Executive summary - Udo Bullmann

Gate Gourmet1. Company descriptionFor a long time Gate Gourmet was considered SwissAir's "Crown Jewel". The company was worth roughly 6 billionSwiss Francs before the bankruptcy of Swissair and the 9/11 impact on the aviation sector. Gate Gourmet, wasbought by Texas Pacific Group in 2002 for around CHF 1 billion. Gate Gourmet's then CEO welcomed the sale withthese words: "Through a combination of strategic acquisitions and organic growth, Gate Gourmet should experiencecontinued success." At the time of its acquisition by Texas Pacific Group, Gate Gourmet employed over 26,000workers in 33 countries with 144 flight kitchens.As Gate Gourmet was formerly the wholly-owned airline catering division of SwissAir, Gate Gourmet were publiclylisted. After the Texas Pacific Group acquisition Gate Gourmet is now a privately held company. In practice thismeans that almost none financial details concerning the company are disclosed.2. Economic and social effects2.1 LBO description (offshore base, activity focus, etc.)Texas Pacific Group (TPG) is a leading global private investment firm with over $30 billion of capital undermanagement. TPG manage several types of funds including private equity, venture capital and public equity and debtinvesting. The firm was founded in 1992. Holdings have included stakes in technology (Seagate Technology, ONSemiconductor), consumer franchises/products (Burger King, Ducati), retailers (J. Crew, Petco), airlines(Continental, America West), and entertainment (Metro-Goldwyn-Mayer). In 2006 Texas Pacific Group raised a $15billion sized buyout fund.2.2 Effects on job creation, investments in training and education of labour force, investment ininnovationFrom 2002 to 2005 workers of Gate Gourmet have experienced severe job cuts: From 26.000 to 22.000 workers andfrom 144 to 109 flight kitchens. Especially one round of job cuts has caught the attention of the media and public:In August 2005 some 800 workers were sacked by the airline caterer Gate Gourmet. The Transport and GeneralWorkers Union (T&G) had been in negotiations with Gate Gourmet since February over measures to deal with amassive projected operating loss at Heathrow. A rescue package was put forward in June, but when it became clearthat management was excluded from the cost-cutting measures, the workforce rejected the package. In August, GateGourmet announced their intention to hire 120 temporary workers - while permanent staff continued to work underthe threat of being made redundant. The company ignored calls for discussions and brought in the temporaryworkers. Workers on sick leave and holiday were informed by letter that they had been sacked.In addition Gate Gourmet also found themselves in a bitter labour dispute in the United States in the summer of2005. Unions presenting Gate Gourmet employees successfully sued to get their health benefits after the companytried to eliminate them.2.3 Corporate governance and economicsGate Gourmet reported making losses in each of the four years leading up to the 2005 dispute, losing some £22million in 2004-05. The path to "organic growth" at Gate Gourmet began with a meticulously planned assault ontrade unions beginning with the struggle at Heathrow Airport in the UK. The offensive then moved to Germany'sDüsseldorf airport, where members of the IUF-affiliated Food and Allied Workers' Union NGG have been onstrikeover the company's refusal to negotiate wages and compensatory measures for increasingly arduous workingconditions.In a clear challenge to Germany's established collective bargaining framework, the company has been demandingenterprise-level concessions on working hours, holiday leave and shift pay despite the fact that these are negotiated at