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In-flight Wi-Fi: High cost of deployment may deter airlines

The Government may have started giving out licences to operators for offering Wi-Fi services in domestic flights, but it may be a while before passengers get to access Internet at 30,000 ft. High cost of deploying the service, bleak financial conditions of the aviation sector, in general, and lack of clarity about the business model may come in the way of offering in-flight Wi-Fi services.

“Airlines are bullish, but it will take longer than expected due to the financial crunch they are facing at the moment,”said Partho Banerjee, President and Managing Director, Hughes Communication India Ltd (HCIL), one of the companies to procure in-flight and maritime connectivity (IFMC) licence from the Department of Telecommunications.

Last December, the Centre had decided to provide the IFMC licence that allows service providers to partner with Indian and foreign airlines, along with shipping companies, to provide in-flight and maritime voice and data facility via on ground telecom network or using satellite.

“It will take 3-4 years for their entire fleets of the airlines to be connected,” said Shivaji Chatterjee, Senior Vice-President and Head Enterprise Business, Hughes Communications India Ltd.

An aircraft needs to be grounded for at least two days to install the system. A flat antenna needs to be fused and retrofitted on an aircraft to connect to the satellite. This means commercial losses for the airline and they are currently not in a position to idle any aircraft.

The other option is to install the antenna when the aircraft is brought in for maintenance. It takes around ₹3 crore to install the system on an aircraft. “To get the airlines to take the plunge now is going to be a task. Full-service carriers such as Vistara could look at adopting the service, but airlines want to focus on the return on investment first,”said Chatterjee.

Service providers also point out that the Indian mindset of wanting ‘free Wi-Fi’ might pose a problem for the airlines.

Business models

“Unless it is offered free at the beginning, people will not adopt it,” said Banerjee. There are three models that airlines could opt for. One, is to offer different packages at different price points. Services like ‘message only’, ‘Email only’ and ‘content streaming-social media’ which could cost anywhere ₹100-500 per user.

Citing the example of Southwest Airlines, Chatterjee said, “They offer paid Wi-Fi services at speeds of 1-2 MBPS per user which allows them to stream videos. Adoption rate is high at 15 per cent.”

The other way is to add a calculated cost to the ticket. The third way is to absorb the cost entirely, and offer it like an amenity to the customer just as Japan Airlines does.

According to PJ Nath, Managing Director and CEO of Nelco Ltd, a Tata group company which has taken the IFMC licence, the shipping sector may adopt the service first.

“It takes approximately ₹3 crore to install the system on an aircraft versus ₹30-40 lakh on a ship,” Nath said.

“Our view is that the maritime market may take off faster than that of the airline business because the complexities involved in terms of getting an aircraft ready for the service will take more time than a ship,” he added. Technicians can install the system even when the ship or the vessel is on the move.

Source: The Hindu