A recent Wall Street Journal article, in which you were quoted, suggested passengers have been ambivalent about paying for inflight Wi-Fi. Do you think this will change as the technology improves? Or will the service eventually be wrapped into the cost of the plane ticket?
Any time you introduce a transaction into the middle of a product stream, it makes people pause and think, “Am I getting value for my dollar here?” If someone is paying $29.95 a month for connectivity at home, why would they pay half that much for a few hours worth when they’re flying? There are other ways to attract revenue besides per-flight pricing. Individuals can buy long-term memberships or companies can pay a bulk rate fee for employees to use an airline’s system in flight. That takes the dollar transaction out of peoples’ immediate focus.
It’s not that inflight Wi-Fi is dead, it’s that per-flight pricing doesn’t match what happens on the ground, and it won’t last very long in the air.
Is inflight connectivity bound to become ubiquitous? Or will it lead to greater fragmentation of the industry, with different airlines carving out niches as the “business airline” – with free Wi-Fi – or the “entertainment and leisure airline” – with top-notch audio/video-on-demand programming and a great inflight magazine?
Airlines will not be able to remain the only carrier without connectivity as an option, because it will matter soon to the great majority, or at least a substantial minority of their passengers. On a per-passenger basis, the cost of offering Wi-Fi is lower than it is to provide a number of other services. At some point it’s just going to become part of the cost of doing business as an airline.
At the World Airline Entertainment Association connectivity conference in July, you said airlines should be skeptical of what passengers say they want and “observe instead of survey” how passengers act and what services they use.” What did you mean by that?
That came out of some observations I made years ago when I began my career at American Airlines. The inflight products group conducted a number of surveys asking premium business travellers what they were looking for in terms of food service. The answers came back pretty substantially in favour of healthy food, light meals, lots of fruit – stuff that’s good for us. After they made the changes flight attendants reported carrying bags of uneaten granola bars and fruit off the airplane – but there was never an ice cream sundae left over!
The only way to actually understand if you have a valid business model is to start by dipping your toe into the water with a trial. You need to have a realistic assumption of how many passengers use the service at what price point. Bidding to go in fleet-wide on a 50- or 100- or 300-aircraft basis without having sufficient usage data is a perilous thing when you’re talking about a multi-million dollar investment.
What impact will inflight connectivity have on traditional IFE, like custom magazines and audio/video-on-demand systems?
For the majority of airlines it will be complementary. There will be airlines that don’t have in-seat IFE today who will go with connectivity instead because it’s a relatively cheap solution in the long term. But the connectivity discussion has mostly centered around US-based carriers doing domestic flying. You don’t have time to watch a movie on a flight that’s 90 minutes or less but you may be able to get 30 minutes worth of email done if the price is right.
If you’re an international airline such as Singapore or Lufthansa with a substantial amount of 8- or 10-hour plus flights, traditional IFE is a very valuable service. It gives passengers the option of discovering something new, and it is a key part of the airline branding in and of itself.
Are there still opportunities for branded content in a connected airplane?
When you have a connected airplane you will have the ability to bring together all of the onboard media in ways you just couldn’t do with a printed magazine, catalogue or video on an imbedded IFE system. What you’d have is the ability to provide not just awareness of a product or brand, but to provide opportunities for your passengers to go ahead and take action on those messages being provided.
So if you’re a tour operator with a number of unbooked seats or a hotel with empty rooms, you’d be able to know that a plane-full of customers is arriving in your city and you can offer them an exclusive last-minute deal. That’s a game changer for advertisers.
That works well for seatback systems with connectivity. But if people can roam the web freely on their laptops, how do airlines and marketers direct passengers toward their unique portal or partner?
If somebody is using your system for free, part of the terms of service may be to allow for a certain number of targeted ads to come across the system. Or people may opt in to receive targeted emails over the course of their trip. Nobody’s really talked about linking this in the largest sense to services like Google AdWords that work on the ground. Airlines can work with connectivity providers to provide a very similar keyword-based application. If you know what passengers are browsing for you can determine what those people want and deliver to them something that is unique versus what they can get by simply surfing the Internet on their own.
Will passengers accept a limited browsing experience, or will net neutrality advocates resent being confined to a walled garden?
That is what some connectivity carriers are presenting as an option. Browse for free in the little area that we give you or you can have access to the entire World Wide Web unfettered for a fee. That’s how some applications from Apple’s app store works – you can download a free version or pay to never see an ad again. The same model can work for the airlines.
What else should people know about the future of inflight connectivity?
I think that from the airline side, the real key to profitability is integrating the connectivity they are offering customers with the airline’s ground operations. You want to be able to use this bandwidth to update passengers on the status of their connecting flights, to accommodate passengers with delayed flights, or to provide information to your international partners. This would allow airlines to avoid the peaks and valleys associated with a number of arrivals or departures hitting an airport at the same time. There are all kinds of operational efficiencies on both the maintenance and day-to-day dispatch side that can benefit from connectivity.
That’s where connectivity becomes more than a service you provide to passengers, but a meaningful long-term business investment.