In-flight high-speed connectivity and the use of personal mobile phones are two ways that carriers hope to offer enhanced service while also ringing up a profit.
The freedom to use a personal mobile phone at 35,000ft is the dream of many airline passengers. Given that 83% of travellers carry mobiles, according to research by Norway-based satellite communications provider Telenor, there is a contest to be among the first carriers to offer this enhanced service to customers. But is it merely a question of service differentiation, or is there money to be made?
There are two routes to the connectivity goal - high-speed internet access and the use of cellular phones - and the race is on in both cases to sign up the world's carriers. There are four main players: ARINC/Telenor, Connexion by Boeing, OnAir and Verizon Airfone. At present Connexion is out in front as the only one to see aircraft in service with its product on board. It offers high-speed internet access through which passengers can access their corporate virtual private networks, send and receive e-mails and surf the net.
Connexion has been operational on some Lufthansa flights since May; All Nippon Airlines (ANA) introduced it in November; Japan Airlines (JAL) and SAS in December; and Asiana, China Airlines, Korean Air and Singapore Airlines (SIA) have all signed up to introduce it early in 2005. SIA also plans to be the first carrier to provide live international television via a passenger's own laptop from 2005. It will do this via the Connexion service.
Passenger revenues
To access Connexion's internet service, whichever airline they fly with, customers pay a set charge for the duration of the flight, currently $29.95 for flights over 6h, $19.95 for flights lasting 3-6h, $14.95 for flights of less than 3h or $9.95 for half an hour. Payment is by credit card or by pre-payment agreements, but Connexion is to link with mobile phone service provider Vodafone and will carry out trials in which passengers will be able to charge their internet sessions to their Vodafone accounts. If the trials are successful, this will be the first such deal for Connexion.
With only a limited number of aircraft in a carrier's fleet equipped for the service, Stan Deal, Connexion vice-president commercial airlines, admits that advertising and building awareness is a challenge. Print advertising at the gate and on board, rather than more widespread promotion, is being used where provision of the service is the exception rather than the norm. At Tokyo, however, although ANA and JAL are deploying their Connexion-equipped flights on different routes, the concentration of such services at Tokyo aids marketing. Deal says: "From our point of view, having both operators out of Narita makes our marketing task easier, especially with Lufthansa flying into Narita as well. It makes the job of building awareness in Tokyo quite easy."
Verizon is a veteran of in-flight telecommunications.For 20 years travellers flying over Canada, Mexico and the USA have been able to make calls from basic in-seat handsets. Although this is available on 1,100 aircraft, uptake has been slow, with annual revenues totalling only around $15 million a year. The company is now developing broadband connectivity that will offer passengers wi-fi (wireless fidelity) high-speed access to the internet as well as e-mail services. Michael Kuehn, vice-president marketing and sales group at Verizon Airfone, says the system will be available in late 2005 subject to regulatory issues being addressed.
All the competitors in the race to provide broadband services and mobile telephony on board aircraft are having to jump through the same regulatory hurdles to prove the safety of such innovations. The US Federal Communications Commission is addressing the issues of broadband licence applications and whether to loosen the ban on the airborne use of mobile phones.
The ARINC/Telenor system will have a central control panel through which cabin crew can control the availability of the service, possibly reducing it to receiving and sending texts only during the quiet hours. The partners aim to announce launch customers shortly and they will be involved in shaping social policy. "We will probably see the service fully operational by the end of 2005," says Graham Lake, Arinc's European managing director, adding that the initial airlines are likely to gradually phase in the service on specific city pairs.
Airbus, SITA and Tenzing have now christened their joint venture as OnAir (see November page 60). They plan to provide in-seat telephony and short message services as well as e-mail from passenger laptop computers. In the year ahead the venture will be extended to include access to corporate virtual private networks. Mobile telephone access for voice calls and text messaging is expected to become available in 2006. OnAir claims that it will be the only service to offer voice and data cabin connectivity for both long and short haul.
The advantage of the OnAir and ARINC/Telenor products is that, unlike Connexion, they will use antennas already installed on nearly all long-haul aircraft to access satellite communications. However, these antennas would have to be installed on short-haul fleets, which would cost in the region of $250,000 per aircraft.
OnAir going live
The company is expected to be in operation by mid-February, with Airbus contributing its experience of overcoming regulatory and certification issues in aircraft production. At this stage of its development there are few details available about cost structures, but SITA says the system will take just two to three nights to install during routine maintenance and that charges to customers will be similar to international roaming rates, with airlines receiving a proportion of the revenue. The company says that these rates are considerably cheaper than existing on-board telephone systems.
The model will see OnAir effectively become a roaming operator in the sky. An airline will get a single-digit revenue share depending on how it promotes the service, says SITA senior vice-president airline operations George Cooper.
Interest in the new high-speed connectivity is much higher outside the US majors, which is hardly a surprise considering the parlous state of their finances. Connexion's Deal says Boeing is talking to the US carriers about the product and the manufacturer believes that when their financial position improves the system will capture its fair share of the US market.
Operational benefits
All the companies offering these services stress that they will not only benefit the passengers, but airline operations too. Aircraft computer systems will be able to use the bandwidth provided to talk to diagnostic systems on the ground, which will help improve maintenance, while flightcrew will be able to use the voice and SMS voice facilities to communicate with air traffic controllers and ground services.
Providers are reluctant to discuss installation costs, but ARINC's Lake says the partnership can install its system overnight at a maximum cost of $100,000. The Connexion system is more expensive because it requires the installation of an external antenna. This work, coupled with the avionics fit, initially took 20 days to be completed. However, Lufthansa Technik, which is playing a leading role in installing Connexion, is confident that as skill levels increase this can be reduced to seven days. Deal says installing wireless equipment is a lot less expensive and maintenance free than a wired cabin and adds that the company is surprised at the extent to which wireless has developed. "We believe that the fundamental cabin of the future, not just for connectivity, but also entertainment, will be wireless."
Verizon Airfone's Kuehn says that airlines signing up for its broadband system will do so on a revenue-sharing basis, but adds that commission structures will vary according to carrier and market area. Passenger payments will be made by credit card, but existing subscribers to Verizon wireless services, of which there are 41 million, can register to use it at reduced rates and be charged through their usual billing system.
It is during long-haul flights that the ability to keep in touch is really expected to pay dividends. What was once downtime for the business traveller will become useful and profitable because of the ability to exchange e-mail and voice and SMS messages for the duration of the flight. And as ARINC's Lake points out: "As bandwidth increases, services can be added incrementally." Once regulatory and security issues have been addressed, it appears the sky is the limit for in-flight connectivity.
Source: Airline Business
