Canadian airlines are pushing for new revenue streams from onboard wireless services, including Internet shopping, but questions remains about regulations and the technology infrastructure to support in-flight WiFi in the country.
Gregg Saretsky, chief executive officer of WestJet Airlines Ltd., said his company is currently in talks with U.S.-based ground-to-air service provider Gogo LLC and another company providing satellite service that Mr. Saretsky didn’t name to offer WiFi onboard to passengers, possibly by the end of this year or early 2014.
“I would say before the end of the year we will have a definite agreement with one or the other of those two vendors. And the first aircraft will be equipped shortly thereafter,” Mr. Saretsky said Thursday.
For some, the lack of network access on flights provides a rare chance to detach from the daily barrage of e-mails and online connectivity. But Canadian travellers increasingly expect WiFi to soon be offered on flights, as it is by American carriers such as American Airlines Inc., Delta Air Lines Inc. and United Airlines Inc. and a number of overseas airlines, Mr. Saretsky said. Air Canada has been offering WiFi on flights from both Montreal and Toronto to Los Angeles, in U.S. airspace. But the ground-to-air service doesn’t yet exist in Canada.
Passengers on a plane get WiFi service as they pass over special towers beaming their network coverage skyward. Passengers on U.S. flights using Gogo’s network can begin accessing the network once the crew gives the okay at an altitude of 10,000 feet, the minimum set by the Federal Aviation Administration.
Transport Canada spokesperson Maryse Durette said Canadian regulators are currently re-examining prohibitions on the use of wireless transmitting devices in flight. In the U.S., Gogo’s service is allowed because the company bought a spectrum of frequencies from the Federal Communication Commission allowing air-to-ground communication. The FAA prohibits the use of radios in cellphones in flight.
But as regulations evolve, airline executives foresee new revenue streams, including commissions from onboard shopping.
“The key to freeing onboard [purchasing] in a meaningful way is connectivity,” said Air Canada CEO Calin Rovinescu, speaking this week at a panel discussion on ancillary fees and revenues at the annual general meeting of the International Air Transport Association in Cape Town. “I’ve analyzed our top 25 ancillary revenue categories and for us, the onboard component is still very small,” he said, lagging well behind fees for extra baggage, ticket changes and upgrades.
“As soon as we get WiFi consistently, we’ll see those levels quite differently,” Mr. Rovinescu said.
WestJet’s Mr. Saretsky sees revenue from commissions on purchases and other Internet services. “People on board an aircraft would have a unique identifier that they are coming from a WestJet flight. So the retailer would be able to see that this is coming from a WestJet flight, and we would get a commission, a stream of revenue.”
WestJet is considering a pay-per-use system in which passengers would open up their laptops or tablets and are then greeted by the plane’s WiFi connection. Some services would be free of charge, however, such as purchasing WestJet tickets, Mr. Saretsky said.
He doesn’t envision this as a major stream, noting that on average only 5 per cent to 10 per cent of U.S. travellers take advantage of the service on WiFi equipped planes. Instead, it would be intended more as one of many features primarily for business travellers.
“It’s a relatively small segment that is availing themselves of that service. And most are surfing the Web and or doing business, checking e-mails. They are not transacting in big numbers. So the revenue stream is small.”
Yet, according to John Thomas, head of global aviation at L.E.K. Consulting, onboard WiFi purchases is still an enticing opportunity for carriers. “When people get on an aircraft, they’re actually in a great retail mindset. After an hour into the flight, they start to relax and their minds open.”
Bert Archer is a freelance writer