Press Release

Gate Gourmet Response to Union Vote Results

Reston, VA, June 2, 2005 - Gate Gourmet is disappointed that employees in the U.S. rejected a new cost-cutting contract that would have achieved necessary labor cost reductions as part of its ongoing restructuring efforts. In light of the balloting results, Gate Gourmet is reviewing its options going forward. Our strong preference remains to reach consensual agreements with the labor groups that will provide the savings critical to a successful restructuring.

In the meantime, Gate Gourmet continues to do business as usual with no interruption in service to our airline customers.

Gate Gourmet was not attempting to break new ground in these negotiations, but rather to bring its labor costs and productivity levels in line with competitors. Our proposal, which included a single-digit salary percentage reduction for the vast majority of employees, was modest com-pared to the deep cuts already accepted by our customers' unionized employees.

Because labor represents about half of the company's expenditures and is the single largest expense item, we are in the regrettable position of having to ask our employees also to make sacrifices. The company also was willing to share in its success. Gate Gourmet's proposal included a profit-sharing component modeled after Southwest Airlines' industry-leading plan. Ours, however, was even better than Southwest's in that it would have paid out in cash annually rather than into a deferred compensation program.

Under our previous labor contracts, signed before the events of Sept. 11, 2001, our union-represented employees have enjoyed a nearly 20 per cent increase in pay. Revenue since 2000, meanwhile, has dropped by more than 30 percent as airlines dramatically slashed costs, including their food service programs, following Sept. 11. Since then, however, management compensation has been frozen while union-represented employees continued to receive pay increases. We have no choice but to reduce our own labor costs in order to compete.

The cost-reduction effort in the U.S. is part of a worldwide restructuring to return the company to financial health. In the U.K., Gate Gourmet remains engaged in negotiations with its labor unions. The company also has been in active and productive discussions with lenders, who have remained supportive as the restructuring process unfolds. In the end, however, the company must have competitive costs to fix the balance sheet.