Has the death knell rung for embedded in-flight entertainment? Virgin American doesn't think so. Not by a long shot.
In fact, the carrier - which is rolling out new upgrades to its IFE system, including 'The Red Store' for onboard shopping to further capture passenger spend - is already mulling the type of next generation system it wants to bring on board its Airbus A320 family aircraft by 2013.
And what type of system is that? A fully connected one! Virgin America calls the project 'Cabin 2.0'.
Key quote from Virgin America president and CEO David Cush:
"We know we want a significant upgrade in hardware, and significant upgrades in bandwidth, and by 2012, or more likely 2013, we'd [like] wider monitors on the airplane, with more functional handheld remotes and keyboards, faster processors, and faster Internet that is integrated into the system from inception, so it really becomes about the capabilities of the platform."
Cush's quote begs all sorts of questions, so read on for my exclusive Q&A with him.
Q You plan to add a connected element via the Aircell Gogo link to your current in-flight entertainment system (with limited social media and real-time credit card transactions). Will Gogo be able to keep pace with your bandwidth demands in the coming years, as you look ahead to both a next generation system and at passenger requirements for in-flight connectivity?
A The simple fact is we are going to need greater bandwidth, faster speeds of uploads in particular, but also downloads, and somehow they are going to have to keep pace with the technology. Three or four years from now, having the speeds we have today, will not be sufficient. The web is getting more and more video intensive and we are going to have to figure out a way to have a bigger pipe and a faster pipe in the next few years. I am confident Gogo will find a solution but if they don't we'll go somewhere else."
Q Has your current system paid for itself yet?
A These systems are long-term investments. They should stay on the airplane as long as 12 years, although we think the hardware life cycle is probably half of that or perhaps a little less. They pay for themselves in a couple of ways. One is that the preference factor for our airline and quality rating for our airline is very high. Certainly the Red system is one of the most visible reasons for that. We have been slow to successfully monetize the system, but we have a lot of momentum now [with the roll-out of new functionality, including The Red Store]. Certainly, the systems in my view have more than paid for themselves. That's why we're looking into what we call 'Cabin 2.0' and we will invest more money in the system and we will do that as it will have greater capabilities and more opportunities to monetize. We would not invest more if we didn't think it was paying off for us now.
Q How much ancillary revenue do you gain from your current system?
A We do track that by flight and we analyze it quite heavily, but we don't disclose those numbers. The ancillary revenue for passengers is [overall] up 40% year-over-year, and we're expecting that type of growth going forward when we add more functionality. "
Q How responsive was hardware manufacturer Panasonic Avionics and software specialist CoKinetic when you said you wanted to upgrade your current system by adding SkyMall shopping, more detailed Google terrain maps, and other new functionality?
A In general they are responsive. Panasonic is interested in our business and knows we are growing and wants to sell us more IFE equipment going forward. CoKinetic is a small company that is responsive to our desires in general. That being said, this is complicated stuff. It's on an airplane, 35,000ft above the earth and none of it is simple, and I'll be completely blunt, even putting in something like shopping took us something like six months longer than we hoped it to. We're used to rapid speed to market, that doesn't always happen with these big complicated IFE systems, and the software it takes to drive them.
Q What do you think of the argument that passengers' own devices coupled with in-flight connectivity will destroy embedded IFE?
A That is like saying the Internet is the death knell of cable television. We think people want the option for having entertainment dished up to them and letting them make the choice. [The questions to ask are] 'Who owns the transactions? Who owns those customers? And ultimately, who owns those eyeballs.' We've had lots of interesting discussions with the leading thinkers in the San Francisco Bay Area, with Google and with others, on how they view the entertainment and information going forward. People have been saying this for five years [that embedded IFE won't survive]...and it has never gone anywhere. We're a big believer in seat-backs."
Q Will Virgin America ever extend its service beyond the Americas?
A We're starting with Canada in a couple of weeks. That's kind of dipping our toe into it, as it gives us a good feel for the complexities [of international service], and even though Canada is very similar to the US, there are important complexities involving immigration, taxes and customs. But other than Canada and probably Mexico in the next six to nine months, that's pretty much it. We have lots of opportunities here in the united States, certainly in North America, and I would not see us doing too much beyond that. We have Virgin Atlantic doing a great job across the Atlantic and V Australia doing great across the Pacific