American Airlines has just announced that they sue their supplier Gogo because they claim ViaSat has faster inflight internet. Gogo's shares immediately decreased by 30%.
Certainly inflight connectivity has become big business. According to Euroconsult's newly released report, Prospects for In-Flight Entertainment and Connectivity, total revenues from passenger connectivity services are expected to grow from $700 million in 2015 to nearly $5.4 billion by 2025, a 23% CAGR over the 10-year period.
The number of connected commercial aircraft is expected to grow from 5,300 to 23,100 over the 2015-2025 period, accounting for 62% of the global fleet.
it seems that in the US the race between airlines about best connectivity on board is a serious one. Do customers decide for an airline because they offer (better) wifi? Or will it just become a hygiene factor to judge the image of an airline, whether it is modern and applies to latest standards? Mobile friendly websites and mobile check in have become a goal post in this way. Customers take it for granted and almost get suspicious about an airline if they realise that they do not offer mobile check in or a website working well on all devices.
Louis C.K. jokes about wifi on airplanes. He says, “It’s fast, and I’m watching YouTube clips. It’s amazing—I’m on an airplane! And then it breaks down.… And the guy next to me goes, ‘This is bullshit.’” Many travellers have experienced exactly this.
We had called it the "cold reality" of inflight connectivity for the panel discussion at last week's Hamburg Aviation Conference: In most cases in-flight wifi is not a good experience. You never know whether your plane will offer it as most airlines have equipped only parts of their fleet. In addition, planes can have different equipment installed, And quite often equipment is broken or wifi does not work consistently throughout the flight, or with very low speed.
In this panel we tried to shed light on some of the key questions surrounding connectivity on board, gate to gate and end to end. And to understand what the customer really wants and what it means for the airline. And if the customer is prepared to pay for wifi. In addition, we looked at other opportunities which the connected aircraft can bring, leading to increased operational efficiency (for example position optimisation, weather real time information, crew information etc).
Too often, these questions are looked at with a focus on technological solutions - whilst the latter should just be the means to achieve a target. The above mentioned American Airlines case of wanting to terminate their contract with Gogo as they realise that their competitors offer faster broadband is an interesting case to watch. It seems in the US the race between airlines is not about connectivity yes or no but who offers the best one.
Let's put the customer in the equation. Are they really demanding it or is it being pushed as it represents big business for the supplier. Can airlines really achieve a positive business case from this quite significant investment in the times of decreasing yields?
in-flight entertainment systems are used for various applications, including HD movie browsing and playback, audio tracks, games, food and beverage browsing and on demand ordering, duty-free products browsing and purchasing, moving maps, informational pages, weather and news, advertising, passenger surveys, video announcements, in-flight event announcements, language classes, virtual museum visits, information about the destination etc.
Kenny Jacobs, CMO at Ryanair stated that they think that wifi on board will not be a key decisive factor for a customer to decide for an airline. When booking a trip, for example to Barcelona, the customer is excited about Barcelona, not about the trip itself. The trip is the commodity. Yet Ryanair do test a simple on board network with Airfi, a kind of portable mobile network, to be able to provide movies for entertainment, with a special focus on families - one of the customer segments that had avoided Ryanair in the past.
Some airlines have gone for partnership models in order to finance wifi. Vueling partner with Movistar in order to finance wifi on board. JetBlue have started a partnership with Amazon, focusing on Amazon Prime customers. Norwegian offer wifi for free on all of their shorthaul fleet in Europe and see this as a key differentiator.
For sure, route length and maturity of the airline in terms of customer experience and positioning as well as simple profitability figures are key in terms of the decision if and when to introduce any kind of connectivity on board. If done well, it might help to differentiate and gain some additional revenues and gain savings through increased efficiency. But it is not an easy journey and will in many cases will just add additional problems and another big project. Maybe airlines should cooperate with airports in this area as well to create gate connectivitiy?
Some airports such as Hyderabad have started to introduce fast wifi at boarding gates to allow passengers to download videos within 3 minutes. Will airports take over the customer experience whilst airlines fail? Or will airlines and airports find a way to cooperate for the benefit of the customer? Do they really listen to their customers to know what they want from wifi?
And finally, what about passenger-related 'big data'? For example, by providing cabin crew with relevant passenger insights? Or by turning the inflight portal (be it wireless IFE or inflight connectivity) into a personalised environment? One statement at the hamburg think tank last week was that airlines already own millions of data, but are not able to use them nor to even bring them together. Should this be solved first?
"End-to-end connectivity is all about connecting people not computers", says Jon Norris, Lumexis, VP Sales. If the people - the customer - are the starting point of any considerations, then it will lead the airline to the right decision for their specific environment..
Please contact us if you want to get in touch with the participants of the panel or if you want to discuss with us if inflight and / or gate connectivity could be relevant for you, whether a viable business case can be made and what you need to look out for.
XXL Solutions is a boutique consultancy founded in 2010 by Ursula Silling. It focuses on customer, technology, innovation to improve customer experience, generate revenue and achieve a sustainable profitability and strong market position. It helps airlines, airports, other travel stakeholders, retailers, banks, insurance companies and other industries to develop and implement their commercial strategies, manage change and meet the challenges of the always connected customers. In contrast to other consultancy organisations XXL Solutions develop tailor made solutions for organisations and work with their client’s people as a way of transformation and embracing change.
The boutique event “Hamburg Aviation Conference” has become the leading think tank for future oriented organisations. It brings CEOs and senior management, experts and thought leaders from the aviation and travel industry together with retailers, technology organisations and universities to think future and to discuss holistic strategies to face this dynamic environment. The conference was originally founded by Hamburg Airport in 1999 and has been organised by XXL Solutions since 2014.
@hamburgaviation, #thinkfuture16, www.hamburgaviationconference.com