Over the past 3 years, we’ve seen a proliferation of WiFi on airlines throughout the United States.  Some airlines such as Virgin America, Delta and Airtran have already installed it fleet wide and some are already working on fleetwide installations (Southwest).  Others have installed it on a smaller sub-set of their fleets such as American Airlines, United Airlines and US Airways.

I like it.  I’ve used it and even a few years later, I kind of marvel that I live in an age where we can have internet access on an aircraft for what is a pretty small fee.  Remember the age of $3.00/min phone calls on airliners?

The question is, is it a viable revenue stream for airlines?  It’s difficult to find out the “take” of revenue per flight but the percentages bandied about range from 5% to 10% so far and that is even on airlines who are offering it fleetwide.  It costs about $100,000 to install the Aircell GoGo Inflight system on an aircraft.  Reportedly even more for the Row44 kit that Southwest is deploying.

Remember when internet access began to pop up at hotels?  The fees were, at times, almost outrageous at $30 / day and it was only found at the more “elite” hotels.  Over time, that changed and now it’s more uncommon to find no internet access at your basic Motel 6.  It’s prolific and, in most cases, free.

I think that is what is going to happen with airlines in the United States.  I think we’ll one day see this service free or available for a fee so cheap ($1 to $2 per flight) that it will seem free.  And that is why I think airlines such as American, United and US Airways remain somewhat hesitant to go with a fleetwide installation. 

I believe they’ve seen the future and the future presents a kit of equipment on the aircraft that adds weight and generates, at most, $100 per flight.  That isn’t a self sustaining model and it implies that airlines will one day have to sustain it with air fares.  The very thing they’re working hard at de-bundling services from.

I do not think that WiFi is going away one day soon.  To the contrary, this is just the kind of added value service a LCC can offer and competitively distinguish itself from legacy airlines. 

The only kind of flights that I think WiFi has revenue potential on are long haul, overseas flights.  Particularly those flights between the US east coast and Europe.  Flights full of business people who work on those flights which are short enough to fly frequently but long enough to eat and also get something done as well as capture a nap.

Given the cost to install and maintain these systems, I cannot ultimately see airlines keeping this system in place to generate revenue that adds to profit.  At most, the fees will pay for the initial installations and, perhaps, maintenance over time but this isn’t the holy grail for profits.

Filed under: Airline Fees, Airline Service by ajax