Making the Connection

WHEN IT COMES TO INFLIGHT CONNECTIVITY, THE US AND the rest of the world appear to be on diverging flight paths. While their counterparts in Europe, Asia and the Middle East have embraced sophisticated multipurpose, satellite-based systems enabling passengers to connect virtually anywhere by mobile phone, the majority of US airlines are settling for simpler solutions that offer broadband data capability for Wi-Fi-enabled devices such as laptops, PDAs and smartphones but not voice capability. Ironically, as a result of this decision, they have overtaken the rest of the world in terms of numbers of aircraft equipped with broadband connectivity, having trailed for most of this decade.

The decision by US carriers to focus on data rather than voice is not surprising given the fact that neither the Federal Communications Commission nor FAA has approved the use of mobile phones during flight. Furthermore, surveys indicate that the practice is opposed by a large share of the US traveling public as well as flight attendant unions, whose members would have to enforce airline policy and government regulations regarding their use.

A handful of carriers, among them AirTran Airways and Southwest Airlines, have committed to outfit their entire fleets while others are taking a phased approach. Their caution is understandable. Few US airlines are profitable, the economy is in deep recession and the cost of turning hundreds of aircraft into Wi-Fi hotspots can be a daunting prospect. Furthermore, the capability of the most popular system is limited to the US, which means it doesn't make sense to equip international fleets that will spend most of their time in airspace where the system doesn't work. And some experts point out that there is no compelling case that the industry will make a profit from offering Internet access.

"The jury is still out whether there is a financial return on these services if the airlines are installing [connectivity] as a way to make money," says Tim Farrar, president of TMF Associates, a consultancy that analyzes the market for satellite, wireless and broadband telecommunications. "If you charge, will the fee cover the cost? It's not clear if they are charging enough to make a profit. It's nice if customers like it, but when it comes down to it, will the airline provide it if it costs money to do so?"

Nevertheless, as more and more carriers take the plunge, the rest will have to follow for competitive reasons. "The future is inflight broadband connectivity," Forrester Research VP Henry Harteveldt tells ATW. "I see that as essential to the airline experience as the beverage cart."

Major League

AirTran was the first major US airline to make a Wi-Fi product available across its entire fleet of 136 737-700s and 717s, a task it completed in July. It chose Aircell's Gogo product. "We spent an awful long time looking and talking to all of the potential providers of connectivity," Senior VP-Route Planning and Marketing Kevin Healy tells this magazine. "With Aircell, one of the more compelling aspects was that none of it was new technology. There was no question of whether it would work."

Aircell's terrestrial, or air-to-ground, system relies on a network of cell towers within the 48 contiguous states. Antennas mounted on the belly of the aircraft can pick up signals up to 240 mi. offshore. According to Forrester Research, installation costs about $100,000 per aircraft.

"When we developed our ATG service, it was just a more economical way to provide Internet connectivity," Aircell Senior VP-Airline Solutions Fran Phillips explains to ATW. "Very little technology has to be on the airplane. We have over 500 aircraft installed and we haven't been flying for a year yet." A major selling point for AirTran was the light weight of the system, around 150 lb. "Look at the cost of fuelparticularly last summer. Anything that added weight has a very high expense," Healy comments. According to the carrier, installation took about 8 hr. per aircraft as experience was gained. He says it decided to install Gogo throughout the fleet as quickly as possible in order to maintain "product consistency," and "the customers absolutely love it."

Pricing is set by Aircell but "we work flexibly with our airline partners," says Phillips. "If our system isn't working then we aren't making money and the airline isn't making money." An AirTran spokesperson confirms that Aircell works with the carrier to develop pricing. For example, during the first two weeks of September AirTran offered exclusive pricing of $5.95 for Wi-Fi regardless of the type of device (laptop or handheld) or flight length.

Last spring, American Airlines committed to install Gogo on more than 300 domestic aircraft over the next two years following a trial of the product on 15 domestically operated 767-200s. The decision was not taken lightly, says Manager-Inflight Communications and Technology Doug Backelin. "First and foremost, it's a product enhancement our customers really value," he says. "It's an expensive thing for airlines to provide. As far as revenue, we certainly want to break even."

He notes that AA was a launch customer for Boeing's landmark Connexion by Boeing Ku-band satellite-based broadband product in 2001, although the carrier subsequently withdrew from the program following 9/11. Boeing ultimately pulled the plug on Connexion in 2006, citing high development costs with no foreseeable breakeven and disappointing passenger take-up. It left behind some very disappointed airline customers, foremost among them Lufthansa.

Satellite for Southwest

SWA is taking a different path, having become the airline launch customer for Row 44's satellite-based system after testing it on four aircraft. Fleetwide rollout will begin in the first quarter of 2010. Alaska Airlines also has trialed the system and expects to make a decision next year. Row 44 is supported by the Hughes Network System that provides worldwide coverage via satellite technology. Mobile phone service will be offered to customers where it is permitted, says Row 44 President Gregg Fialcowitz. It is approved to operate its satellite system in Mexico, Canada and some European countries.

