Forget champagne, fully flat beds and onboard showers. For airlines’ business travelers, the must-have facility these days is WiFi.
In the past few years, European airlines have been rushing to install internet connectivity in an attempt to catch up with their US and Gulf rivals, which were the first to meet growing demand for WiFi in the sky.
Carriers from Air France-KLM, British Airways and Virgin Atlantic to low-cost airlines such as EasyJet are planning airborne WiFi services as the technology matures and becomes more affordable. Last month, Lufthansa revealed plans to offer broadband internet across its short and medium-haul flights from early summer next year.
European carriers have had to overcome technological challenges, too. US domestic carriers have access to a cheap air-to-ground network run by Gogo, which costs about $80,000 per plane and can be installed overnight. But European airlines have to use more expensive satellite-based technology because of the oceans and mountain ranges they have to traverse – and these systems can cost as much as $400,000 per plane, plus another $100,000 for installation.
As a result, United Airlines offers wireless internet on 85 per cent of its fleet, while Air-France and BA provide it on only one and two aircraft, respectively.
However, analysts say that, in spite of the costs, passenger expectations are forcing European carriers to compete.
Olivier Fainsilber, partner at Oliver Wyman, a consultancy, says: “They’ve had to focus on keeping up with Middle Eastern carriers on customer comfort and service – and WiFi is likely to be the next focus.”
In addition to winning – or keeping – customers, WiFi also provides airlines with commercial advertising and marketing opportunities.
“A flight is now the longest time that airlines have to be connected with their customer,” points out François Rodriguez, chief marketing and strategy officer at WiFi provider Sita OnAir. “Everything else is done online, like self-check-in, so providing digital services can help personalize the experience for flyers.”
Mr. Rodriguez believes airlines could use WiFi to ensure a smooth flying process for customers. This could involve sending alerts to say where their luggage will be or offer the option of booking a taxi for arrival.
Marketing and partner services is where the value lies for most airlines, most analysts believe, as it is difficult to make a lot of money from selling WiFi access to customers, who are used to being given free access in shops and cafés.
Sita OnAir says uptake of WiFi is 30-40 per cent when it is free, but around 5-6 per cent if customer are made to pay.
Last October, Emirates took the decision to give limited free WiFi and recorded a fivefold increase in usage. “Customers seek free WiFi on the go, especially while travelling, and it is becoming the norm for most people who want to stay connected through online social networks and instant messaging,” explains Patrick Brannelly, division vice-president for customer experience at Emirates.
But it becomes harder to justify the free access and marketing model on short European flights, according to Tim Farrar, a telecoms analyst at TMF Associates. OAG, the flight data company, calculates that the average western European flight time is 1 hour and 46 minutes compared with 2 hours and 4 minutes for the average US domestic flight.
“It’s interesting that the airlines in Europe that have deployed WiFi so far are those mostly on the fringes of Europe, such as Norwegian and Aer Lingus,” says Mr. Farrar. “Both of those have longer than average flight length compared to Lufthansa or Air-France.”
Technology suppliers are helping to make the business model more attractive for European airlines. Inmarsat, the UK satellite company, will next year launch its new broadband satellite network, Global Xpress. This offers better quality airborne WiFi and uses lighter equipment, lowering the fuel burn – and therefore the cost – for the carrier. Lufthansa will be the first airline to partner with Inmarsat but EasyJet and BA are in talks with the company.
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Leo Mondale, president of Inmarsat Aviation, is confident its lighter weight satellite terrestrial hybrid solution will see uptake increase across Europe. “Once an airline sees there’s a solution that outperforms the available alternatives and weighs a couple of hundreds kilo less per plane they have to look at it,” he says.
EasyJet had previously ruled out introducing WiFi but Ian Davies, the airline’s engineering director, said its concerns were close to being solved by second-generation technology providers, such as Inmarsat.
“EasyJet believes it is no longer a question of if but when we are able to install a product that works well for our passengers and the airline,” he says.
Other technology providers are helping to offset the costs, as well. Panasonic Avionics, a provider of satellite WiFi systems, has developed a new low-profile antenna that reduces fuel burn through a 65 per cent reduction in weight and drag.
Panasonic estimates there are about 12,000 narrow body aircraft that have a demand for WiFi. “Our expectation over the next five years is that you’ll rarely see an aircraft come off the production line, whether it’s narrow body or wide, that doesn’t have a form of connectivity,” says Neil James, executive director of corporate sales and product management at Panasonic Avionics.
For some low-cost airlines, though, WiFi remains an unnecessary luxury. Ryanair, Europe’s largest low-cost airline, does not plan to offer the technology in the short term, according to chief executive Michael O’Leary. “People won’t pay the costs of it on a one-hour flight,” he says.
Copyright The Financial Times Limited 2015
By Tanya Powley and Peggy Hollinger
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