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.
