If you’re a travel manager or travel buyer, you must be aware that all of your travelers are spending money to get connected while they’re in the air. But is that expenditure visible to you? We spoke with two of our experts; Katie Raddatz, Director CWT Solutions Group Americas, Air; and Chad Guillory, Director CWT Solutions Group Americas, Ground & Emerging Practices, to take the pulse of in-flight wi-fi from a travel manager perspective. We got the travelers’ take on in-flight wi-fi in a post on June 18.
Savvy: Where do airlines innovate next? How quickly are they moving toward higher speed, going satellite rather than cellular?
KR: In the U.S. for long haul domestic flights and globally for international travel, carriers are moving from air-to-ground systems to satellite because of the functionality to provide it. More carriers are investing the money for their long haul and international routes because they have the higher yield and revenue of a business class passenger to offset that expense.
CG: I read an article which makes sense to me: If you think about how hotels do it, a lot of them now have two plans. One of them is the free plan, where if you just want to get you or your kids connected so they can do something. It’s kind of slow, but it’s kind of free. The other option is, pay $10 and get five times the speed. I could see that going to planes. If you want to log in quickly and check social media, that’s free. If you want to download two 5-10 MB files and send and receive and do your business, there might be a higher rate of speed connection available.
KR: I think the other piece is a model where depending on what seat you buy, it comes with accessibility. Today Delta does it with Delta Studio, their in-flight movies and entertainment. The segmentation within your cabin, with your seat determining what amenities you get, I see that being the next layer. If we can’t upgrade everyone in the frequent flyer program, what are other ways we can reward them for their loyalty? If we weren’t able to upgrade you, as a platinum traveler, here’s something that has a quantifiable value to it and probably doesn’t cost the carrier very much. I see carriers moving towards that type of offering. Obviously, it’s a revenue share that they’re giving up but it’s a value add that today doesn’t exist.
Savvy: How much revenue are we talking about?
|More about in-flight wi-fi
Katie and Chad discussed connectivity in the air from the traveler perspective as well. Are travelers satisfied? Will the pricing change? More in CWT Savvy Traveler.
KR: We don’t know how much it is for wi-fi alone, but the size of the ancillary market was expected to be $50 billion worldwide for 2014. Carriers are very hesitant about sharing that information. I call it the holy grail of data. But it’s sales of preferred seat assignments, early boarding benefits, frequent flier miles sales to partners, checked baggage fees, onboard drinks,snacks and meals, but wi-fi is a huge piece because of the price point. Think of it: For a one-hour flight, people are paying $12.95. That’s decent revenue, even if they only get 50 percent of it. It’s sizable – multiplied by 250 seats on an airplane, times however many frequencies a day, that adds up. It’s money today that from a corporate discounting standpoint is untouched. Clients are trying to tap into it, but it’s not anything we’ve had success achieving from a carrier.
Savvy: So clients would like to manage this, but are unable to do so.
KR: Correct. They have not had the response from the suppliers that they’re willing to negotiate on that. One big key is getting their arms around the value of that spend, because oftentimes that spend comes through a different channel. How do they consolidate their data to understand the spend on carriers from travel and entertainment expense data?
CG: I was on a flight a couple of different times where you can get free wi-fi if you do something specific, like watch a three-minute video from a supplier and you get 30 minutes free.
Savvy: That’s the model for free wi-fi in a lot of airports.
CG: Similar thing.