Thursday, September 29, 2011

. . . in Flight WiFi Revenue

By way of explaining what may on the surface appear to you as a rather odd subject for this blog, I like to mention every now and then that . . .

This Blog --> Speaking Of . . . <-- This Blog

. . . you are reading what is both a blog in the most common sense and purpose of the title (it exists for the purpose of sharing my ideas, thoughts, and observations) and a place of great convenience where I am able to write about the things I stumble upon that either (A) I find interesting enough to want to think upon, mull over, and write about, that (B) nobody wants to pay me to write about or that (C) I choose not to write about for pay because I find it amusing to write about it simply out of the desire to write about it. Confused? Yeah, me too.

In-Flight Wi-Fi Revenues to Surpass $1.5 Billion in 2015, Says In-Stat

A recent article by In-Stat (the market intelligence unit of NPD Group that is often used by stock traders, investors, and those who evaluate events, businesses, and companies with an eye towards investing their own or other people's money... I read its output largely due to the fact that every now and then it examines a subject I am interested in -- say one in every 30 email articles or so being the average) that examines the revenue being earned by airlines and the technology companies who provide in-flight Internet access -- places the income from that small sector at something about to surpass $1.5 Billion with a 'B' dollars.

Initially the market for in-flight 'net access was a small one for a couple of reasons, not the least of which was that getting travelers to spend money on the service initially meant convincing them to alter several habits that are ingrained into travelers because it is how they have been traveling for the past 20 years or more.

Specifically you needed to get them to break their habit of carefully packing their computer bag into the overhead bin and convince them to put it under the seat instead. In addition to that, you also needed to break their habit of not using their computer in flight; but you have the airlines help with that to some degree in that on the newer airline hardware and specifically mostly everything Boeing 737 and above -- there are now power outlets installed into the bulkhead or each seat that conveniently allow users to use their personal computers in-flight...

Another major factor is the increase in truly portable computing devices and our willingness to make use of them as a form of entertainment while traveling -- and now I am specifically talking about the iPad, tablet computers, and basic book and text reading devices like the Kindle which also have basic net surfing capabilities built into them.

As these habits are changed we see profits rising for in-flight 'net access companies -- and the airlines -- and this is food for thought... Both industries undertook extensive research to get a better handle on understanding their customer base, and the results were more than a little bit of a surprise...

Some of the research findings include:
  • Take rates have increased significantly, moving from an average of 4% in 2010 up to 7% in 2011.
  • While in international markets in-flight broadband is just entering the competitive differentiator stage, In-Stat believes it will rapidly transition to a competitive requirement in these markets as it did in the US.
  • Combined, smartphones and tablets are now the predominant devices, in terms of percent of connects.
  • In-flight broadband providers are beginning to introduce new revenue opportunities, including additional passenger services (video and voice) and operational services.
The research pretty much verifies my own assumptions -- and it is always nice to have someone else spend their money verifying my own analysis of a situation.

The tech has caught up with the desire -- users are doing a lot more than simply checking their email or reading and replying to chat boards.... They are splitting their time between work activities and play, which I find fascinating...

The airlines learned that offering the service is no longer an optional thing -- customers expect it to be there and a growing percentage will actually avoid airlines who do not offer it on flights longer than 2 hours. Travelers in the forward classes (first certainly, business increasingly) not only expect the service to be present, they expect it to be free or at least included in the price of their tickets.

Many airlines are combining their Internet access capabilities with the onboard entertainment systems -- Virgin America is a good example of this trend -- not simply spreading the capability throughout the aircraft but making good use of it themselves as the heart of their news and entertainment systems in the send of payment systems more than anything else.

For example, when a passenger orders food through the video touchscreen built into seatback in front of them or installed in the arm of their seat, it used the Internet to accept and process the payment using a credit card that is "swiped" through the same card reader that is used to activate the airphone at each seat. It is not simply food that this system is used for, but movies, TV, and the skymall as well to the point that the cabin crew no longer accepts cash money.

This all bears further contemplation... And perhaps a closer look at Boeing's Connexion and why it failed to take off (yeah, bad pun), what GoGo did right, and why Southwest's satellite-based service had so many issues.... More thought indeed.

1 comment:

emily mainzer said...

In today's technology internet is the major one where we get all information.Usage of internet services increasing day by day.Recently read that airlines are trying to provide in-flight WiFi services to the customers. The charges & packages of these wifi services are reasonable.If this things implemented in all airlines that will be the good news for the customers.