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China – the new frontier

Most of you reading this will be aware by now of the China IFEC Summit taking place in Shanghai. This unique event has been organised by GIS Events, a company based in Shanghai that has excellent links into the Chinese aviation industry and is actually supported by the Chinese aviation authority.

I know first hand how tirelessly this company has worked to raise awareness of inflight entertainment and communications (IFEC) issues in China through this annual event.

Gethin’s China IFEC Review is being distributed at the Summit this week. For those of you keen to know more about China it will give an overview of this market and show that China beckons as a very real and dynamic marketplace.

This new edition, Gethin’s China IFEC Review is now available for download for a limited period on the GIS Events website at www.gisevents.com/2010/ifec/

This particular edition takes account of a new audience. Gethin’s China IFEC Review is targetted at China aviation and is in both Chinese Mandarin and English.

China really is the new frontier, with all the exhilarating challenges that represents. I have been privileged to learn of the laborious and often unpublicised efforts that some IFEC companies have made in setting up shop in China. There are no short cuts to making gains in the region.

In a way China is an acid test for the IFEC market. There are regulatory issues to deal with as well as the commercial ones, not to mention cultural and language challenges as in any region.

China’s IFEC market is still in its infancy but is rapidly building up pace. Thales and Panasonic already have strong footholds there. Thales is big in the burgeoning widebody market. Rockwell Collins has a strong share of the narrowbody market. Panasonic systems are also being installed and the company is boosting resources in China. Already, from contacting many IFEC companies about China, I can tell that some of them are not yet ready to enter such a large and new terrain. But I suggest it is the overwhelming stature and character of a new untapped market that makes it all the more tempting. It tests the calibre, patience and internal politics of a technology or service provider.

China means you have to learn new rules, new ways to do business.

No-one knows what fruits this new frontier will bring to bear. It’s worth bearing in mind that old paradigm – risk versus reward.

For further enquires related to Gethin’s China IFEC Review email: publishing@gethinsinflight.com

fruitful, diverse revenue solutions

I’ve been going over my notes and source material from the Expo a week or so ago and noticed how powerful the inflight entertainment and connectivity movement is becoming for airlines.

It’s no longer about an airline being able to afford an expensive proprietary system. It’s now about hardware vendors bringing fruitful diverse revenue solutions to airlines. For example, I noticed talking to Bluebox how the company is coming up with finance solutions for airlines, from capital loans via investment banks, through to flexible leasing/rental solutions. In some cases recycling the equipment itself – a good idea both from an environmental and economic perspective.

Then I talked to Row44 and was impressed by how much this company has done its homework in retail and ancillary revenues for its airline customers. Initially I had felt that Row44 was based on a small corps of innovative engineers, but talking to the company at the Expo, another more commercial strategy came across, with flexible commercial models for airlines to use. So that airlines are not forced into a standard end user fee. They can choose from more than one business model. And then there is Row44′s walled garden of a portal which also creates ancillary revenues for airlines. There is too much detail involved to go into here. I just want to give you a general impression of the direction that the IFEC industry is heading.

Then there is Airline Services in the UK, building out new hardware for airlines who have obsolete or low performance equipment on board, reluctant possibly to upgrade to a state of the art embedded system. ASL is using its expertise in maintenance of all types of aircraft equipment to offer ruggedised IFE hardware that can be quickly installed and easy to maintain.

Then there is Lumexis, and having spoken to the CEO of their new customer, Flydubai, I can tell you the reason he chose Lumexis was primarily to keep costs down (because, apparently, the system is featherlight) and yet maintain potential for ancillary revenues.

It seems to me that our sector will be responsible for generating new revenue for airlines. It seems to me, that inflight entertainment and connectivity in particular, are going to help airlines get creative about improving profitability. Don’t let’s get sidetracked by the ‘passenger experience’ and generic labels like that. I even personally believe that the more holistic approach towards cabins and interiors is the wrong focus for our market. It is distracting, and we can’t afford to get distracted in these tough economic times. IFEC vendors have got to keep their eye on the ball, not start worrying about how they are perceived in other sectors and the wider family relationship of aviation. It’s time for the hard maths, which is what vendors and airlines are dealing with day to day.

