gategroup snaps up Inflight Service to become sector ‘leader’

Onboard solutions provider gategroup is to acquire Inflight Service Group (IFS) for CHF 130 million (about €119.4 million), a move it says will see it ‘become the leader’ in the airline Buy on Board (BoB) sector.

gategroup is to acquire Inflight Service to create a Buy on Board ‘leader’

gategroup Holding AG will acquire 100% of IFS, a move the company says will enable it to generate CHF 240 million (€220.5 million) and EBITDA of CHF 13.4 million (€12.3 million) in additional revenue.

The purchase price is estimated at 6.5 times EBITDA post-synergies and is forecast to be 12% accretive in terms of cash earnings per share (EPS) in year one, and 16% in year two. The deal was agreed using funds from Triton, an investment fund, and was described in the statement as ‘debt free’.

Sweden-based IFS is the leading BoB provider in Europe with a focus on the Nordic and Baltic regions. It employs around 300 people and provides retail services to airlines, ferry and cruise lines. Current clients include airlines Norwegian, TUIfly and SAS, and ferry/cruise operators DFDS Seaways and fjordline.

gategroup says the acquisition see it become the ‘leader’ in BoB services in terms of size, number of customers, business intelligence, and on-board technology.

BoB is a key segment for inflight retail, with low cost carriers with no complimentary food or drink service accounting for around 50% of all short-haul traffic.

“We are very pleased to have found a service provider in IFS that shares our focus on innovation and efficiency, with the flexibility to quickly adapt within the ever-changing world of the airline industry and with a common goal to provide the best possible offering to customers,” said Xavier Rossinyol, gategroup CEO.

“This transaction, therefore, represents much more than an accretive acquisition: It is a clear step forward in creating the largest Buy on Board operator in the industry, leading commercial innovation, knowledge of customers and technology as well as to accelerate ancillary business generation for the airlines whilst significantly enhancing passenger satisfaction.

“We look forward to welcoming the IFS employees to our gategroup community and to jointly continuing to develop and deploy advancements in this important retail space, to modernize the passenger experience, and to create incremental value to our shareholders.”

Lars Löfgren, Inflight Service CEO, added: “To have gategroup as the new owner to IFS gives us a unique platform to further develop our business within and outside of the Nordics. We as partners will have the opportunity to manage the whole value chain, develop best-in-class retail concepts and implement these with the business partners we work with. We could not have gotten a better owner in order to drive our business further.”

The transaction is subject to the approval of Polish antitrust authorities and is expected to close in February 2016.

Global inflight retail sales fell 6.7% for the first half of 2015, according to Generation figures released at TFWA World Exhibition & Conference in October. Liquor has become a important category for the sector, with a 2014 GuestLogix report claiming that liquor, beer and wine accounted for 57 percent of all sales onboard US airlines for the four months to March 2014.

See the January 2016 print edition for a dedicated inflight retail report.