In addition to the greater coverage provided by a satellite-based system, Row 44 touts its pricing model. In effect, the company furnishes the system to the airline for a fee and allows the carrier to establish pricing. "Airlines can set the price, or can offer it for free," Fialcowitz tells ATW. He says his company will be able to offer some live television transmission by year end. In August, Scandinavian LCC Norwegian Air Shuttle was announced as the launch customer in Europe.

Aircell remains the market leader in the US by a wide margin, however. Its system was installed on some 535 aircraft as of early September. Air Canada, Delta Air Lines, US Airways, United Airlines and Virgin America have committed to installing the Gogo product on some or all of their aircraft.

US says it is working through the early stages of installation on its fleet of 50 A321s and expects to complete the project by the end of the 2010 first quarter. "From the US Airways perspective, this is a product that over the long term an airline needs to be competitive--especially for the business traveler," says MD-Consumer and Partnership Marketing Kevin Jackson. Cost was an important consideration, he adds. While not disclosing the agreement with Aircell, he acknowledges, "We can generate a minimal profit but compared to other ancillary products it seems small."

Two-year-old Virgin America, which offers free live television at every seat via its "Red" IFE system powered by Panasonic Avionics, also has outfitted its fleet with Gogo. "Guests really wanted it," says spokesperson Abby Luanardi. "Since we launched, we've seen such a high uptake it's been an inflight revenue model as well . . . Gogo is perfect for us." In a demonstration of the capabilities, a Virgin America employee used Skype VoIP to talk to Oprah Winfrey from an aircraft on a show that aired last spring. The airline noted it does not normally permit passengers to use VoIP for voice calls but they can use Gogo to Skype "via the instant message feature."

Aircell officials say Gogo provides a platform for further developments in cabin services, such as streaming video and audio and live television transmission. Phillips says Aircel "likes the ATG technology--it's better and more economical." It has set its sights beyond US borders and hopes to be able to provide international seamless service, perhaps by partnering with a company that employs satellite transmission. "That's in our road map" she tells ATW. "We expect to have a trial going with an international [carrier] sometime next year."

Another entrant is JetBlue's wholly owned subsidiary, satellite-based LiveTV, which is developing a narrowband option for Internet access using Kiteline ground cell towers. The service, to be introduced on 20 JetBlue aircraft by year end, will be offered to passengers free. A spokesperson says the carrier is not interested in designing a system that could accommodate mobile phones.

The Great Divide

The situation outside North America is markedly different, with most airlines focusing on providing inflight mobile phone connectivity with less emphasis on feeding the seemingly insatiable appetite for texting, e-mail and Internet surfing that characterizes users on that continent.

The leader in installed systems in this arena is OnAir, owned by SITA and Airbus. It uses a GSM and GPRS (Ground Packet Radio System) network for mobile communications. Inmarsat's SwiftBroadband satellite service provides high-speed, high-capacity voice and data communication with global coverage. OnAir is designed to allow for integration with other air-to-ground links like Ku-band. By year end it will be able to offer Internet access on aircraft equipped with SwiftBroadband modems, OnAir CEO Benoit Debains tells ATW.

Airlines flying with OnAir systems installed as of early September were TAP Portugal, Ryanair, Royal Jordanian and Wataniya Airways, in aggregate representing around 60 aircraft. British Airways will offer OnAir on its new all-business-class service between New York and London City Airport that was scheduled for a Sept. 29 launch. Announced customers include AirAsia, Jazeera Airways, Hong Kong Airlines, Oman Air, Qantas, TAM, EgyptAir and Shenzhen Airlines.

Close behind is AeroMobile, a joint venture involving Telenor, the world's seventh-largest telecommunications company, as the majority shareholder and ARINC, which holds a small share. At this writing, AeroMobile's Avion system was operational on 51 aircraft flown by Emirates and Malaysian Airlines. V Australia has chosen the system but it will not become operational until later this year. In addition, more than five other carriers have committed to it, including Qantas for its domestic fleet. The system, which enables voice calls, text messages and GPRS data services, is certified by EASA for use on most 777 and A330/A340 variants. AeroMobile says its system has been used by more than 400,000 passengers.

Providers of traditional IFE also are jockeying for position. "There are not that many players that can provide the total end package--there are lots of players providing parts and pieces," Thales Group VP-Strategy and Long-Term Solutions Dan Reed tells ATW. "Only a few players are offering a full, turnkey package." Thales' Internet technology, TopConnect, will be launched via a partnership with OnAir and select airlines. "The market we are looking at is international," Reed says.

Panasonic Avionics has a broad customer base for its IFE systems but has yet to enter the Internet competition. VP-Global Communications David Bruner says the company will roll out its new exConnect broadband service by year end, with the first airline service expected in 2010. It has partnered with AeroMobile on the eXPhone, which V Australia is expected to introduce.

In addition to its small holding in AeroMobile, ARINC launched its own connectivity solution called Oi (Onboard Internet), which also uses the Inmarsat SwiftBroadband satellites. According to ARINC, the system works via the IFE system and "also through passengers' own portable devices . . . through its joint venture with AeroMobile."

As inflight connectivity becomes more widespread and more capable, Forrester suggests carriers will be tempted to curtail their investment in more advanced IFE systems. "In the long term, inflight Internet access will give airlines the option to exit the IFE market. Passengers who don't have their own devices could rent laptops or portable television/DVD players at gates, check-in counter or on planes."