Wednesday, December 16, 2009

Continental Latest Airline to Opt For In-Flight Wi-Fi

Continental Airlines, the laggard among major domestic airlines in deciding whether to install Internet Wi-Fi connectivity, said today that it chose Aircell's widely-used Gogo system. Starting in the second quarter of next year, Continental said it will offer Gogo service on its fleet of 21 Boeing 757-300 aircraft that primarily serve domestic routes.

The Gogo system runs off land-based towers and doesn't work on overseas flights. Competing systems like the one offered by Aircell's much-smaller competitor Row44 work off satellites, and thus can be used over oceans. Oddly, Row44's major domestic customer so far is mostly landlocked Southwest Airlines, which plans to roll out the system on its fleet of 737s. (Row44 claims it has superior connectivity and reliability; Gogo disputes that).

More than 600 aircraft flown by domestic airlines are now wired with Gogo. Delta Air Lines has been the leader, but American Airlines hasn't been far behind. AirTran and Virgin America now have their entire fleets wired. United, US Airways and Alaska Airlines and Air Canada are either slowly rolling out Gogo or plan to do so soon.

The costs for a connection vary, and many promotions are under way. Gogo service can cost up to $12.95 on some long-haul domestic flights, but the price is lower for shorter flights and for those using hand-held Wi-Fi devices, rather than laptops.

Continental said that it plans to offer the service from "$4.95 and up, based on length of flight." It didn't specify what "up" means. I'll get back to you on that.

Nor did Continental say whether the Gogo system will be rolled out to the rest of its mainline domestic fleet, or when.

Aircell has told me that it costs about $100,000 per plane to install the Gogo equipment. However, it is not clear how much of that cost has been paid by individual airlines, or whether some of the installation costs have been paid by Aircell itself -- a company financed by venture capital betting heavily on the not-sure-bet proposition that enough people will pay for the service to make it profitable.

To date, the "take rate," which is the term for the percentage of passengers who opt to pay, has been in the 5-7 percent range on average on most flights, I am told. That is below break-even levels, but supporters of in-flight Wi-Fi firmly believe that there is a growing market, driven mostly by the sharp increase in the number of hand-held wireless Wi-Fi devices being carried by fliers -- that will soon be solid enough to build a profitable industry for in-flight connectivity and for promotion of ancillary products such as in-flight marketing, including retail sales.


No comments: