The Disconnect In Demand For In-Flight Broadband And Service Success

from the something-doesn't-match-up dept

Boeing's decision to shut down Connexion, its in-flight broadband service, wasn't too surprising, given the few carriers that had rolled out it. But in some sense, it was puzzling, because there's such an apparent interest in in-flight broadband -- something backed up by yet another survey about it. So, if interest is so high, why can't somebody make in-flight internet access work? Connexion has failed, Tenzing's big plans never took off, and Airfone's overly expensive and underwhelming services were never popular. The biggest problem is the tremendous cost of outfitting airlines with the equipment to make the systems work, with Connexion's costs reported to be up to $500,000 per plane. With the airline industry bouncing from one financial crisis to another, and the most successful carriers being those that can hold their costs down the best, this is a pretty insurmountable hurdle. The bigger problem is that the real demand for this service, in all likelihood, isn't as high as all these surveys and media stories would indicate -- or in a world of free WiFi hotspots, demand falls off the table once a fee is introduced. Interest in the services carries on, with several companies participating in a recent FCC auction to secure licenses for air-to-ground spectrum. It sounds like most of these companies will use different technology than Boeing's satellite-based system, which could help them lower costs, but the more fundamental question they've got to answer is whether the demand to pay for this sort of service actually exists. Airline JetBlue was one of the winners of that auction, and it could use free in-flight internet access in the same way it uses its in-flight TV: as a perk to encourage business. That could be a more workable model, but still, an expensive one.

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  1. identicon
    Paul, 30 Aug 2006 @ 12:06pm

    Seat Size

    Airlines know that the seat size is an issue, but money talks for this round.
    The more people they can fit on a plane the more money per flight they make. If they make the seat bigger then they either have to make the plane bigger or raise prices, and since making the plane bigger isn't very likely the prices will raise.
    There is of course the 3rd option where the airline decides they can make up the price difference in volume, thinking they will steal the competitions customers, and that would most likely be true but prolly the most devistating option for the airline in the long run.

    Lets say 1 airline makes the seats bigger and keeps costs the same, they steal some customers from the other airlines. The other airlines say "oh shit" at their income loss and so they decide to impliment larger seats with the same cost and regain their customer share. So now we have the majority of the airlines with bigger seats at the same cost, these airlines are now all making less money than they were with the smaller seats because they are charging the same, getting the same customers, and moving less people per flight. What do they do? Raise the price to make up the difference.

    There is already a solution for people who are willing to pay more for a bigger seat. It is called first class.

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