By JOE SHARKEY
EVERYBODY wants to be connected, and most major airlines in the United States have made bets that in-flight Wi-Fi Internet service will be a profitable sideline, or at least a worthwhile brand enhancer.
As the year started, about 700 commercial airliners were outfitted with Wi-Fi by Gogo, a product of Aircell, which is by far the leading provider of airline Internet connections. That is roughly a quarter of the domestic mainline fleet, excluding regional jets.
The number reflects robust growth for a service that started on an American Airlines plane in the summer of 2008. Gogo is now being offered (or will soon be offered) on eight airlines: American, Delta, AirTran, Virgin America, United, Air Canada, US Airways and Continental. (Southwest Airlines, meanwhile, has been working with another Wi-Fi provider, Row 44, to install a Wi-Fi system on its fleet.)
But no one knows how viable the market for in-flight connectivity can be, given that many passengers, particularly younger ones, resist paying for a Wi-Fi connection. The airlines with Wi-Fi connections have been charging up to $12.95 a flight, depending on the length of the trip, to cover their costs.
Most airlines decline to provide the so-called take rate, or percentage of passengers who choose to pay for the service. But from what I’m told, it has been running at 5 to 7 percent, and is spiking on some flights, like Virgin America’s routes between San Francisco and New York, which attract a lot of business travelers who work in technology industries.
In mid-December, Continental Airlines made a move that further clouded the picture. Continental, which had lagged competitors in embracing in-flight Wi-Fi, announced that it would install Gogo on its fleet of 21 Boeing 757-300 aircraft early this year.
But at the same time, Continental indicated that it was hedging its bets. Continental has also been installing a live in-flight television system, which is now available on 48 of its later-model 737s and is planned for its 757-300s by the end of the first quarter. Those are the same 757s, incidentally, where Continental has decided to install Gogo Wi-Fi.
Continental says it is experimenting with the market. The television system DirecTV offers 95 channels of live television and eight programmed channels, for about $6 a flight. (It is free in first class.)
The DirecTV system also offers a service — free to everyone — called Kiteline, which uses a tiny slice of the broadband spectrum for passengers to send and receive e-mail messages and instant messages. This bare-bones connection does not allow surfing of the Web. But it is free, whereas Gogo’s full-broadband service is not.
Continental’s question is, Will passengers who already have the option of watching television pay for a full broadband connection, or will they be satisfied with the limits of a free e-mail connection?
“Our goal is to try to understand what customers want, and what people are willing to pay for connectivity — which is something that customers are going to be looking for in air travel,” said Jim Compton, Continental’s executive vice president for marketing. “But what does connectivity itself mean?”
There is a lot of money riding on such questions. Aircell and its airline partners say they believe that demand for Gogo will keep growing, especially given the spurt in sales of Wi-Fi-enabled BlackBerrys and other smartphones, which are more convenient to use in cramped airline coach seats than full-size laptops.
“It is dependent to an extent, over time, on hand-held devices,” said Ron LeMay, Aircell’s chief executive. He said that after a sluggish period in the first half of 2009, Gogo was expanding rapidly again.
In the second half of 2009, he said, usage grew “over 10 percent a week, although admittedly a number of those sessions have been promoted sessions” — by which he meant promotional offers for Gogo by other companies marketing to airline passengers.
But he added that paid sessions and revenue had been growing recently by “over 5 percent a week.” Gogo is now looking for more businesses to subscribe to extended plans for traveling employees, rather than depending solely on single transactions in an aircraft cabin. He also said that regional jets, which are increasingly flying longer distances, could be a growth market.
It costs up to $100,000 a plane to install Gogo. Initially, Mr. LeMay said, Aircell paid those costs, but last year the model was changed to require airlines to pay for installation.
As to Continental’s long-term plans, we’ll see how the experiment works out.
“We’re certainly interested in far more than 21 airplanes, but what they’ve committed to at this point is 21,” Mr. LeMay said.
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