Is free inflight wi-fi the way forward?
As the adoption of inflight connectivity amongst airlines in the Asia-Pacific region steadily increases, the focus is firmly on how best to monetise the service
Many airlines in the region are offering passengers free access to inflight Wi-Fi, looking to recoup on the initial investment and cover ongoing costs, either by driving loyalty through an enhanced passenger experience or via third party sponsorships. Could APAC be leading the way by defining the way data is consumed in the air?
It certainly seems that more and more airlines in the region believe in a free model. Take Air New Zealand for example, the airline recently decided to convert its free trial period into a permanent offer and is now giving passengers connectivity completely free of charge throughout the duration of its flights.
And it’s not just full-service airlines doing it either, Indonesian low-cost carrier, Citilink is offering inflight connectivity completely free of charge to all of its passengers.
- With the numbers of advertisers using second and third-party data set to rise to 64 percent in the next two years, this rich data could prove very lucrative for airlines
What’s in it for the airlines?
These are digitally-savvy and innovative airlines, who haven’t made the decision to offer free connectivity lightly. Yes, they are keen to offer an outstanding passenger experience but they are also keen to capitalise on the huge potential to earn ancillary revenues, through the data they collect as passengers use onboard Wi-Fi services.
It makes perfect sense in an industry with constantly shrinking margins, to consider how they can benefit from the rich data and analytics they capture as they carry hundreds of millions of passengers around the globe.
Beyond the direct charges for passenger connectivity plans, the increased use of data onboard results in the airlines learning more about passengers. And as the airlines gain a greater understanding of their passengers’ needs and preferences, they are able to offer third party advertisers and sponsors immensely targeted reach to this captive audience.
Data holds value
With the numbers of advertisers using second and third-party data set to rise to 64 percent in the next two years, this rich data could prove very lucrative for airlines.
Mahata has already partnered with third party advertisers to support their free of charge service across the Garuda and Citilink fleets; the online travel agency, Tiket.com and the recently announced Aeria Interactive, who are an online gaming and AdTech company.
Taking a long-term view, Mahata see funding passenger connectivity as an investment because the more megabytes used onboard, the deeper the value of the data to advertisers.
Mahata has publicly stated that its third-party sponsorship is more than compensating for the costs of installing and operating inflight broadband. This is rather impressive when you consider that the service only went live at the beginning of the year, and bodes well for the free model.
- Mahata’s recent announcement of a successful round of financing, to the value of US$ 21m, which will be used to finance hardware on their “zero CapEx, zero OpEx” model to the airlines, shows the faith investors have in the third party financing model.
Beyond the data
Of course, inflight connectivity’s value proposition goes beyond data, and into the realms of loyalty and competitive advantage.
Air New Zealand, known for its fresh thinking – the award-winning Skycouch is a prime example - has moved away from monetising its connectivity service through selling sessions, and has seen the bigger picture in offering the best passenger experience to its guests. And as far as the airline is concerned, GX Aviation is the best onboard Wi-Fi for its passengers.
“The free model is a trend we are seeing more and more in APAC,” explains Chris Rogerson, Inmarsat Aviation Regional Director for APAC. “I see it as a strong endorsement for our GX Aviation broadband solution because airlines are showing that they have real confidence in the network.”
Air New Zealand is a perfect example, emphasises Rogerson. “It has an international fleet of wide-body aircraft, carrying 300+ passengers, yet it has a completely free inflight connectivity proposition. That means that they know the network will deliver, not just today but also in the future with our next generation satellite capacity. I think that’s a very powerful validation for GX Aviation”.
What have the results been so far?
It’s early days for most airlines in the region, who have only recently installed inflight connectivity and have been trialling different models.
The trend is looking good so far, with Citilink’s technology partner Mahata Aero Teknologi, announcing at 2019’s AIX conference, that it was achieving an 80 percent take-up rate over the last month on its aircraft. This is the highest rate that’s been reported anywhere globally.
This high take-up rate is a reflection of the growing demand for connectivity in the region. Asia Pacific has been the biggest contributor to global mobile phone subscriber growth in recent years, with 2.7 billion unique subscribers recorded in the region at the end of 2016. This represents two thirds of the region’s population and more than half the world’s mobile subscribers.
It is predicted that by 2020 there will be more than 3.1 billion mobile subscribers in APAC, representing three quarters of the region’s population. It is also predicted that by the end of the decade, 600 million people will have gained access to the mobile internet across the region, which equates to just over 63% of the population.
- With internet access so readily available to the majority of the population in the region, it’s easy to see why inflight connectivity has moved from being a “nice-to-have” proposition a few years ago, to a “must-have” for most passengers.
Long live the connectivity ecosystem
As airlines continue to adopt connectivity services, the focus continues to shift from earning revenue purely from the connectivity service itself, to developing a wider ecosystem that can expand the opportunities for monetising passenger data.
The opportunities and relationships being built in the APAC region are opening the door to new thinking and giving airlines around the world something to think about.