Aircell L.L.C. CEO Jack Blumenstein looks into the future of in-flight Internet services and sees an aircraft devoid of television monitors or screens on the back of seats. Blumenstein envisions travelers watching movies, playing games or surfing the Web by connecting their own personal handsets to an on-board Wi-Fi network.
This type of in-flight entertainment is still years away, but the groundwork was laid last year for the market to take off.
“It is clearly a watershed year,” Blumenstein said of 2008. “It all happened.”
Blumenstein said Aircell is positioned to succeed in a market that has failed to take off with prior attempts.
Two years ago, Aircell bid $30 million for spectrum that was auctioned by the Federal Communications Commission. Verizon Communications Inc.’s Airfone division owned the spectrum, but it was put up for auction by the FCC after the telecom giant made an unheard of decision to return the spectrum as the Airfone service was not being widely used by travelers.
Biz model
Blumenstein said the Airfone service was costly to build and operate. The custom network required custom equipment, which had to be installed on aircraft and included phones placed on the back of seats. The service itself was also costly.
Blumenstein said Aircell at one time looked at buying the Airfone service but decided against it. Aircell decided that its business model for air communications should mirror what is happening on the ground regarding wireless communications. The company’s Gogo network is an air-to-ground broadband system that utilizes cell towers.
Aircell also decided to get away from the voice aspect and provide Internet service for passengers who use their own handsets or laptops to surf the Web. The cost for a coast-to-coast flight is $13 and $10 for flights shorter than three hours.
“What we provide is great value,” Blumenstein said. “Contrast that with $10 for a three-minute phone call.”
In August, American Airlines became the first domestic airline to offer in-flight Internet service to its passengers using the Gogo network, offering the service on some transcontinental flights.
Aircell also has contracts in place with Virgin America, Air Canada, Delta Air Lines and is negotiating with other airlines, Blumenstein said.
As many as 2,000 airplanes could be equipped with Gogo by the end of this year.
The company will also sell Gogo to private jet owners. Blumenstein said Wi-Fi access for a private aircraft will be about $1,500 per month.
“There are huge opportunities in that market,” he said.
Equipment partner
As Aircell continues to partner with some of the largest domestic carriers, Georgia-based EMS Technologies Inc. is making significant moves to be a leader in providing equipment necessary for in-flight communications.
Last year EMS said it spent more than $100 million to acquire companies to bolster its infrastructure offering. When it comes to providing in-flight Internet services, Domorski said the company is positioning itself to become the leader in providing equipment for such networks.
“We handle the plumbing of the business,” he said.
In late December, Delta launched the Internet service on a handful of planes, and plans to expand its offering this year to its main fleet of 330 aircraft.
As this year unfolds, Blumenstein said Aircell will offer games, movies and other entertainment to travelers over its network. Aircell is working with distributors and companies that own rights to games and movies. Blumenstein said there will be free content, as well as “on-demand” entertainment for a fee.
Paul Domorski, CEO of EMS Technologies, said in-flight communications will be a booming market in the commercial and private sectors. He likens the industry to when Wi-Fi was first introduced at hotels.
“Wi-Fi at hotels is now an expectation,” he said. “We believe the same will happen in the air market. We will see rapid growth.”