We need to keep this new arithmetical and technological direction on track, and remember, it is those working hard in the IFEC garden shed, tinkering with the technology, playing with new applications, pulling retail brands into the mix, pushing the frontiers of financing solutions, who are driving and will continue to drive, new revenues and new products forward.

ash cloud reigns at Expo

Two themes dominate the start of the IFEC market at Aircraft Interiors Expo Hamburg, taking place since yesterday till tomorrow.

Ash cloud and APEX. Mean anything to you?

The ash cloud was clearly casting a pall over the first day of the show. That was the first topic of conversation, meeting and greeting business colleagues and visitors alike. How did you get here? Was your flight delayed? being the typical openers. I heard first hand the ordeals that many people underwent to get here. It’s a tribute to the stamina and invention of our industry I reckon, which relies on the individual to support the collective effort. Still, as a journalist, it was a little frustrating, because the journey experience was often a distraction from extracting real news.

And talking of the passenger experience, how apt that WAEA should change its name to APEX (Airline Passenger Experience Association) at this very pivotal moment in ash cloud misery. That was the second topic that started up when anyone started a conversation here yesterday.

It has got people foxed. I don’t know whether that was the intention, but people look blank when they try to figure out the hidden significance of the name. It’s worth pointing out that the majority of WAEA members voted the name in, but from what I hear, it wasn’t their idea in the first place. In other words, the lobby for a name change was not a grass roots campaign. So what you might ask? Well, if it wasn’t a grass roots cause then what is its future, or rather what impact will it create?

The hope from its electorate is that it will do the trick to seal the future of the former WAEA to embrace a wider context. However, this wider ground is already claimed by this show the Expo, which embraces cabin interiors, catering and other amenities and installation. Or perhaps APEX is hoping to widen its membership from these sectors – this is not clear.

What I have picked up through the grapevine, is that the name reflects a decision to drop the word ‘entertainment’ from the association title/brand. I find this rather sad. Discarding a key word that summed up the very genesis and driver behind the IFE industry in the first place.

If anyone is in any doubt, the E in IFEC as in Gethin’s IFEC Review, stands for ‘entertainment’, and long may it remain so. I have no problem with the word ‘entertainment’ as in inflight entertainment, and I may be wrong but I doubt if any airline entertainment manager, system vendor, service provider, or other company in our great space, has a problem with it either.

Maybe we should use the word more, to give it rightful precedence! and don’t forget that it is a great differentiator in an industry that is becoming increasingly amorphous.

In terms of hard news, there are some contracts being announced both on the entertainment and connectivity front. OnAir announced Libyan Airlines, and Lumexis announced FlyDubai, a low cost carrier contract.

Elsewhere, activity continues with ingredient companies such as Astronics, EMS, and enhancements to Rockwell Collins IFE products. Later we will hear the outcome of the Crystal Cabin Awards, although Panasonic has already announced an award for its integrated smart monitor.

Thales is also offering a fully integrated seat solution. This marks the start of renewed collaboration between IFEC vendors and seat vendors. Sicma announced such a product at last year’s show which was ordered for Royal Jordanian. So possibly the integrated IFE seat product, could attract new airline customers.

On the handheld IFE front, there is a good showing from the main vendors. The BlueBox stand with its new ipad device is currently mobbed out, and over at digECor, the company is showing off its latest devices which are offered in China through its partnership with LeFeel.

Today, the second day of the show, it is starting to feel more like business as usual. Although everyone here is fretting about how/if they will get home ok, and wondering where the ash cloud will hit next. No-one at the show, it seems, is exempt from its caprices.

green shoots at last!

I apologise to all my blog visitors for being ‘away from my blog’ the last month. In fact I have been setting up a new domain and a new one stop shop website. I was hoping to have it all up and running in time for the mega Expo in Hamburg next week – but technology has its glitches as we all know. So what I am going to do is blog from here for a bit longer (seeing as this site is so popular!) and then I will get you all to come over to my new domain after the show for a virtual ‘after-party’ so to speak.

