Press release
In-flight cellular services may be not be profitable for airlines, slowing
future deployment
MENLO PARK, Calif., Sept. 29 /PRNewswire/ -- A new report from
Telecom, Media and Finance Associates, Inc. (TMF Associates), "The
Market for In-Flight Passenger Communications: Lessons from Connexion"
forecasts that widespread deployment of in-flight cellular services could be
limited to those airlines who can justify investment in passenger connectivity
as a service differentiator, since many airlines may be unable to demonstrate
a compelling direct return on investment in these services.

While rapid deployment of in-flight cellular could produce annual end user
revenues of more than $600M from 4500 equipped planes by 2016, a
failure to generate sufficient ROI for airlines may result in revenues of less
than $200M from under 1800 equipped planes.

Tim Farrar, author of the report, commented "A key lesson from the failure
of the Connexion-by-Boeing system was that low usage, leading to
insufficient revenue per equipped aircraft, results in airlines having to
subsidize the cost of equipment. We estimate that the in-flight cellular
services offered by OnAir and AeroMobile, using Inmarsat satellite
equipment, will need to generate much higher end user revenues than the
$100,000 per plane achieved by Connexion, before the service reaches
breakeven for airlines on a standalone basis. Only then will it start to
become attractive to low cost carriers. This represents a challenging
objective since in-flight cellular calling will remain a premium-priced service,
targeted primarily at the limited number of frequent business travelers who
need to remain constantly in touch. However, terrestrially-based
Air-To-Ground (ATG) systems, such as that planned by AirCell in the US,
are expected to use lighter, cheaper equipment and thus may be profitable
at much lower levels of end user revenue. As a result, widespread
deployment of in-flight Internet access may be easier for US airlines to
justify".

The report provides airlines, equipment manufacturers, service providers
and analysts with a comprehensive re-evaluation of the in-flight passenger
connectivity market and the lessons from the failure of Connexion-by-
Boeing. It discusses proposed connectivity services and the views of
airlines, passengers and regulators, and analyzes the business air traveler
market in detail, including spending on comparable existing services. The
report examines rapid and slow deployment scenarios for in-flight
connectivity, analyzes the key factors that will determine which scenario is
realized, and provides ten year market forecasts of deployment and
revenues for in-flight cellular and Internet access services by region of the
world and passenger type. Conclusions are drawn about the size of the
opportunity and the implications for airlines, passengers and service
providers.

For more information about the report, see
http://www.tmfassociates.com/aero

TMF Associates, headquartered in Menlo Park, California, is a leading
consulting and research firm providing business and technical analysis in
satellite, wireless and broadband telecommunications. The firm specializes
in Mobile Satellite Services (MSS), including Ancillary Terrestrial
Component (ATC) technology, and works with operators, investors and
equipment manufacturers to analyze complex market issues. For additional
information, please visit
http://www.tmfassociates.com.

CONTACT:  Tim Farrar, President
Telecom, Media and Finance Associates, Inc.
650-839-0376 or tim.farrar@tmfassociates.com
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