Would airlines come to Aircell’s rescue (if it needs it)?

I wonder if Aircell’s airline customers are tad peeved at the latest turn of events. The positive publicity they’ve enjoyed in the media – including on this blog – for bringing in-flight Internet to passengers is diminishing, as everybody and their brother questions the viability of the Gogo fee-for-service model, and as a growing number of consultants go on record to say that not only has Aircell been equipping aircraft for free (which we already surmised), but it has been giving airlines a slice of the early returns (yowers!).

Neither claim has been confirmed by Aircell or the airlines, by the way, but many folks are coming to the seemingly logical conclusion that if Aircell was getting a windfall of cash, it wouldn’t need to initiate layoffs.

In the true American tradition of propping up celebrities only to tear them down, the Monday Morning Quarterbacks are now out in the full force with their “I told you so” mantra. Truth be told, a few of them actually did tell us so. One man on the right side of the argument all along has been Connexion by Boeing’s former chief marketer David Friedman, who knows a thing or two about unsuccessful forays into the in-flight connectivity realm.

We highlighted some of Friedman’s comments on this blog in the past, but two quotes are proving particularly haunting, and should give Aircell’s customers pause today.

Said Friedman:

“We [initially] offered to give [Connexion] away as a trial for free but the airlines said, ‘If this is successful, you want us to pay for all these antennas?’ They were concerned that if customers were demanding it, it would put them [the airline] in a tenuous situation in terms of customer relations.

“So you have the cost of the system and cost of the infrastructure. You can offset that through a variety of ways, such as advertising. But sponsorship and advertising and direct fees is not enough! People believe, by the way, that they should have Internet for free because they are used to having Wi-Fi for free. Then couple that with the issue of power outlets. If an airline doesn’t have enough power outlets on the plane, how are they going to charge a flat fee?”

If things are as bad for Aircell as some people claim, what should its airline customers do? A growing number of industry insiders believe these airlines might opt to help sustain the Gogo offering, or, as Friedman notes in a new IAG podcast – “What would have to happen is the airline would have to contribute more of the cost of the equipment.”

Listen to the entire podcast in full at the following link: http://iagblog.podomatic.com/player/web/2009-09-22T13_54_52-07_00

For the record, Aircell says it recently received “substantial funding and commitments from existing and new investors and expect to add to those before the financing closes”.

Also for the record, despite questions about the Gogo business model – and whether people will actually pay for in-flight Internet – one thing is certain: passengers, many armed with free promos, freaking LOVE the service. Check out what people are saying right now:

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11 Responses to Would airlines come to Aircell’s rescue (if it needs it)?

  1. Wandering Aramean September 23, 2009 at 12:04 pm #

    I doubt that the airlines would try to rescue Aircell. They don’t really have the cash and I don’t think that the presence of the gogo service is sufficiently driving customer behavior (i.e. more tickets sold) to justify the expense on their part.

  2. Bob September 23, 2009 at 4:55 pm #

    I smell a sinking ship.

  3. Yossarian September 23, 2009 at 6:51 pm #

    Do the math folks.

    Aircell thought they were doing 1,200 aircraft in 2009, it’s not going to happen, probably more like 700, give or take 20 or so. They have completed AirTran, Virgin America and most of American. Most of the infrastructure is complete. With SWA indicating they want to go with Row 44, there probably wasn’t much justification to keep the headcount up.

    Let me ask this-If Aircell secures United and gets all of USAirways planes, then hires 50 employees, would you say” Aircell is golden!”?

    As an airline customer of Aircell, I have to admit they looked like they needed some LEAN in their organisation. And just like an airline, they are trying to find pricing that will resonate with their customers.

  4. Mushroom September 24, 2009 at 12:13 pm #

    I, the Mushroom Man, predicted this sorry state of affairs a few months ago in my hypothetical investors meeting post.

    Some innocuous person raises the point of “will people actually want to pay for thiss?” and suddenly it’ll dawn on everyone.

    In a manner not disimilar to the “naked emporer” that many of these “slick” connectivity providers have no clothes. And they’re actually quite small down below despite the boasts.

    Reminds me of a situation much like CbB. Will people ever learn!? :(

  5. Klaus Hergeschiemer, from G Section September 24, 2009 at 8:53 pm #

    Meh

    It wouldn’t surprise me in the leats if yo ushook the Aircell tree, and a few CbB alumus fell out. You’d think they would have learned all this the first go round, but I always seem to give some people too much credit.

    The aircraft today is a merchandizing center. I disagree that people should get this service for free. It doesn’t work that way in today’s US airline market. Any item of value has an assumed cost. You either opt in, or opt out.

    I shake my head that Aircell appears to be prostituting itself by giving it away, any which way it can. Too many prices = too confusing. One price fits all is more like it.

    Mushroom Man-I don’t completely disagree with you though. These visible growing/contraction pains for Aircell (and perhaps others) is rearing its ugly head, and perhaps that’s exactly what they needed-a wake up a call. I atribute this condition to that of a college ball player who starts reading all the OpEd sports pages out there and starts getting delusions of granduer.

    I hope for the airline’s sake, they can get the pricing decided upon, or start running the company more responsibly. Otherwise, there will be no one to flip the “on” switch on those 500 aircraft.

    K

  6. Ludwig von Hapsburg XII "Stinky" September 25, 2009 at 11:00 am #

    Klaus

    Good luck getting the spell check working.

    Yossarian…

    Thank you for finally admitting to us that you work for United. I was certain when I heard you speak about headcount reduction with such knowledge and expertise, it had to be the case.

    Sorry, I have been away in Chino….got 6 months for sending hurtful emails to your boss, Glenn. He keeps closing my lounges.

    “Stinky”

  7. Mary Kirby September 25, 2009 at 11:21 am #

    I spoke with Aircell this morning. It says 35 employees were let go – no senior staff – and “some contract workers” who were not Aircell employees. My article is here: http://www.flightglobal.com/articles/2009/09/25/332784/aircell-reveals-extent-of-layoffs.html

  8. Yossarian September 26, 2009 at 10:19 pm #

    Stinky, you ole dog, you know I cannot confirm nor deny my employer.

    I checked and RWG has her facts straight, only 35, but a number were fine individuals who lost out in a numbers play.

    Looking forward to meeting RWG at WAEA, I understand she dresses conservatively and always wears flats. ;-)

  9. Former Aircell employee September 30, 2009 at 12:17 pm #

    Hi RWG,
    FYI, it was 37 employees and 41 contractors who were let go two weeks ago. And today Aircell has not made payroll yet. Apparently a glitch in the system.

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