Some other news from the Gethin’s IFEC blog is that my newsletter Gethin’s IFEC Review, is teaming with the China IFEC summit organisers, GIS events, and we, together, are going to produce an amazing China edition for the China summit in Shanghai in June. It’s going to be posted on the official China IFEC Summit website as well as being hand distributed to all delegates. You can contact me at publishing@gethinsinflight.com if you want more information about this, or Jeni Walters who is in charge of marketing at GIS Events. Her email is jeni.walters@gisevents.com. Jeni is an enthusiastic advocate of all things IFEC and the more people who get involved with this event, the better. Their url is http://www.gisevents.com/2010/IFEC/

Ok, that’s enough marketing spiel. In fact the focus is a bit closer to home at this time with Aircraft Interiors Expo Hamburg looming. Today we definitely have a market more IFEC than IFE, which was not the case a few years ago. You are going to see the biggest developments dependent on inflight connectivity from now on. Forget about entertainment as just being an onboard standalone system that winks at you in the dark (on a night flight!) from time to time. This will be a sleeping fully connected beast. The new technologies have to have an open architecture to leverage the broadband pipe.

I can’t tell you how this is the most exciting of times in our market. When I first got involved in IFE journalism back in the day (sigh), let’s face it, there was a slower pace. There was always a buzz in the market, because after all it is about entertainment which is the more glamorous end of aviation, but it was a closed shop in many respects. But now, with the advent of connectivity, our whole landscape is changing. For example, innovator startups like Lumexis really do stand more of a chance today than they would have ten years ago. I can’t count the number of corporate casualties who just did not have the muscle or power to break into the market in the past. But Lumexis is announcing its first commercial airline contract at next week’s show, and this is encouraging news for all talented companies entering the market. I know Lumexis is not a connectivity provider, but the openness that connectivity brings is opening up fresh opportunities across the IFEC industry as a whole, in my view. Bluebox Avionics from the UK is also announcing the first iPAD entertainment device called Bluebox Ai! How cool is that! Again, another smaller niche company (though not a startup because it is long established). Rick Stuart at Bluebox definitely has his finger on the pulse. He always seems to know what’s going on in the market, good and bad. He’s always got a fresh take on IFEC developments.

So, the new shoots of spring are with us, and Hamburg beckons. I’ll bring you a bit more news later as we move into next week and before the rush hour at the Expo really begins.

celebrating a year of successful blogging on the IFEC market

I thoroughly enjoy writing this blog – in fact it’s the one-year anniversary coming up. I started it just prior to the Aircraft Interiors Show last year. I just want to say …

Thanks to everyone for their fantastic support over the last year! I have received so many messages of encouragement via email. It seems the posts I have written here touch on subjects that matter to many people in the inflight entertainment and connectivity (IFEC) market.

Remember you can always visit my domain of www.gethinsinflight.com where you will find more information about my newsletter Gethin’s IFEC Review (formerly Gethin’s Inflight News), and you can also email me from there.

And thanks to all those people who have boosted traffic to this blogsite especially the ones who make the effort to create links and post comments.

Here’s to another great year of Gethin’s IFEC blogs…

a twist to the tale

In my last post I said the connectivity race was hotting up. It is even hotter now as news reaches me that Alaska Air has plumped for Aircell and not Row44 for a fleetwide installation.

The dealbreaker it seems was cost and speed of installation. At least, that’s what the airline has just told me. Their passengers want wi-fi, and, like NOW.

I am wondering where this will leave Row44? Row44 says it is disappointed not to win Alaska. However it still has Southwest as a major launch customer.

Certainly ku band has a role to play internationally, but the US domestic market is now largely sewn up by Aircell. Success breeds success, and with over 700 aircraft and counting, the gogo service looks set to run and run.

Of course the weak link in the chain is international and across water – for Aircell, that is. The way things have developed, America is looking increasingly like some giant island – with its ban on voice calls and the limits to international service from the one service provider leading the market. Aircell has always said though it will address international – but when? Today it tells me the Gogo service will come to Mexico and Canada ‘in the near future’.

It will be interesting to see how US airlines with international route networks respond as the international connectivity market beckons.

