United has now joined the North American airlines signing up to fit the Aircell service for in-flight Internet connectivity. Similar to American, it is initially just installing the service on its P.S. business-oriented cross country flights between JFK and LAX/SFO (though American also includes some 767 flights to MIA). Undoubtedly this is a great boon for business travelers, and our experience of the service was excellent. However, to date it looks like overall usage levels are very low, since few leisure travelers are willing to pay $12.95 even for a five hour flight.
On a American SFO-JFK afternoon flight last October, we decided to walk the plane and count the number of users: the result was 8 out of 34 business and first passengers were using it, but only 2 out of about 110 economy passengers. I’m sure American is pleased with this – since the high revenue customers at the front of the plane are happy, but the amount of money flowing to Aircell is far from enough to pay for the network. We understand that to date Aircell has installed the equipment for free, so the only cost to the airline is the fuel to fly it around.
Based on the usage levels we saw, gross Aircell revenue is probably only ~$60K-$80K per plane per year, less even than the $100K seen by Connexion-by-Boeing back in 2006. Connexion had many of the same characteristics – giving away equipment, a high fixed cost network (in that case global satellite capacity leases rather than a national tower network), a large staff, and was also a great service for passengers and airlines. There are a few differences, most notably that the Connexion equipment was much heavier and more expensive than the Aircell terminals, but also that Aircell can supplement its passenger revenues with installations in the business jet market. However, Boeing ultimately decided it couldn’t afford to continue to run the service, as did Claircom, Airfone and others with their earlier voice services. In the current financial climate, we wonder if Aircell’s network will be able to avoid the same fate? Certainly they seem a long way from the prediction of 2000 equipped aircraft by the end of 2009 made by Aircell’s CEO last summer.