May 13, 2007

Inflight Wireless Internet On The Way

Communications providers and airlines are preparing to offer wireless inflight Internet and other onboard connectivity services within the next year. Learning lessons from last year's disbanding of Connexion by Boeing, providers are developing solutions that they say are cheaper, lighter and easier to install, while airlines note inflight Internet remains an amenity they are clamoring to provide.

Southwest CEO Gary Kelly, during the carrier's first-quarter earnings call last month, said it would solicit requests for proposals to offer inflight wireless Internet access. Kelly said Southwest is seeking to outfit a prototype with such service within the next nine months. A Southwest spokesperson would not say which companies the carrier would solicit in its requests. Kelly noted the move is part of a larger Southwest strategy to seek new sources of passenger revenue.

Southwest is exploring new add-ons and revenue streams that don't "create hard feelings from our customers," vice president of marketing, sales and distribution Kevin Krone recently told Business Travel News. Krone said Southwest would avoid following other airlines in monetizing offerings that currently are free.

"What else can we add of value that customers would be willing to pay for?" Krone said. "What we don't want to do is convince ourselves that Coke actually is an add-on."

Southwest isn't alone in planning to deliver inflight Internet. "I'd be surprised if anybody wasn't looking," an American Airlines spokesperson said. "Wireless access onboard is the primary thing customers want in the way of a new amenity. We just haven't found a solution that makes economic and logistical sense."

In a posting last week to his "flight log" on, CEO David Neeleman said the carrier is "gearing up" a plan to offer "silent options" for passengers to remain connected in flight. JetBlue said it would take advantage of the one megahertz of spectrum its subsidiary LiveTV purchased in a U.S. Federal Communications Commission auction last year to enable customers to send text messages from such handheld devices as cell phones or BlackBerrys. "The challenge is to offer something most customers want and will use, and to do it without adding unbearable implementation and maintenance costs to our bottom line," Neeleman noted.

Unlike Southwest's plan to increase revenue through such services, "We prefer to make any option free to our customers—we learned a lot from the Connexion by Boeing experience," Neeleman said. "The Connexion product offered broadband access for a fee, and the number of people who used it was very limited. Not enough people were willing to pay for the service. An expensive product needs a lot of customers, and it just didn't work out."

Meanwhile, vendors are seeking to overcome economic and logistical concerns that ultimately undid Connexion, and several are working on bringing their wares to market. The World Airline Entertainment Association identified several companies that are offering or developing inflight connectivity services. They include OnAir, AeroMobile, AirCell, AirTV, ARINC, ASiQ, Delta Beta In-Flight, LiveTV, Panasonic Avionics, Starling Advanced Communications and Thales Avionics.

U.K.-based airline industry consultancy IMDC said airlines are to up spending on inflight entertainment from $1.86 billion in 2006 to $2.44 billion in 2011—driven largely by spending for inflight connectivity offerings.

AirCell president and CEO Jack Blumenstein said the company is less than a year away from coming to market with an offering. The company last year gained an air-to-ground broadband license, purchasing 3 mhz of spectrum in the same FCC auction through which LiveTV purchased its 1 mhz.

AirCell this summer is setting up its ground-to-sky network throughout the United States and plans to install it in planes for further testing by October—first with private jets and then with commercial airlines, Blumenstein said.

"For airlines, the cost and weight of the Boeing Connexion equipment and cost of delivering service to the passenger made it difficult," Blumenstein said.

The company said it looked closely at the Connexion business when it engineered its offering. AirCell said it has developed lighter-weight equipment at lower price points with quicker installation times for airlines.

"It's a very powerful attraction on the airline side," Blumenstein said. "We'll have a series of key airports, depending on the airlines we're working with, where we have teams geared up to do an overnight Wi-Fi installation. For some of the larger widebodies, it could be a two-night process. In any event, it's something that doesn't interrupt the scheduled use of that aircraft."

Blumenstein said the company still is sorting out pricing , but likely would have subscription services available at around $10 per flight segment, while offering negotiated pricing for corporate clients buying in bulk.

AirCell said it would launch in North America, but later would explore bringing the service to other regions. "This North American footprint represents about 60 percent of global passenger miles," Blumenstein said. "If we do a good job there, we've got a hell of a business."

Although several domestic carriers said they are on board for at least exploring such services, international airlines were quick to embrace inflight Internet. In 2004, Lufthansa Airlines became the first carrier to launch Boeing's Connexion service. Other international airlines joined the fold, including All Nippon Airways, Asiana Airlines, China Airlines, El Al Israel Airlines, Etihad Airways, Japan Airlines, Korean Air, SAS and Singapore Airlines. However due to a lack of demand, Boeing at the end of 2006 officially disbanded the service.

When discontinuing Connexion by Boeing, chairman, president and CEO Jim McNerney said, "Regrettably, the market for this service has not materialized as had been expected."

As a proponent of inflight Internet, Lufthansa is expecting once again to bring Wi-Fi back to its airborne customers. "We are actually toward the end of an RFP process for new providers and hope to have the service back online at the start of next year," a Lufthansa spokesperson said.

Others, however, aren't so quick to once again ante up for the service. Korean Airlines American regional headquarters director of passenger marketing and sales John Jackson III said the carrier is looking at "a couple of options," but noted, "I don't think that anything would happen this year." Echoing the sentiment of Boeing officials, he said, "Demand just wasn't what we expected."

A Delta spokesperson said the carrier's inflight entertainment offering by Panasonic has connectivity capabilities built into the platform, "where we could build it into our existing technology if we see the market for it."

"We've looked at it," said Delta executive vice president and chief of customer service Lee Macenczak. "I don't think the demand quite matches what we need it to be right now to make it work. Over time, you'll absolutely see it. It's interesting, sometimes you'll talk to customers who say the airplane is the one place they can shut down, where they don't need to work, where it's a sanctuary, but other people really want that capability."

A WAEA spokesperson said carriers abroad have shifted some focus toward enabling inflight cell phones and handheld mobile devices, versus Internet access.

Several, including Air France, BMI, Emirates, Qantas, Ryanair and TAP Portugal, are in various phases of exploring or rolling out capabilities that support mobile devices onboard, partnering with companies like AeroMobile, OnAir and Panasonic Avionics Corp.

Emirates said nearly 30 countries have approved operating cell phones over their airspace.

However, it appears unlikely the United States will. FCC in March nixed inflight cell phone use (BTNonline, March 23), leaving inflight Internet—or other silent options—the next frontier of inflight services.

By Jay Boehmer

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