The other prospect is Thales Avionics Inflight Systems – which is responding to connectivity questions next week. In other words, the company is not abandoning inflight connectivity after all. I will update my blogwatchers at the end of next week, when hopefully all will become clear. Or clearer at least. I have been invited to their ‘connectivity suite’ in the UK. Sounds interesting.

Crunching connectivity numbers

The global inflight connectivity race is heating up. It looks as if inside the US it will be a two horse race with Aircell pretty much in the lead and Row44 following on its heels.

Outside the US we are now talking a three horse race – OnAir, AeroMobile, and, more recently, Panasonic Avionics Corporation, with its latest announcement of Turkish Airlines to add to the biggie of Lufthansa. In fact the company affirms five signed contracts, including the two it has announced so far.

I say ‘recently’ mainly because Panasonic entered the race rather late in terms of announcing its launch customer. Lufthansa will be the biggest international installation of its kind ever. Panasonic doesn’t do things by halves. But it is important not to place bets on any particular horse in this global connectivity debate. Will Aircell announce an international partner (and I mean a partner not an airline) to extend its domestic US reach to offshore destinations?

The vaunted T Mobile consortium venture has not got off the ground. This was a story that staggered on for years and years for one of the protagonists Miltope. A definite early winner in OEM supplies in connectivity, via a supplier contract to Connexion, Miltope was keen to get back in the race. But the alliance with T Mobile has not borne fruit, especially after it failed to win the Lufthansa deal. The irony is that Miltope’s equipment is still in place on the Lufthansa fleet which as I write is under installation with the new Panasonic Ku band kit. Also, Miltope is working in supplying a component called nMAP to Panasonic for future contracts.

Thales has gone incredibly quiet on the connectivity front. What happened to the big fanfare of a connectivity launch at the Aircraft Interiors Expo of 2008? Answers please.

Today I heard from a research company called IMS Research – no relation to IMS Inflight. The former has announced that there are 1400 commercial aircraft with airborne connectivity in circulation. I am not sure how they crunched the numbers but taking the Aircell installations into account, this figure could be feasible. Anyway, add another 0 and you have the numbers for 2015, at least in IMS Research’s book, which forecasts 14,000 commercial aircraft with connectivity. The book, or rather report, was researched over six months in the second half of last year, and was released in January.

The consultancy speculates that ‘this may become a lucrative revenue stream for the many airlines struggling to make a profit.’ I may be wrong here, but according to my rather different kind of research no-one is currently making a profit – neither service provider nor airline. Service providers stand to make a profit earlier than the airlines – I know that’s not what airlines want to hear – but in the long run it may be possible for airlines to break even and possibly generate a profit.

In a statement the company adds, ‘A $5 charge for connectivity for a short flight of up to 1.5 hours equates to significant revenues with today’s passenger numbers.’ Again, I have to argue that this is a vague estimate – and if I were an airline I wouldn’t bank on passengers being prepared to pay that sort of money for online access in five years’ time. Let’s face it, even now, passengers are balking at inflight internet costs. One airline exec recently told me that he thought that shorthaul was really only good for voice and SMS (GPRS type services), and that longhaul was the right vehicle for internet/full broadband. So if that is the case, then one and a half hours’ flying time is not the ideal paradigm for measuring a ROI on internet access.

IMS Research bases some of its findings on the number of wi-fi connectivity devices being sold, 300 million projected for this year and a billion units by 2015. I should add here that IMS Research is no lightweight when it comes to analysing the uptake in consumer devices. And the study author assures me that his work is based on ‘solid research’ with hard data to back it up.

Notwithstanding, whether it’s a billion units, more or less, the jury is still out as to the remuneration provided by internet access. It works well in the US for Aircell because the operating costs are lower and less capital investment is needed than other satellite technologies. Having said that, the costs cannot be that low because Aircell recently got a shot in the arm worth $176M. I don’t have access to corporate confidential numbers but ground based satellite networks are widely acknowledged as being a lot cheaper to run than the costly alternative of orbital satellite networks in the rest of the world.

