Short-haul operators are embracing connectivity, but there’s no ‘one size fits all’ model. Discover who’s on board, and what’s driving the take-up
The cut-throat nature of the European short-haul market, with its tight margins and reliance on ancillary revenue, has seen several airlines struggle to cope with intense competition from rivals. From the UK’s Monarch to Air Berlin and Alitalia, the last 12 months have been a challenging time for some in this sector.
Nevertheless, the low-cost model remains strong. The Financial Times reports that 15 years ago, budget airlines had just over 9% market share in Europe. Today they provide more than 40% of all scheduled airline capacity.
And there is an increasing sophistication at play here, too, as airlines look to create value and relevance for the customer – beyond the price of the ticket itself. The rise of so-called ‘millennial’ airlines, such as Joon and BA’s Level, could represent a new wave of audience-specific, generationally targeted airline brands.
This is where connectivity can help. Clearly, airlines that offer inflight Wi-Fi will be more appealing to a younger, always-on generation. But it goes much further than that.
Connectivity is considered by many to be predominantly a long-haul priority. From the passenger Wi-Fi standpoint, this is due to extended journey times and the better potential returns on investment this would seem to bring. More hours in the air means more time online, in other words.
In the cockpit, too, connectivity is more or less mandatory for long-haul, transoceanic flights, with short-haul still relying on VHF.
Now, however, short-haul operators are seeing the many benefits that seamless broadband provides for them too. From operational cost-savings to better passenger personalisation, here’s why short-haul and connectivity are proving to be perfect partners.
Passenger demand is now sky-high
A 2017 survey of 9,000 passengers conducted by Inmarsat revealed that, despite misconceptions, short-haul passengers have an even higher demand for connectivity than long-haul fliers.
With short-haul, 77% of passengers say they would pay for connectivity on this flight type, an increase of 64% from 2016. Those happiest to pay are passengers aged 25-34, parents travelling with children, and passengers travelling in Asia-Pacific and the United States.
This demand for connectivity in short-haul could be driven by the fact that, in many ways, short-haul is like a daily commute, where checking your phone on the way to work is commonplace. So while long-haul passengers are more organised travellers – they’ll plan to watch several films on the IFE system, for example – it could be argued that short-haul’s commuting mind-set means that those passengers will expect to be able to continue their online life while flying, just as they would on a bus or a train.
It’s a brand differentiator
With every short-haul airline competing on price, connectivity offers airlines a point of difference. Until, at least, all short-haul airlines provide inflight Wi-Fi. This is particularly relevant for non-LCC carriers, as the provision of Wi-Fi makes their higher ticket prices more palatable to potential passengers.
Arguably, the more crucial differentiating aspect, though, is what airlines do with that connectivity. IFC doesn’t just allow passengers to work or check their social feeds in flight – it can also provide a number of data opportunities for airlines, and become a platform for innovation – through enhanced entertainment and retail options, for example. This provides a reason why a passenger might choose one airline over another or pay slightly more for a ticket.
As airlines gather richer passenger data through IFC, they can better personalise their service and offerings. It also multiplies the possibilities for inflight shopping. An open platform that allows passengers to buy anything from their seat, rather than just what’s on the trolley, makes airline retail a far more interesting, and lucrative, proposition.
Expanding the ancillary revenue opportunities
2017’s Sky High Economics study by the London School of Economics bears this out, noting that for low cost carriers in particular (the vast majority of whom are short-haul), an inflight connectivity service is a powerful driver of ancillary revenue.
It noted: “The ancillary revenue model is particularly suited to LCCs, who have in the main pioneered the ‘a la carte’ concept as the core of their ancillary strategy. As such, passengers flying with LCCs have experience with an add-on approach for additional services or features.
These airlines may also exhibit better adaptability at implementing broadband-enabled ancillary services as a result, and stronger passenger take-up. In addition, LCC leisure passengers, and in particular holidaymakers, are likely to have a greater propensity to spend than some other leisure and business travelers.”
In other words, as noted previously, it’s the casual nature of short-haul – where passengers have pre-planned less – that will see them doing, say, destination-based shopping while in flight.
Business travellers need to keep working
Passengers flying for business expect and need the option to work at 35,000 feet. What used to be dead time is now productive time, thanks to IFC. Inmarsat’s passenger survey revealed that more than half (56%) of business fliers said that the ability to work online greatly improved their experience of an airline.
AirAsia recently revealed, for example, that connectivity queries have become one of the most frequently asked pre-flight questions by passengers – many of them business fliers – as online working in the air becomes more commonplace.
It’s boosted by the growing trend of business passengers choosing LCCs as their short-haul flight provider. The provision of a service like IFC, which has traditionally been the domain of full-service carriers, could sway their choice when this passenger type goes to book a flight.
The operational benefits are huge
The modernisation of air traffic management, particularly at a regional level, means that it’s increasingly likely that cockpit connectivity will be mandated for short-haul. This will usher in a host of benefits.
As we know, short-haul is a complex beast. Where long-haul operators generally have a fixed hub and spoke operational model, short-haul regional operators often have more complicated route structures. The increased likelihood of delays and other operational challenges that this creates can be alleviated to a degree by connectivity. When data is flowing from aircraft to ground in real-time, and airline ground crews can receive constant updates on the plane’s operations, then cost-savings – through advanced weather or technical fault reporting, for example – can be made.
There are a variety of IFC models that will work for short-haul
As it’s a still a relatively young development, there’s no ‘one size fits all’ model when it comes to pricing or partnerships. And given the breadth of models currently operating, the coming months and years will reveal whether an industry-wide cost structure emerges, making it easier for passengers to compare like-for-like.
Some current examples include Lufthansa’s FlyNet inflight Wi-Fi solution, which offers three levels of access. Message costs €3, FlyNet Surf is €7, and FlyNet Stream is €12 per flight. While FlyNet Message only allows the use of messaging services such as email, WhatsApp or iMessage, FlyNet Surf also enables passengers to use the internet. With the FlyNet Stream service package, video and audio streaming is also possible.
In the US, carrier JetBlue offers a free high-speed inflight internet service, called Fly-Fi, across its network. Many other US airlines, such as Delta, offer internet access through a time-based plan.
JetBlue passengers can also start a 30-day free trial of Amazon Prime. Once they have download the Amazon video app to their mobile phone or tablet they are free to browse and view Prime movies and TV shows.
Eurowings has also introduced Inmarsat satellite-based inflight internet, with messaging and email services (Hangouts, iMessage, WeChat, Line and Snapchat, WhatsApp – excluding voice and video messages) from €3.90 per flight.
With increasing numbers of short-haul and low-cost airlines activating IFC, it’s clear that inflight Wi-Fi can be a strong ancillary revenue generator. And as a brand differentiator and an integral part of an airline’s digital transformation, connectivity represents the cornerstone of a revolution in commercial aviation.