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Web onboard can at best be characterized as a field trial today. According to market research firm In-Stat, the airline industry expects to have nearly 800 planes providing broadband Internet service by the end of 2009, a mere 2.9% penetration of the worldwide fleet. While some carriers with small brand new fleets like Virgin America have been first to offer the web on every flight, others with larger operations and older aircraft are selectively deployed on their heavily traveled business routes only. At an average cost of US$50,000 per plane the industry is facing an investment of at least US$1.3B to retrofit existing aircrafts. Given the rate of aircraft churn don’t expect to be surfing the web on your average flight anytime soon. It’s more likely that take up will be spurred by new plane orders where the WiFi hardware is built in at the factory.
Airlines already operate substantial revenue producing internet businesses with their corporate branded web sites serving as virtual travel agents and more. Passengers conveniently and frequently book flights, pre-order meals, buy travel insurance, rent cars, reserve destination hotels or purchase holiday packages on these sites. Orders can be paid for by credit card, direct withdrawal from one’s bank, a web payment service such as PayPal, or loyalty rewards. As a result, airline web sites have become some of the most popular destinations on the web today. According to Sea Mountain, flight bookings alone represent 60 percent of the US$90 billion online travel industry annually.
Airlines have managed to rapidly grow their online business portfolios with partners who have aggregated various travel products and services and whose content and transaction engines are virtually embedded on the airline web sites. The content is changed dynamically to reflect customer preferences and new travel offers. Carriers are paid a commission or a transaction fee for presenting their passengers to their web content partners. Partners may also pay for any advertising on the site. While some operators have chosen to focus solely on travel options other carriers are creating full-fledged shopping portals spurred by their growing non-travel related loyalty reward purchases. Whatever the objective, airlines have for the most part used a ‘walled garden’ approach with partners, that is controlling and charging for access, to develop and differentiate their online brand and offers.
Few doubt that air travel will be completely web-enabled within the next 5-10 years, the deteriorating economy notwithstanding. Forrester Research suggests that half the traveling public will be connecting, especially on long haul flights, once this transition is complete. A small number of Internet Service Providers (ISPs) to airlines have sprung into action with time-based fee service models that most travelers are accustomed to (the same models are being used by hotels and airport roaming service providers). With the promise of ‘all you can eat’ web onboard, airlines are now faced with the complex challenge of integrating this service with their traditional online, onboard retail and in-flight entertainment operations.
So what’s the right ecommerce approach with the web onboard? The answer may be found in this simple question: will you allow your passenger to buy your competitor’s airline ticket onboard? Airlines have little option but to continue with the walled garden design onboard. Only this approach will maximize onboard revenues, differentiate service, and personalize the passenger travel experience. ISPs simply facilitate wireless connectivity. With the integration of a real-time retail transaction platform, such as the industry-dominant GuestLogix model, the walled garden can yield even more transaction efficiencies, security and revenue opportunities with passengers.
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