Late last year, we were contacted by an airline that wanted our opinion on whether free-of-charge IFC is set to become the norm in the future. They were interested in what other airlines were intending to do and wanted to gain more insight into which carriers already offer free Wi-Fi around the world.
With IFC becoming more of a hygiene factor than a nice to have, free offerings have become a hot topic in the marketplace. Furthermore, as airlines look towards recovery and how they can draw passengers and gain an edge against competitors, they should not forget inflight Wi-Fi as a market differentiator – and importantly the power of free. We decided it was time to explore this issue by investigating what these free IFC offerings looked like and the prospect of ‘free’ turning into a growing trend.
After surveying 30 different airlines with free IFC offerings, we were able to establish a clear trend of increasingly free inflight Wi-Fi offerings, over the last two years, which we examined in more detail within a white paper.
Why offer free IFC?
Our research pointed to several factors that are driving the free of charge IFC offering. Firstly, there’s rising demand for free access to Wi-Fi in the sky, as over 80% of passengers in advanced economies own a smartphone. Most of them pay a monthly cellular network subscription fee and expect to be able to access data no matter where they are – work, home or even on the underground. So, why should air travel be any different?
Beyond passenger demand for online experiences, COVID-19 may boost the roll out of free Wi-Fi services for a specific reason. At the end of May, IATA published the COVID-19 Aviation Health Safety Protocol, giving guidance to reduce sales of onboard duty free goods, food and beverages, and touch-based payments where possible. Many are also predicting that airlines will remove seat-back cards and inflight magazines to minimise risk of virus spread.
Secondly, increasing competition within the aviation industry is driving airlines to gain competitive advantages wherever they can. Industry analysts estimate that the number of aircraft offering IFC will grow by more than double over the next 10 years, from 7,400 aircraft in 2018 to 23,000 in 2027 due to demand. That means that just offering IFC will no longer be a differentiator for airlines, instead, they will need to use connectivity in a way that differentiates them and that’s where free-of-charge access can come in.
Thirdly, as new satellites are launched, the bandwidth available to passengers is increasing, in fact overall very small aperture terminal (VSAT) satellite bandwidth is set to reach an expected 120 Gbps in 2025. This higher bandwidth means that passengers can experience connectivity in the air as they do on the ground, giving them access to data-hungry services, such as video streaming, live TV and gaming. These services provide ample opportunities for airlines to earn ancillary revenue through retail, advertising and sponsorship partners.
And lastly, industry analysts have reported reduced airtime wholesale pricing over recent years and predict that this trend will continue for the next few years. This lower price encourages investment by airlines and makes third-party sponsorship an easier sell.
Free IFC has been shown to drive passenger take up rates up to 30%, from under 10% for paid IFC. This larger audience size further enhances the appeal of partnership to retail, advertising and sponsorship partners, who are keen to reach these captive audiences, often in the mood to spend as they begin their holiday.
Another new model has arisen due to reduced airtime pricing, which is attractive to mobile network operators. These telecommunications companies are keen to conquer the final frontier of connectivity, by extending their coverage into the aircraft cabin through roaming distribution agreements.
In fact, the latest example comes from Germany, where Deutsche Telekom has just announced that its residential customers will be offered free inflight broadband, powered by Inmarsat’s award-winning GX Aviation solution, on all domestic, short and medium haul flights operated by Lufthansa Group. By enabling this advanced roaming service, and allowing subscribers of mobile network operators and Wi-Fi service providers to automatically access the inflight Wi-Fi service, we can overcome some of the barriers to WiFi such as cost and difficulty in accessing.
Inmarsat is also currently trialling a new Wi-Fi roaming technology, called Passpoint, to allow passengers to seamlessly roam in the air, just as they do with terrestrial roaming services.
We are working with some mobile network operators and are on the cusp of bringing this cutting-edge service to customers. Once in place, a SIM card-based solution would lead to automatic authentication, as passengers boarded the plane, meaning they would be connected to the inflight Wi-Fi without lifting a finger. This will have a significant impact on take up rates.
Under these kinds of agreements, the airline would sell the IFC airtime on a wholesale basis to the mobile network operator, and the network operator would provide its customers with IFC that was covered by their monthly phone charges. Everyone’s a winner.
About the author
Elizabeth Sanderson is Airline Proposition Manager within the Retail Revenue Management team for Inmarsat Aviation with a focus on driving revenue and take-up rates with our airline partners.
Prior to joining Inmarsat, Elizabeth worked within the aviation industry for airlines including Continental Airlines, United Airlines, Delta Airlines and British Airways in a variety of roles including sales, strategy, product, distribution and alliances.