Tim Farrar of TMF Associates took a gander at my recent blog about Connexion by Boeing’s numbers – and how one industry insider believes “voice can close the gap” - and the analyst figured he might as well chime in with a few thoughts of his own.
Farrar takes a rather more pessimistic view of the whole situation than our two previous players. (Isn’t it interesting that so many IFE&C folks have such vastly different ideas about whether money can or cannot be made in this business? This is a risky business, but the gamble might just be part of the fun of it all.)
In any case, here is the third installation of Connexion – doing the math. Do you agree with Farrar’s assessment?
Those numbers ($150K per plane per year for Wi-Fi) look reasonable for a heavily promoted service on an airline with power at every seat and lots of cross country flights (Virgin America). Not necessarily applicable to other fleet-wide installations of course.
Voice revenues might be roughly the same again, if you allow people to use cell phones (i.e. not in the US), but you’ll have to give a big slug of revenue to the cell phone operator, negotiate roaming agreements, etc. Far from clear that this closes the gap to make it profitable for all concerned.
My estimate for Internet access in 2006 was about $120K average across all planes. Connexion was just over $100K per plane per year at the end.
Remember that OnAir’s published proposition two years ago (presumably what was used to convince Ryanair) suggested EUR550,000 per plane per year in gross revenues from voice and SMS in Europe – laughably overestimated.
So surely we need to reject the idea that there’s money to be made for both the airline and the service provider from any Ku-band installation. The same is very likely true for Inmarsat-based solutions (no usable flat-rate Wi-Fi after all) and possibly even the case for Aircell (if there’s no voice and assuming they want to make a return on their capital investment in network rollout, although its really a sunk cost by now).