What are the main challenges in expanding kitchen capacities at present?
Edgard Graterol (EG): The challenge has been, how do we get back to 2019 numbers? The kitchens were there. We just had to bring back the resources.
The big issue has been the shortage of people. Because of that resource scarcity, it’s an employees’ market: You can go wherever you want and you’ll find a couple of cents more here or there. Recreating that loyalty to the company and the retention part has been a challenge.
The loss of experience that we had – several people retired during the pandemic and what was in their heads is not easily replaceable.
We knew that people like to travel and we need to feed them. I think we always knew that the business was going to come back. It was a question of how quickly. I think it came a lot quicker than we all expected, especially the domestic.
What approach did you take to re-opening kitchens?
EG: I think there are two different parts. Part of it is the preparation. From my side, I knew that we would need functioning trucks. Somebody needs to make sure that the trucks are functioning, but I didn’t have that somebody to go turn them on every day…Even if we only had one maintenance guy, making sure that the trucks were being turned on and off every day meant that they were going to be able to turn on when we actually needed them.
In hindsight, when you see the challenges of the supply chain and how difficult is it to get a truck right now, that became even more important. You had to use stuff that you had or wait for six months for a truck to show up – if you are lucky and can buy one.
So I think there was a lot achieved in the preparation phase and that was important. We spent some of the time making sure that our training was going be ready for the massive amount of people that would come in once we started hiring.
Once we said ‘now we’re going’ we had to be agile and really flexible. We had to find some creative ways of ramping up our kitchens. We created a task force made mostly of people from outside that had retired and could give us support. The experienced people helped guide the new people. Having that vision was very important.
During the pandemic, we found out that we could do other things. That flexibility in the company was really interesting. In order to survive we had to look at other markets and things that were not necessarily just airline catering. We started diving into meal kits, where we could use the expertise that we had in a completely different part of the business, going directly to the consumer.
We started the concept of ghost kitchens, where we created our own brands and went directly to consumers. We were using the spare capacity that we had to create a completely new way of using the capabilities and expertise of the kitchen. Now both of those businesses are now an integral part of the portfolio, which makes us more resilient in case something else happens in the future.
How were challenges overcome?
EG: We were able to find some creative ways of doing that. In the beginning, you could find a city that was struggling and we said ‘we cannot service you there but we have this hub we will still take care of you. It might not be in that particular market where you’re at but we’ll make sure that there’s food coming back and forth and that means your passengers are fine.’ We have since been able to ramp up our stations to the point where we can get back to our traditional model.
Being able to create collaborations and talk to customers openly I say, ‘look you want to open in Austin but I don’t have enough people’ and ask ‘can I double cater from Dallas?’ It was not perfect, of course, but from a food safety perspective and from a customer perspective it was okay. We were able to flex together to say ‘this is what we’ve got’ and serve the market even when the situation was not ideal.
What new models of food preparation have evolved?
EG: Cloud kitchens exploded in the pandemic with people ordering from home and realising that maybe there didn’t need to be a restaurant on the other side and that you could open an app and somebody else can make cookies, chicken wings or whatever.
We had all this spare capacity. So we decided to give it a go and go directly to the consumer. The whole concept was developed. We set up some payloads and six different brands in the US. We also have this business in Brazil and Hong Kong.
I think what was really interesting was that the customer really appreciated the culinary behind it. We had culinary expertise and logistics expertise. We were using our airline catering kitchen to create maybe 80% of the product; let’s say chicken wings. Then you send them to a smaller place that maybe doesn’t even have a storefront inside a warehouse somewhere. There you have two people and when somebody wants teriyaki chicken wings, add some teriyaki sauce, put it in the oven for five minutes and then give it to the Uber driver so they can deliver right away.
That worked out really well. Consumer feedback was positive…I think it is business that we will continue to do. From an operations perspective, it allows you to work with your peaks and valleys because you can do this when nothing else is happening in your kitchen.
The other piece of business that we dived into was the ready-to-cook kit meals that people started getting during the pandemic. We had a couple of customers that gave us the different components. We put them all together into a box and then give it to FedEx to pick it up and deliver. The business exploded and some people didn’t have the capacity to make that. We had the people and the space.
Customers had the opportunity to use our network to create and our distribution centres; they were managed by us with their brand. So that was another very interesting business. That becomes revenue opportunities which makes the company much more resilient.
Another model that we use is utilising the capabilities of one bigger kitchen. Sometimes we said this kitchen is going to go down to the barest of bones and become a jump-off. Basically, you produce all the food somewhere else and send the cart ready to go, so you can cross-dock into the high loader and put it on there.
In the Texas market, Houston was producing all the food and then trucking it over to Austin. Austin was doing just the final part and delivering it. It’s a model that we developed as part of increasing our capacity and we were doing a lot of that in 2019. We’re back into that because of the ramp-up that we’ve seen in some of the markets.
In the Florida market, a lot of the food is produced in Miami and trucked up the state into Fort Lauderdale and even into West Palm Beach…You can create scale capabilities in the bigger kitchen and then provide some of the satellites with good food. There are some savings and synergies. When some of the smaller kitchens start coming back on board, that’s something that we can explore, depending on the market and how far it is from a bigger production centre.
What are the key lessons of the pandemic?
EG: Coming out of the pandemic, customers, us and passengers had that understanding that we’re all in this together. I think we discovered that there are ways of working together and solving problems other than the classic customer-supplier relationship. So it’s more how can we do it together?
It’s also how I use technology and digitalisation and automation to make myself more resilient and less people-dependent, so we can serve the next increase in business. So one of the things my team is doing right now is really thinking about what we do for the future and how we get ready for that.