Ryanair chief Michael O'Leary is looking to the longer term for its newly-launched on-board mobile phone service to deliver significant ancillary revenue benefits.
The Irish carrier has just formally launched the OnAir service on 20 aircraft and plans to roll it out across its full fleet over the next two years.
"We are looking at it as an attractive feature and a growing source of revenue to Ryanair," said O'Leary at a press conference in Dublin announcing the formal launch.
Revenues generated from calls and messages on board are split between OnAir, the relevent mobile operator and Ryanair. O'Leary would not disclose the split and says the carrier is not expecting too much in revenues during the initial roll-out of the service as passengers had to become used to being able use their phones.
"We have put no figure on it in our future projections, partly because it is a six-month trial, and I think for the next year or two it will quite small," he says. But it will mature and open the path to other possible services via the phone link, he says: "Then I think it wil become a large revenue source.
"Over time this will be our way into in-flight entertainment and in-flight gambling. I think that will be where the big revenues will be, but it's probably three, four years away."
"Our focus today is on the phones and messaging, then we'll see what other services we could offer subsequently."
While O’Leary says the carrier is being careful not to over-promise and stresses the service is currently only available on a small number of its fleet so far, the service is heavily promoted on those aircraft it is equipped on. Overhead cabin bins throughout the aircraft feature adverts for the service, cabin announcements are made announcing when the service is available, and overhead red/green lights in the aisle display whether calls can be made.
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The OnAir system enables six simultaneous voice calls to be made in-flight – this capability will be increased to 12 by year end – alongside text and e-mails services operating over Inmarsat’s SwiftBroadband network. Call rates are set by the individual mobile operators and are in line with international roaming rates, rather than intra-EU call rates, at typically €2-3 per minute for voice calls.
“There are very substantial costs [to set up the overall service], so it is reflected in the initial charges being somewhat high. I’m sure we will have some bleating about the price,” says O’Leary. “[But] it’s your choice if you want to use it. I don’t think people will use it for rubbish calls. As it grows, the cost and charges will inevitably fall.”
Pointing to the cost of outfitting each aircraft he adds: "This isn't cheap. Clearly its not going to be profitable for the short to medium term. But in the long term it could be very substantial for both Ryanair and OnAir. This is potentially an enormous business."
Back in 2005 Ryanair carried out a short-lived trial of handheld in-flight entertainment players, but O'Leary is far more confident of this initiative. "I would be much more optimistic that this will be more succesful than the IFE system," says O'Leary. "We were just overtaken by technology," he says of the portable IFE experience. "Why this is different is we are adapting the technology to what people are going to be doing."
Source: Airline Business
