Does Continental have big cojones?

Aircell’s in-flight broadband dominance in the United States was further underscored today with the announcement that US Airways – yes US Airways!!! – has committed to install Gogo on its 50-strong fleet of Airbus A321s beginning next year.

It’s a surprising move in light of the fact that US Airways recently opted not to expand a trial of Lumexis’ fibre-to-the-screen IFE system, complaining that, despite its interest in IFE&C, financing for installs had dried up. Well, they’re getting the financing from somewhere, you can be sure. (How big is Aircell’s war chest?)

I must admit I am thrilled that US Airways is moving forward with in-flight Wi-Fi equipage (Not because it’s Aircell. If it was Row 44 or another broadband provider, I’d be equally happy oh yee accusers of my bedding down with anyone.) God knows I’ve suggested it to US Airways a number of times.

US Airways has, in essence, seen the writing on the wall – it knows it has NO hope of competing with broadband-equipped carriers unless it equips its own aircraft because the rest of its domestic product is abysmal (As a frequent traveller, who lives outside of US Airways’ Philadelphia hub, I can assure you I am educated on this point).

Cojones.jpg

But this blog is not about abusing US Airways, which should be applauded for figuring out a way forward despite the current economic crisis (and keeping a secret in this highly-connected world). No indeed, this blog is about pointing out that Continental Airlines is now the only major carrier not to announce a broadband strategy in some sense, and to ask a few important questions.

Aircell’s customers include Air Canada, AirTran, American, Delta, Northwest  – yes, it considers this deal separate to its one with Delta…I just learned this today – plus United, US Airways, and Virgin America.

Alaska Airlines and Southwest are trialling Row 44′s satellite-based solution, and would like to offer the service fleet-wide. Southwest says it will reveal its broadband strategy next month. Southwest has spoken to Aircell but a very smart cookie says it is unlikely that Southwest will follow the same strategy as its Dallas rival American. Time will tell.

JetBlue is offering subsidiary LiveTV’s basic Kiteline service on an A320 but plans to expand with a 20-aircraft equipage from the fourth quarter. Kiteline is the same service that Continental previously said it intended to offer. In recent months, however, the carrier has declined to confirm that this is still the case. What Continental is doing is focusing on equipping its domestic fleet with LiveTV’s 80-channel live television system.

So here’s the question – is Continental taking a gamble by initially focusing on live television instead of broadband? Does Continental have some big cojones for striking out on its own (that is, of course, presuming it hasn’t secretly inked a broadband deal)? The answer is – nobody really knows.

While Aircell has grabbed nearly every significant IFC headline of late, the company has not yet revealed its usage stats. It has also been experimenting with pricing. This indicates that the jury is still out about how much people are going to pay for in-flight Wi-Fi. To help us understand better, I urge you to take the IFE&C survey.

As hotels, coffee shops, my local Salad Works, some airports – most recently Jackson International – and others move to a free-Wi-Fi model, will airlines be able to sustain a fee-for-service model?

That is a question that LiveTV keeps coming back to. Last week at the World Airline Entertainment Association (WAEA) single focus workshop in Everett, Washington, LiveTV vice-president of sales and marketing Mike Moeller said the JetBlue unit believes in broadband but doesn’t yet see how this will generate revenue for airlines if passengers start demanding it for free.

Some folks would argue that advertising, sponsorship and other clever marketing tools will augment the estimated $100,000 cost of installation per aircraft, even if carriers eventually bow down to pressure and offer in-flight Wi-Fi for free. Airlines might also collectively wrap the service fee into the cost of their tickets, especially if the entire US fleet is equipped).

The equation is sufficiently foggy that LiveTV has decided to focus on its weapon of choice – live television. Moeller points out that the average adult in the USA still watches 5.5 hours of television per day. Holy God! Where do people find the time? I’m happy to catch a glimpse of Brian Williams at 6:30pm.

Someone once said that television is the “Novocaine for the brain”, says Moeller. So, if given the option between paying for 80 channels of live television or paying for broadband, LiveTV’s reasoning is that passengers will choose the latter at this juncture.

Of course, if you’ve got broadband, then you can access TV over IP. But will the Gogo bandwidth support high-bandwidth requirements such as these when the US fleet is equipped? Aircell says it will. Here’s how LiveTV answers the question of video over the Internet (it’s a slide from Moeller’s presentation).

LiveTV slide TV.JPG

 
Check out Moeller’s entire presentation at the following link:

SFW LiveTV Presentation 7-15x.pdf

No matter how things shake out, things will no doubt all be gravy for Aircell since, for airlines, there is no turning back now. The travelling public has been given a taste of in-flight Wi-Fi thanks to Aircell and they are now starting to expect it. Someone will have to pay. But whom?

As you can see, there are still a lot of questions to be asked. We need some answers! I’m working on trying to get us some ASAP.
 

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6 Responses to Does Continental have big cojones?

  1. Dave July 23, 2009 at 4:07 pm #

    I think it might be a good move on Continental’s part. TV is very important to many people- especially when they’re trapped in a metal tube for hours on end. Broadband is cool, so long as you have your laptop with you, which many people do, but many do not. As for paying for broadband- you have a captive audience so to speak- boredom opens doorways to a great many things. Personally, I want both… internet and TV. Also I must insist on a X-box Live network being setup… a captive airliner audience would be perfect for a HALO 3 death-match.

  2. Mary Kirby July 27, 2009 at 4:50 pm #

    I agree with you, Dave. I too want both – Internet and TV.

    I recall a recent Virgin America flight, during which I found great satisfaction in relaxing a bit and doing something I don’t get to do at home – watch the Real Housewives of Orange County.

  3. Dave July 27, 2009 at 7:03 pm #

    Indeed… I do something similar on such flights, I watch the movies I couldn’t justify paying full price at the theatre or that I’m too embarrassed to admit publicly that I would ever consider watching- which I imagine is the case with you and the reality show that you mentioned.

  4. Wandering Aramean August 4, 2009 at 9:54 pm #

    I’ve talked to some of the higher ups at CO about this specific topic several times over the past several months, most recently with soon-to-be CEO Jeff Smisek in June during the party celebrating the 75th Anniversary Livery plane (which is beautiful, BTW).

    He repeated their oft-stated line which is that he understands that some people like the concept and the technology, but they are still waiting for someone to show that there are actual profits to be had (or revenue to be lost) on the basis of having IFI available or not. They are still planning on moving forward with the KiteLine install in Q1 (assuming that LiveTV is actually ready with the service in mid-November – a HUGE assumption to make). They’re going to put it on ~30 planes and fly them around for a month and see how many people use it and how well it is received.

    Lots of folks want the internet to be there but most of them still aren’t willing to pay a sufficient price to actually cover the costs of having the service on all the planes.

    It really becomes a question of whether people want free crap, expensive good stuff or neither; the free/cheap good stuff just doesn’t seem to be there yet, at least not in broad distribution.

    Plus, there are a lot more folks willing to pay for the TV than the internet service, despite the fact that those of us talking/blogging about it really would like to think otherwise. ;)

  5. Jamie October 29, 2009 at 3:22 pm #

    Most of the airlines have been losing money now for seven or eight straight quarters. Offering something for free never results in gains — people didn’t switch to Southwest because that carrier refused to implement bag fees, nor has Continental seen a big spike on account of continuing to provide free meals — and meanwhile the losses keep piling up.

    People used to get a lot more for the price of a ticket, but that ticket was also five or six times what it is today. Twenty-first century passengers see planes as providing long-haul bus service; they put no value of amenities and reward the cheapest fares with their business. So, I think that Smisek has exactly the right idea: go where the revenue is.

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