Technology

In-Flight Wireless Revenue Set to Surge, Report Says


As airlines rapidly expand Wi-Fi service, keeping passengers connected on airplanes could turn into a near $100 million business this year

Checking e-mail on a plane might be about to turn into a big business. Aircell, which now provides Web access on more than 950 planes in the U.S.—up from fewer than 100 just one year ago—has seen its May revenues rise 50 percent over February's sales, Aircell President and Chief Executive Officer Michael Small said on June 30. "We are seeing growth every day," Small says. Revenues from in-flight broadband access are expected to jump from $7 million in 2009 to $95 million this year, according to a June 30 report from consultant In-Stat. In-flight broadband service providers can also make money from fees, advertising, and selling goods and content, such as movies on demand. By yearend, more than 2,000 planes will have onboard Wi-Fi networks, allowing users of iPads, iPhones, and other Wi-Fi-enabled devices to tap into the Web at 30,000 feet. Today, fewer than 10 percent of passengers appear willing to pay for the service, based on results of a 2009 trial conducted by Row 44 Inc., an in-flight broadband provider based in Westlake Village, Calif. Service Fees

The technology's use should increase as fees come down. Aircell, based in Itasca, Ill., currently charges $5 to $13 per use for its Gogo service, depending on the duration of the flight, or $34.95 for a monthly subscription (it recently began offering first-month access for $19.95). But prices for the service should slide 24 percent between now and 2014, partly as competition increases, according to In-Stat. Aircell's Gogo service has been installed by airlines such as American (AMR), Delta (DAL), United (UAUA), Alaska (ALK), and AirTran (AAI). Southwest Airlines (LUV), which launched Row 44's service on its planes in June, offers passengers free access to the SkyMall online retail shop, as well as to a map tracking a flight's progress and to select games, Row 44 Chief Executive Officer Gregg Fialcowitz says. "Over time, in the next five years, it will trend toward a free service," he predicts. Row 44 is in discussions with telecommunications companies interested in sponsoring a free in-flight service, Fialcowitz said, declining to identify any of the companies. The services could also effectively serve passengers targeted advertising. "We have high-demographic customers, we know where they are going," Small says. Both attributes are valuable to advertisers. Revenue Split

Row 44 uses leased satellites to provide in-plane broadband access. Aircell has a network of about 100 ground-based towers that capture traffic from passing planes and pass it to the telecommunications network. Depending on an agreement with the airline, Row 44 either collects fees from passengers directly and shares them with the client airline, or receives a per-passenger fee from the airline, which collects all the passenger fees, Fialcowitz says. Southwest charged $2 to $12 during its Row 44 trial period, depending on flight length, but has not disclosed formal pricing. A Southwest spokeswoman was not immediately available to comment. Both companies are already planning to expand abroad, onto the turf of competitors such as OnAir, whose customers include British Airways and Oman Air. Panasonic Avionics, which provides in-flight broadband for Lufthansa, announced an agreement on June 16 with Virgin Atlantic Airways to enable passengers to make phone calls and send and receive e-mails via mobile devices. In the fall, Row 44 will launch its service on Norwegian Air Shuttle in Europe and on South Africa's Mango Airlines. "Globally, we see this as a billion-dollar opportunity," Fialcowitz says.

Kharif is a reporter for Bloomberg Businessweek in Portland, Ore.

Too Cool for Crisis Management
LIMITED-TIME OFFER SUBSCRIBE NOW

Sponsored Links

Buy a link now!

 
blog comments powered by Disqus