Pay Up Sucker!

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If connectivity implementation is any indication of airline health, one might think the carriers are swimming in money. This logic could not be further from the truth! of the 20 airlines reporting last quarter revenues last week, all 20 reported revenue reductions from the same quarter the year previous – the drop averaged almost 16%. This is an astounding number considering all the airlines that are stepping up to connectivity. The chart shown here (compliments of OnAir) points out that airborne connectivity is a worldwide trend and one can only assume that onboard hardware costs are only a necessary evil in the attempt to garner additional revenue….and revenue is the problem. As one guru told us, “…I suspect that companies and individual travelers are not only traveling less but, when they do travel, are riding it out in coach instead of business/first class.” This means lower revenue and thus solving the problem by cutting back is not the only answer. It means that adopting a “pay for play” policy is going to be the mantra going forward. While this trend has been alive and growing within airlines for the last year, amenities such as Internet, voice and data calls, and the like will be tolerated, no promoted to the passengers if they are willing to pay for it on existing aircraft. The adoption decisions of IFE and connectivity hardware may be another matter.

Inflight Entertainment, as such, is also under pressure. Not only are the big systems a threat to fuel burn and install costs, there are a number of press stories out this week on the adoption of a mobile entertainment and information life style that favors data and iPod integration with the seatback. More than one attendee at the recent WAEA Single Focus Workshop had a laptop, a Blackberry and a iPhone in front of them as they listened to the various speakers (we have the pictures to prove it). The connected lifestyle on planes may have a few less entertainment components but the business folks want to use their laptop (for hours) and want to check email the whole trip. If many could talk, they would do that as well.

The bottom line – Winners will be paid services like Internet, calling and data providers, on-plane advertisers, connectivity hardware providers, and in-seat power manufacturers The losers might be IFE, seating, and pretty much anything that cannot be purchased on a plane. And yes, if airlines see a bucket of money in voice calling, watch for the US H.R. 915, Section 425 (“Hang-up Act”) to fade into the background noise.

Comments

One Response to “Pay Up Sucker!”
  1. Pretty! This was an extremely wonderful article.

    Thanks for supplying these details.

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