Supply of in-flight Wi-Fi far exceeds demand
Rapid technology advancements keep driving broadband speeds and availability on planes, but passengers seem less than eager to connect.
But a number of signs contradict that assumption.
According to the Wall Street Journal, analysts estimate that only 10% of fliers hook up for in-flight Internet. On flights operated by the 100% "Internet-equipped" fleet of Virgin America, the average rate of usage is only 16%.
GoGo Inc. the largest in-flight broadband provider in the US, keeps increasing prices and adjusting fee schedules to keep up with its mounting losses. According to its latest filing with the Securities and Exchange Commission, the company lost $9 million on operations in the first half of 2012. Roughly 5% of fliers used GoGo broadband on flights where the service was available.
The situation with onboard wireless broadband is especially dire in global markets, where only a handful of airlines offer expensive in-flight Internet options, primarily on long-haul routes.
European aircraft manufacturer Airbus recently exited from OnAir, one of the largest in-flight connectivity providers. Airbus sold its 33% stake to co-owner SITA, the company providing communication and IT solutions for the air transport industry.
Boeing (BA), the main competitor of Airbus, dropped its similar Connexion project in 2006.
Deutsche Lufthansa (DLAKY), an online broadband pioneer, said its FlyNet in-flight access equipment had been installed on 80 out of 105 aircraft in its long-haul fleet. The figure is less than 20% of the company's total fleet. No surprise: The cost of installation per plane is estimated at about €330,000 (or $435,000) an investment that's reflected in the high prices passed on to customers.
Passengers of Lufthansa flights are charged €10.95 ($14) for one hour and €19.95 ($26) for 24 hours of Web-surfing while above the ground. Delta Air Lines (DAL) offers 24-hour service for just $14, but only on domestic flights.
The difference is no surprise when you look into technology behind each of the services.
GoGo, the provider of in-flight internet to Delta Air Lines and other major US-based carriers, currently relies on the extensive ground cellular tower infrastructure across continental US, so-called air-to-ground (ATG) approach. GoGo equipment for aircraft is relatively inexpensive (around $100,000) and quick to install.
On the other hand, the technology has speed limitations (up to 9.8Mbps) and the connection is obviously unavailable on longer transcontinental flights. That's where satellite links come into play: civil aircraft worldwide now rely on satellites to provide Internet (and sometimes cellphone) connectivity while in the air across the globe. Technology advances in the sector swiftly.
Satellite connectivity providers striving to deliver higher speeds are now adding additional bandwidth on proven L- and Ku-band satellites. They're also deploying brand new Ka-band satellite systems (Inmarsat Global Xpress, ViaSat), with promised speeds up to 50Mbps.
This type of Internet access with a promised bandwidth of 12Mbps or more for each customer will be featured this year on JetBlue (JBLU) and Aer Lingus (AELGF) flights in Europe. GoGo plans to offer a similar satellite-based option in 2015.
Still a majority of carriers provide very limited in-flight connectivity service, if any at all. Air France-KLM plans to start its in-flight broadband trial this March with massive rollout in 2014-2016. Russian airline Aeroflot (AETA) plans to add 26 more airplanes to its current fleet of five Wi-Fi-enabled long-haul aircraft. All Nippon Airways (ALNPY) looks to introduce the service in summer.
Some companies move in the opposite direction. Australia's Quantas (QAN) in December 2012 dumped its in-flight broadband project because of weak demand. Its commercial trial on service to Los-Angeles and London attracted less than 5% of passengers, the company said.
Despite the challenges of humble demand and costly deployment, analysts foresee the bright future for the industry.
"Passengers can increasingly expect to have access to inflight connectivity, be it Wi-Fi or GSM, or in some instances both," says Mary Kirby, editor in chief of the Airline Passenger Experience magazine. "There is room for everybody to play -- ATG, L-band, Ku-band and Ka-band."
However, "It's imperative that carriers manage passengers' expectations when selling in-flight connectivity sessions," adds Kirby.
IMS Research predicts the number of aircraft with in-flight connectivity equipment installed will grow nearly five times in less than a decade: from about 3,194 in 2012 to 15,351 in 2021.
The question is how fast the adoption rate will grow.
On top of that, the fee is high, and a fee should be good for the flight duration.
The author is an idiot. Its over priced, not "passengers not eager to connect". I bet most people using it are business travelers who are reimbursed.
A major problem is the time it takes to get past the pop up or redirect in the browser so as to pay for the connection. That part goes so slow that most people think the connection is dead and give up. It as if the ceonnection is runing like an old dial up modem from the early 1990s, but after they get your money the connection always improves significantly. So patience is part of the secret sauce to successfully using WiFi on an airplane.
I travel at least every other week for work and I was on over 100 flights last year. I connected on almost every single one of them (where GOGO was offered) that were over 60 minutes long. The on flight internet saves me a good 2 hours of emails and other tasks that i would struggle to do without connecting to the web (and sometimes VPN).
I'm thankful that companies like Delta are making GOGO an option on more and more of their flights, so other business travelers like me can make the most out of spending time in the air.
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The solid report comes a month after the retailer closed all of its Canadian operations.
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