MARY KIRBY / SEATTLE
Airlines show renewed interest in acquiring equipment, but insist it must be a "revenue-generating opportunity"
Cash-strapped airlines are showing renewed interest in adopting new inflight entertainment (IFE) equipment and enhancing air-to-ground communications, but, rather than acquiring them outright, are asking suppliers to share revenues generated from the services.
Despite dramatic losses in the last few years, United Airlines, which is in bankruptcy protection, says it willing to make new investment in IFE, but, where practical, must "turn IFE into a revenue generating opportunity".
Speaking last week at the World Airline Entertainment Association (WAEA) annual conference and exhibition in Seattle, United chief executive Glenn Tilton said that the business "will not always be about financial restructuring. It's still about the customer. We have the opportunity and responsibility to work [with suppliers] to find a way of delivering the customer experience at competitive cost."
Tilton suggests buyers and suppliers form partnerships to enable them to "settle on common standards, harness cost through collective purchasing, and move away from paying vendors for services".
In June, United signed a deal with US airborne telephony provider Verizon Airfone to equip its domestic fleet with Airfone's JetConnect service, featuring two-way e-mail capabilities powered by Tenzing Communications. Tilton says the agreement will be "a win-win for both companies" as both will share in the revenues.
Suppliers agree airlines are moving towards revenue-sharing models as a contingency to acquiring new IFE services.
"That theme cuts all the way across the industry", says Jack Blumenstein, chairman and chief executive of airborne telecommunications provider AirCell. However, AirCell believes the airlines are most concerned that the systems pay for themselves.
Airlines can bring on board inflight services that lend themselves to promotions and advertising revenues, such as inflight e-mail, short messaging services (SMS) and internet access, says Stratos vice-president aeronautical David Warren.
The WAEA, meanwhile, estimates airlines worldwide will increase their expenditure in IFE in 2003 to about $1.5 billion, compared to last year's $1.39 billion. WAEA notes, however, that the 2002 figure represented an 11% fall in expenditure over 2001.
Source: Flight International
