COVID-19’s blow to airlines: “Travel will recover if countries and governments let it” - IMD Business School
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COVID-19’s blow to airlines: “Travel will recover if countries and governments let it”

The founder and CEO of a company supporting airlines with onboard retail, Caroline Ulbrich, turned to private equity during bumpy times, in a bid to remain on track with her 10-year plan
February 2022

“Business travel will never be the same, and nor will tourism. More because of the impact of the sustainability movement than COVID though,” says Caroline Ulbrich, EMBA 2008–2009, founder and CEO of Versilia Solutions, which provides airlines with full retail support.

“Ultimately, the non-vaccinated will need to continue to do extra tests until COVID calms down. However, travel will recover if countries and governments let it.” She says her team were “shocked” by the speed with which borders shut when the Omicron variant appeared.

Ulbrich’s business was in the eye of the storm when COVID-19 hit. The International Air Transport Association (IATA) reports that there was a 60.2% decrease in the number of passengers flying in 2020, compared with 2019. Total industry passenger revenues fell by 69% and net losses were $126.4bn.

“We had a good start back in 2016. In 2017 we made roughly $5-7m in revenue and, in 2020, were on target to reach $30m. Then, suddenly, revenue dropped to nearly zero from one day to next,” recalls Ulbrich.

In summer 2020, it looked like Versilia Solutions might have to shut down. The financing from initial investors, with whom Ulbrich and her business partner had formed a 50:50 joint venture, had run dry. “We decided to pivot by buying them out. We took out a loan and looked for a new investor,” says Ulbrich.

The company is on target to break even in March and has suffered minimal losses from the pandemic. In fact, Ulbrich says the long-term plan remains intact and Versilia will come out of the pandemic stronger than before, as “the crisis forced us to become even smarter about how to manage cost effectively”. The end game remains to exit, perhaps via an IPO.

Versilia is now backed by BGF, one of the UK and Ireland’s most active investors of equity capital in growing companies.

Parachuted in to save EasyJet

Ulbrich studied hospitality at the Ecole Hôtelière de Lausanne and then went into the hotel industry in Argentina, before moving into airline catering. She had a brief stint as an account manager at LSG Sky Chefs, owned by Lufthansa group, before starting a 15-year career at gategroup, working her way up in positions as diverse as People Development Manager and GM of the catering plant. A heavy dose of training in change management during this period served her well, she says.

It was always a question of time, though, before Ulbrich started her own venture: “I’ve had problems with authority since I was a child, and I have been afraid of bosses in the past because I don’t like being micromanaged.”

It was during her EMBA at IMD – when she was still working for gategroup – that the seeds of Versilia were sown.

“In the EMBA we had a strategy assignment, and my project was establishing an onboard retail business for gategroup. They had the traditional catering in place but not the sales onboard. I realized that the B2B business can’t really run retail shops on modern aircrafts.

“I was just about to move to Los Angeles as a regional director to run several catering units for Gate Gourmet’s West Coast. At the same time, gategroup was at risk of losing the recently awarded onboard retail business of EasyJet, so they parachuted me in to save the account, which was one of gategroup’s largest customers. While at IMD, I convinced gategroup that if they wanted to be successful at onboard retail they had to build a separate independent company so they were not dragged constantly into B2B traditional catering,” Ulbrich explains.

The board bought into it, and Ulbrich became founder and CEO of the new company – gateretail – from 2010 to 2015. It was a natural progression to going it alone, which she did next, simultaneously asking three of her direct reports from gateretail to come along with her and hoping one would say yes. It was a “shock and pleasure” that they were all game.

Versilia Solutions has found its niche in the smaller airlines, such as Air Malta and Pegasus. “We can customize our offering to an airline, meaning we are more personable than our larger competitors such as Gate and LSG who each have some 250 airlines. We have six,” says Ulbrich.

“We are also more competitive on the pricing side and more flexible with the business model. We are only a retailer; not a system company or an airline caterer. All those services are outsourced. What we do is create the best model for the airline,” she explains. That might variously involve introducing new onboard technologies, motivating and training crew, arranging onboard mystery shoppers, and managing the most efficient overarching supply chain setup around the airline network possible.

‘People buy food and drinks on board, just so they can take off their mask’

Some circumstances have conspired to help Versilia weather the lumps and bumps of the pandemic, Ulbrich recognizes, such as the fact they deal with short- to mid-haul airlines that were less affected than intercontinental routes. She also says that when airports became ghost towns it helped the airlines, as passengers boarded hungry and thirsty.

“Those who are more concerned about COVID aren’t going to buy anything at all,” she says. “But others now buy just so they can take off their mask. Spending hasn’t actually reduced overall but it has changed; more water and prepackaged food is now sold and the fresh meals have been eliminated on most airlines.”

The future of onboard retail will be walled-garden internet ordering from your seat straight to the cart, Ulbrich predicts.

And Ulbrich’s working future? “I’m more passionate about running teams than the business itself,” she says. When that exit does take place, it seems unlikely she will let nostalgia slow her down as she sets herself her next challenge.