hnpark@heraldcorp.com)