Everyone wants to know what the future holds for the inflight connectivity market. Who will be in, who will be out, who will benefit. I know it’s a cliche, but it is still far too early to tell. Connexion used to come up with all sorts of corroborative impressive data … but look what happened to it. In terms of internet access, the IFEC industry is still finding out whether the consumer market is prepared to pay in the air for what it can often get for free on the ground. More airports are offering wi-fi access for free on the ground whereas several years ago passengers had to pay for it. This will only hurt the case for pay as you go internet access in the air in the long term.

It might be more useful to research why airlines want to offer connectivity. The reasons, surprisingly enough, often come down to brand differentiation, brand enhancement and identity, the passenger demographic (some countries are more prolific in their use of wi-fi devices than others, or more apt to use SMS than others) and creating a seamless mobile communications service to passengers from the moment they leave their home or office, to arrival at their destination. It is the range of exciting applications, not just to make ancillary revenue, but to provide useful metric data on passengers’ preferences, that requires further analysis.

Airlines, especially those with large fleets are drawn to the inarguable benefits of crew, maintenance and operational benefits. Already some airlines are enabling pilots to use pre-flight planning applications on laptops. Although this does not rely on inflight connectivity, it belies an increasing trend towards wi-fi dependence in the aeronautical field. It is more onerous financially for an airline to fit the flight deck with some applications than to upload the same applications on a wifi device such as a laptop. This enables pilots to make the same calculations and more economically from an airline capital investment perspective.

Additionally, when more aircraft are equipped for connectivity, passengers will be faced with more control and more options in how they manage their journey, just as they are starting to do now with online bookings and payments. The inflight segment is becoming the final piece in the mobile communications jigsaw.

show me the money

Yes I know that slogan is well-worn by now – but seriously – where is the money in IFE?

You would think that inflight entertainment – being a high energy, extremely creative sector (the only aviation sector which actively brings Hollywood into the flying game) – would have money to burn. Given all the branding and advertising potential it offers up… especially in the digital media. Inflight entertainment, by definition, should boast the thrills and spills of creative content and lashings of corporate sponsorship and money, surely? Prior to 9/11, that certainly was the case. I remember the frills at least – on the banqueting chairs at the WAEA gala night for example. And to date, the biggest IFE vendor Panasonic maintains a swish suite at the annual WAEA conference & exhibition. But sadly the frills in our market are diminishing.

Why? There is no longer a cache of money to be sloshed around in IFE or even the newer sector of inflight connectivity. If you cast your eye over most of the suppliers and service providers they are making their money elsewhere. That is not to say they are not making money in IFEC (inflight entertainment and communications), but the big IFE veteran companies, especially in aircraft technology, rely on a wider portfolio. Thales and Rockwell Collins are major purveyors of defence, aerospace and avionics hardware and software. Even in the handheld IFE sector the major players have a diverse portfolio, in which IFE plays a supporting role. digEcor is bred from Wencor, the PMA parts provider, and IMS has a widening portfolio of its own. E.Digital is a specialist in software applications beyond IFE.

OnAir is part of Airbus – a brand name which speaks for itself. AeroMobile is part of Telenor. The list goes on.

This begs the question – is IFE a profit center in its own right? Or does it need to be cross-subsidised by other profit centers within a single corporate entity?

Certainly the success of Panasonic Avionics suggests that at its maximum commercial strength, the market is more than sustainable. Although Panasonic is a consumer brand name in its own right, Panasonic Avionics is one of the few if not only companies, that is an autonomous IFEC vendor with a dominant share of the IFE market.

But this is not always the case for every company boasting a powerful parental brand name. Connexion had the might of Boeing behind it, but it still folded. Sony Trans Com was sold on. There are companies before my time in this market who suffered a similar fate. Some of you will know who they are – you might have even worked for them.

What I do observe is that standalone IFE companies find themselves isolated commercially and more vulnerable to the cyclical nature of the aerospace and aviation sector. There was a company called Delta Beta that used to do the rounds at the major shows. It had great ideas and its products often had the ‘wow! factor’ but it never seemed to get off the ground. Independent companies like these, however novel their ideas might be, are sometimes destined for consolidation or … ominously, collapse. They require large sporadic injections of venture capital to cope with the onerous gestation cycles bringing product to market. We all know that this process, from inception to production and certification can take years, up to a decade even.

