London: Starting early next year, travellers on some Lufthansa flights in Europe will be able to surf the web using airborne Wi-Fi that promises speeds and coverage that trounce existing offerings.
The network, which will use Inmarsat’s satellites and Deutsche Telekom towers on the ground, aims to let business travellers check the news and vacationers chat with friends as they jet across one of the world’s most crowded airspaces. While existing inflight Wi-Fi services rely on satellites or terrestrial infrastructure but not both, Inmarsat and Telekom say their hybrid approach offers seamless service at a lower cost.
The partnership is one of at least three ventures aiming to help European airlines catch up with their US counterparts. While travellers can surf the Internet on about 75 per cent of flights in the US, according to airline rating site Routehappy, only a handful of airlines in Europe offer the service.
"Globally, the penetration rate for onboard Wi-Fi is in the three per cent range,” said Brian Pemberton, vice president and general manager at satellite network provider Iridium Communications. "People are kind of scratching their heads. Can the airlines make money with it? It remains to be seen.”
Inmarsat and Deutsche Telekom say airlines can if they use Wi-Fi as a way to increase customer loyalty. Two other companies are also making this pitch to airlines in Europe: ViaSat, which provides Wi-Fi to US carrier JetBlue Airways, and Panasonic, which serves United Airlines.
ViaSat plans to wade into the European airline Wi-Fi business after it launches new satellites in 2017 and 2019, and could offer service once the first satellite goes online, CEO Rich Baldridge said. Panasonic, which currently offers Wi-Fi using rented satellite space, plans to launch its own device to increase coverage, said David Bruner, vice president of global communications service.
While the Inmarsat-Deutsche Telekom offering will provide faster connections than existing inflight Wi-Fi, ViaSat says its service will be even faster. Inmarsat counters that cost will be more important than speed. It’s preparing to subsidize the installation of equipment on planes, saying the service will catch on in Europe only if airlines offer it free of charge.
"Wi-Fi on board will be free, and telcos and airlines will offer it as an add-on in five to 10 years’ time in order to gain passenger loyalty,” Rupert Pearce, Inmarsat’s CEO, said in an interview.
$5 billion market
Pearce estimates the global market for airline Wi-Fi coverage will be $4 billion to $5 billion a year by the end of the decade. He wants to leverage Inmarsat’s relationships with airlines — more than 90 per cent of commercial airplanes worldwide use the company’s satellite-linked safety services — to gain a foothold.
To try to speed adoption, Inmarsat and Deutsche Telekom brought Deutsche Lufthansa on board by subsidising the $250 million cost of installing equipment on its European fleet, Pearce said. GoGo, which provides satellite service to a number of US carriers, has taken a similar approach, sharing revenue with partner carriers once the upfront cost, which it covers, is amortised.
Ground-based systems can cost $100,000 per aircraft to install, while satellite services cost $350,000 to $500,000 per plane, said Tim Farrar, president of TMF Associates and former president of the Mobile Satellite Users Association.
Low-cost carrier EasyJet said it’s talking to providers including Inmarsat, and is ready to offer Wi-Fi soon.
"EasyJet believes it is no longer a question of if but when we are able to install a product that works well for our passengers and the airline,” spokeswoman Eleanor Gillingham said.
Competitor Ryanair Holdings is "waiting on the right technology to facilitate a low-cost entry point so that it is affordable for our customers,” spokesman Ronan O’Keeffe said.
Europe’s lag is due largely to fragmented regulation of satellite spectrum, Panasonic’s Bruner said. Wi-Fi providers have to obtain permission in 28 EU member states, Switzerland, Norway, and other neighboring countries to avoid gaps in coverage.
"It’s confusing to passengers when there are gaps because they want seamless coverage from gate to gate,” Bruner said.
Inmarsat said its satellites should cover some of the gaps in Deutsche Telekom’s network, which has permission to build towers in 20 European countries.
Among the few carriers currently offering Wi-Fi in Europe is Norwegian Airlines, which offers free live news, streaming video, and Internet access using a system built by Los Angeles-based Global Eagle Entertainment, said Chase Burns, a spokesman for Norwegian.
The satellite-based system isn’t as fast as some of the newer entrants to the market: Internet access tops out at 3G mobile-network speeds, which are better suited to sending e-mail or using mobile chat services than downloading movies. When many passengers try to log on at once, the system can get bogged down, Burns said.
"There can be 100 people online at any time, but our Boeing 737s do have 180 seats," Burns said. "Speeds can be slowed down. But we haven’t had many complaints. The product is free.”