Oberoi looks to exit flight services business

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NEW DELHI Luxury hospitality chain The Oberoi Group is planning to put Oberoi Flight Services on the block after the air-catering business suffered a jolt following the grounding of Jet AirwaysNSE -4.79 %, its primary client, according to people familiar with the matter.

The group, which witnessed a drop in revenue and fell into the red in the quarter ended June, has approached investment bankers to initiate an exit, the sources said. The aviation crisis triggered by the closure of Jet and aggravated by a debt laden Air India – its second largest customer — is said to have had an impact on the air catering business.

“We do not comment on market speculation. Jet Airways was EIH flight kitchen’s largest account, hence the closure of the airline did impact our flight catering business. We have, however, put in place a plan to replace the business that we had from Jet,” the company said in a statement.

However, sources said a sale is on the cards. “Oberoi flight services is on the block. They have decided to exit that business. Most likely, there could be an announcement in quarter one of the next calendar year. There is a deck circulating in investment banking circles for the sale,” said a source.

Another source said no other domestic carrier has any tie-up with EIH flight kitchen. “It’s a clear write off on the balance sheet. Vistara, Indigo and SpiceJet don’t use their services.”

International airlines like British Airways, Air Canada and Cathay Pacific use EIH services. “But that cannot compare with the number of flights of domestic carriers. They were also catering to Qatar Airways, but they bring their own food now,” the source said.

In its unaudited results for the quarter ended June this year, the Oberoi Group, or EIH LimitedNSE 0.15 %, reported a 14% decline in revenue from operations at Rs 340.58 crore, compared with Rs 388.34 crore a year ago, and a loss of Rs 1.13 crore, compared with a profit of Rs 14.70 crore a year ago, on a consolidated basis.

The company attributed the drop in revenue to a general slowdown in business activity, decline in air travel and a reduction in the airline catering business.

The company said exceptional items for the three months ended 30th June 2019, and 31 March 2019 represent a provision of Rs 0.47 crore and Rs 84.75 crore, respectively, against receivables from a single customer in the flight catering business due to uncertainty in business continuity of the customer.

EIH’s subsidiaries include EIH Flight Services, EIH Holdings, EIH Investments NV, EIH International, Mashobra Resort, Mumtaz Hotel and Oberoi Kerala Hotels and Resorts among others.

[“source=economictimes”]

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