That is a long winter for some companies with no parental capital to draw from. And if and when these niche IFE companies stumble, the remains and assets are picked over, and the talent sometimes moves horizontally to a former rival vendor.

History points to the need for a diverse proven portfolio as a cushion to the vagaries of the inflight entertainment and connectivity market.

In this market, you have to show up, keep your visibility high and keep talking to keep selling. It is no good to talk the talk though. You have to walk the walk.

There have been pioneering individuals – both at airlines and vendors – who actually were responsible for some of the lasting innovations in our market. I could be talking to them for years, and then out of the blue get an email to say they have moved on, leaving our industry, or turning to consultancy. They are like shadows disappearing into the night. Occasionally, one or two such pioneering individuals re-emerges as a major protagonist with a rival vendor or airline.

Recession or no recession, the fact is, that IFEC is a brutal market. It takes no prisoners. You need a lot of energy, a smart contact list, access to capital and resilience to be ahead of the game. So why do we stay in it? Because it is tough. Survival of the fittest. If you can make it in IFE, you can make it anywhere.

The low hanging fruit of 2010

For those of you like me waking up to an icy New Year landscape, this is a time of little activity on the IFE front. The generic aviation news feeds are ticking over and new technology seems to be in hibernation till the spring.

Of course it is a new decade, although it doesn’t feel like it. We have seen a steady ascendant in connectivity over the last year or two but really it is the first ten years of the millennium that saw the birth of broadband inflight connectivity for the masses. IFE is now inextricably woven with both satellite and ground network wireless communications. Yet when I entered this market in 1999 it was but a whisper, if that. On demand entertainment was beginning to enter its ascendancy but now AVOD is regarded as commonplace on major airlines.

I am wondering what the new decade will bring. This is clearly a dangerous game to play because in terms of new advances, nothing in IFE can ever be taken for granted. There are too many corporate casualties littering the roadside over the years to testify to that.

But here’s what I’m thinking: wireless and automation. Wireless is a given, now that we have the main contenders like Aircell, LiveTV, Row44, OnAir, AeroMobile and Panasonic in front. But automation… how would that come about and what role would it play in IFE? Well, the military sector is rapidly deploying robotic devices in various known regional conflicts. Advances in unmanned aerial vehicles willl largely become ubiquitous, and it is likely that advances in this sector will translate into advances in the civilian commercial one. It is possible that robotics and automation will start to migrate into consumer electronics and raise questions regarding development of IFE. If you marry wireless and automation then we are talking remote control. With remote control the need for bulky hardware in the cabin may decline. Remote control may of course never enter IFE, given the security hazards it poses. But if these could be effectively overcome, then automation and remote control removes the element of distance and matter.

The ‘cloud’ that is entering cyberspace terminology is likely to play a larger role in IFE. As wireless internet becomes ubiquitous in the cabin, and more and more of us are happy to store data not only on social networking sites, but in other virtual spaces, such as online photo sharing websites, or other such data banks or clouds, then the storing of content on large onboard servers may reduce over time.

Assessing the low hanging fruit is always a risky endeavour. In 1999 it seemed to me that IFE was a world apart from other industries, based as it was on entirely proprietary technologies. The internet has changed much of that, but not all. My suggestion is that simplicity and originality should continue to light the path of new technology and content. It would be good to see a continuance of open systems and processes and a stronger climate of sharing the benefits with partners.

The recent ideas and announcements of revenue sharing via brands, promotions and internet portals is a good start in this area, but there is certainly scope for more original ideas and marketing in the area of content. The rewards will likely be greater support and involvement from airline customers. Airlines would be wise to press the industry for stronger partnership and collaboration in this sector. After all, it is the airlines who know their customers best of all, and who should have the keenest instincts and senses for passenger preferences. Such collaboration is likely to produce the most innovative and profitable commercial ventures in content across broadband, wireless devices and handheld and inseat IFE. Some airlines are already proving the point, and they are the ones who tend to stand up on the podium at IFE events enlightening others. Let’s see more of this in this decade.