In November 2014, Jeremy Gutsche, a well-known Canadian entrepreneur, was on a Singapore Airlines Airbus A380 flight from London to Singapore. A busy executive, he was happy that there was wi-fi available on his flight.
However, it came at a price. He ultimately had to fork out $1,171 for using wi-fi on his 13-hour journey. To put this in perspective, that amount would have paid for two years of high-speed internet connection in Jeremy’s hometown of Toronto. An upset Jeremy tweeted out a photo of his bill, which duly went viral, and he was subsequently featured in the Wall Street Journal.
In-flight wi-fi, and whether or not to charge for it, is possibly the biggest risk airline brands face in 2015.
Singapore Airlines is one of the world's finest airline brands. It doesn’t need to taint its impeccable brand image by overcharging for wi-fi. Yes, it was Jeremy’s mistake. Perhaps he didn’t read the fine print – and he surely forgot to turn off data on his mobile phone for the duration of the flight. But should he be made to pay more $1,000 for his internet usage? Legally, yes. Ethically, probably not.
A brand like SIA should know that to win hearts, you’ve got to go beyond the obvious. But in this case, they didn’t waive the charges for Jeremy.
Today, more than 50 airlines worldwide can provide in-flight wi-fi, with connectivity most commonly being offered in the USA. And it can cost a lot to equip an airplane with connectivity. While most airlines charge for it, some – like Emirates, Norwegian and JetBlue – provide it free to their passengers.
When passengers are charged for in-flight wi-fi, less than 5% pay to use the service, which means airlines don’t make enough money to recover the costs. When the service is offered free, airlines see a tenfold increase in take-up rates. While this should mean more passengers are happier, slower speeds as a result of shared bandwidth often ruin the experience.
It seems the existing in-flight wi-fi business model is broken: a lose-lose proposition that is not sustainable in the long-term for airline brands.
So airlines need to re-think their in-flight wi-fi offerings. Providing wi-fi as a good-to-have alongside 1,000 movies will not work. Charging for it just because they can will not work. Expecting people to pay for internet speeds from the last decade will not work. Maintaining the status quo will not work.
It is important to understand that these days the average customer is used to getting free wi-fi in Starbucks, at most airports and hotels. Airlines, then, need to decide whether this is a service they are willing to offer to enhance the overall experience, or an ancillary revenue source. The likes of Emirates, JetBlue and Norwegian have made the former choice. Saudia will soon be providing real-time customer service with a dedicated team for passengers using in-flight wi-fi. But most other carriers are still confused about how to get in-flight wi-fi to drive revenues with paltry adoption rates. In fact, Qantas has even reversed its decision to offer wi-fi after a short-lived trial.
There are, however, creative ways to drive revenues by providing free in-flight wi-fi to all passengers. Since airlines have a captive audience, they can use the “walled garden” approach to attract advertisers – from landing page branding to earning a commission on selling of merchandise. Delta Air Lines already has a partnership with Amazon that provides free access to the site. The airline in return profits from the relationship. Airlines can learn from airports in this regard.
There is a genuine concern that is often raised: what if too many people start using it? It is true this would slow things down, and that's where airlines need to set the right expectations. They shouldn't promise customers the kind of speeds they expect at home.
I believe that Jeremy Gutsche’s experience was a watershed moment. Instead of quoting terms and conditions, the industry needs to wake up and smell the coffee. They need to think like Starbucks to make wi-fi work for their brands. In-flight connectivity needs to be discussed at the C-level, and cannot be treated as a distant cousin of in-flight entertainment. Currently, few airlines prioritise it – and that is why the risk to their brands is huge.
Let’s hope that next time Jeremy flies long-haul he is greeted with free in-flight wi-fi, and the airline brand he chooses doesn’t suffer as a result.
Shashank Nigam is the CEO of SimpliFlying, one of the largest airline marketing strategy firms, which has worked with over 60 airlines and airports. email@example.com