The world of airline catering is not one the average investor will be familiar with.It is, however, the bread and butter for Journey Group (LON:JNY).It has been central to its financial revival, helping create a business that is profitable, cash generative and dividend paying (the latter being a rarity on AIM).And, if chairman Stephen Yapp's plans come to fruition, it will be the basis of a business several times larger than the one we see today.Followers of the company will recognise Journey in its former incarnation, Watermark, which was dragged back from the brink by the chairman and his team.Since then its debts have been wiped out and its balance sheet mended - to the point where it is forecast to have approximately £5mln in cash by the year-end.There have been three major disposals since 2010. Meanwhile, the Watermark business, which supplies inflight products such as the goody bags handed out by Virgin, is considered by analysts to be non-core.At the same time as this corporate surgery was taking place, the seeds of the main business, in-flight catering in the US under the Air Fayre brand, were planted and have since flourished.The airline catering business turns over around £25mln and is responsible for the majority of Journey's profits, which are expected to be £1.9mln pre-tax this year.This is not bad for a business that mainly operates out of only one airport, albeit a big one: Los Angeles.It caters for the 140 flights a day on average it services from the Southern California hub for customers such as United Airlines, JetBlue, FedEx and North American.Its model differs so radically from the way meals are currently made and distributed by the likes of Gate Gourmet and LSG; it promises a revolution in food on the go, if not in terms of taste, then in cost and flexibility.To understand what I mean you have to first know how airline catering is currently conducted; it's not rocket science, but it bears explanation.Thousands of starters, main courses and puds are cooked and packed in large, expensive kitchens on airport property. No surprises there.It means the traditional caterers are expensive and low margin, while the airlines have little say in what's served up to their passengers.These businesses are asset heavy and require a lot of ongoing investment to maintain.Air Fayre has turned the model on its head by using specialist food suppliers and high-end restaurants and hotels, rather than its own kitchens, to cook its food in the down-time between sittings.This means the model is relatively asset light (although it has invested in chilled warehousing and refrigerated trucks). It also means the airlines are able to specify which meals it wants to carry on its next cycle.The carrier is then charged the price of the meal plus a margin on top to cover wastage and breakage.Air Fayre makes its money by levying a handling fee per plane depending on its size and destination.This covers the cost of putting the chilled meals on trays, stacking them on trolleys and transporting them airside in chilled trucks.The process has been patented, which has warded off potential competitors. This protection lasts until 2022.All this takes place around 10 miles away from the airport, which means the premises are cheaper and labour can be non-unionised.Contrast this with Gate Gourmet and LSG, which are based at the airport which is heavily unionised.The acid test that this works is that the business is now scaling up, winning new customers.Where its competitors' might earn single digit return on sales, the Air Fayre model generates a much better return, according to YappThe risk to Journey is the renewal of the United contract, which accounts for the majority of Air Fayre's turnover.However, this is unlikely, Yapp contends as the consistently high quality of the food and the punctuality of deliveries have earned Air Fayre a top award from United.And the opportunity is huge if it can replicate the template it has created at LAX at other hubs across the States. It could find itself with a decent slice of pie worth US$2bn annually, Yapp believes.Journey Group has an enterprise value (market cap less cash) of £11mln, or just 3.4 times 2015 underlying profits (EBITDA). This puts it in bargain basement territory, particularly if Yapp and the team can deliver expansion plans.N+1's forecasts predict EBITDA will rise from £2.8mln this year to £3.2mln and then £3.5mln in 2016. However, this doesn't factor in the impact of large contract wins or a move into a new American airport."The business can become as big as we want it to," says Yapp."We are building up a younger management team that will then go out to these new cities and build it out, but we are doing this slowly."If we do some of the things we have been talking about in 2015, then we can make very big difference very quickly."
