Gategroup Holding AG

Overview Key strengths Key risks Strong market position and high customer retention rates. Exposure to the cyclical commercial airline industry, which is still recovering from the pandemic (notably Asia-related traffic and business travel) and facing increasing cost pressure. Catering for (growing) premium economy class segment in airline industry and gradual expansion in nonaviation business offer growth opportunities. High customer concentration (with 25% of total revenue generated by two largest clients) and limited bargaining power vis-a-vis customers. Sound liquidity position supported by ample cash on balance and undrawn portion under the shareholder loan with insignificant short-term debt obligations. Considerable debt burden and limited capacity to deleverage from excess cash flows in the near-term. Lingering cost inflation constrains margins, with EBITDA remaining

...We expect Gategroup Holdings AG's revenue to continue recovering in 2023 thanks to the uninterrupted strong demand for air travel. Gategroup derives most of its revenue from onboard catering and the sale of food and nonfood products to air travelers, meaning that its operating performance is positively correlated to increasing passenger volumes. Gategroup's revenue increased to CHF3.9 billion in 2022 from CHF2.1 billion in 2021, mainly due to the underlying strong recovery in air passenger volumes after the short-lived omicron-related disruption in the first quarter. We forecast revenue of up to CHF4.9 billion in 2023, which is comparable with the prepandemic level before the consolidation of LSG Group's European operations acquired at the end of 2020. According to the International Air Travel Association, in March 2023 total global air passenger traffic, measured in revenue passenger kilometers (RPKs), reached 88.0% of March 2019 levels and rose 52.4% compared with March 2022. This furthers...

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