After the advent of in-flight entertainment in the Indian skies (which made an abrupt exit, even from the international leg of most Indian carriers), the next big thing to catch the aviation industry’s eye is Inflight Connectivity – Wifi on the flight basically. Based on a recent article I read in ET, airlines that don’t provide this service to its customers will lose out.
I wonder though, if none of the airlines in India provide this service, who is going to lose out, and to whom? Looking at the bleeding Indian airline's industry, which is poised to lose almost 2 billion dollars this year, I don’t think anyone is scrambling to pour money into this pit.
Let’s look at the cost benefit first – the investment required to provide this service – that’s a huge unknown. Estimates for this range from $200,000 to $1mn. Pricing the service upwards of Rs. 1000 per hour ($15), makes it corporate passengers only kind of deal. Pricing lower to drive revenue through volume would mean a longer period for break-even and a low ROI. In a cost sensitive market like ours, it’s a no-fly from the very beginning. A more detailed CBA further accentuates the issues.
A closer look at the individual airlines reveals other reasons too. Let’s round up the LCC’s –
a. Indigo Airlines - the leader of the pack, the airline that has mastered the art of cutting the non-essential and selling everything they can. While the prospect of generating additional revenue through wifi is a tempting one, the issue is the upfront investment and the uncertain return. Also, while business travelers do form a large customer base for Indigo now, thanks to their on-time performance reputation, their primary customer base is still the price conscious Indian, who can live without wifi for 2 hours in the air, as long as it saves him money. That further puts the return on investment in jeopardy. So as much as Indigo would love the additional revenue, it’s not worth their dime to provide this service.
b. SpiceJet – This is the airline that was on the verge of bankruptcy, in the not so distant past. And they are not exactly known for being pioneers in their field. They are basically, do-as-Indigo-does. So if Indigo is not doing it, SJ ain’t doing it either. In the off chance Indigo does go ahead with it, given the cash flow situation at SJ, they would still need to wait and watch. But yes, if Indigo does go ahead with IFC, it would put a lot of pressure on SJ and they would actually stand to lose out. It won’t be the worst idea for Indigo to do it, to drive SJ out of the market. However, that’s a fight to the bottom and there is no certainty of winning. We already saw the results of that with the incessant price war.
c. Go Air, Air Asia, other regional airlines – it again boils down to ROI. Also, the initial investment is too high for LCC’s and their barebones business model. Inflight wifi doesn't make the cut. Even if they were disadvantaged by Indigo, their key customer base is price sensitive and wouldn’t mind traveling with them, if the trade-off is wifi versus savings.
So it’s safe to say LCC’s are not boarding the IFC flight anytime soon. The full service carrier is a slightly different animal though and there is some hope, but that hope if also quite dim:
d. Air India – Don’t know where to start? This is an airline that’s in perpetual financial crisis and currently looking for a buyer. Also, providing groundbreaking product and service is not their USP. The only thing they have going for them is the fact that taxpayer’s money is cheap and easy to spend. The way this works is if they don’t find a buyer, the bosses who decide to continue feeding this bottomless pit, and bureaucrats at AI are able to spin IFC as a differentiator for attracting customers and increasing revenue. Time will tell if this is how it goes down, but I’m not betting on it.
e. Air Vistara – Vistara has differentiated itself as being the airline with its fingers on the pulse of the market. They gambled with premium economy, given the short length of the average flights and the price sensitive customers, and so far it seems to have been well received by the corporate passengers. They judiciously did not spend money on the entertainment system. And financially, they are in a good position to bring the IFC to this market, given their investors have deep pockets. Question is, why would they? Vistara is still in the growing stage, and their network is still quite weak. They don’t have the best time slots in many airports, which makes them a second choice, or even third for most passengers. And being an FSC, their tickets aren’t cheap, pushing them further down the boarding line for many a customer. Vistara has bigger priorities than onboard wifi.
f. Jet Airways – the only ones who probably have some capacity to do it. They have the in-flight wifi service for streaming their entertainment content. So maybe they have some infrastructure in place and so the cost of doing it might be lower. The problems though are many:
Jet is currently going through a major financial turbulence.
In order to shore up money, they are cutting down on even essential things like food. So they are not in a position to invest money on wifi servers, while they are struggling with paying salaries.
Their key backer Etihad is dealing with their own crisis and probably
They are currently trimming staff, trimming operations and selling jet miles to ride through the financial crisis. Not the time to invest in costly ancillary services.
Another thing worth considering is - do people really need this service? Now, this is purely conjecture on my part, but I think one can afford to be out of touch for the length of a domestic flight. Average flight time in India is less than 2.5 hours. Assuming this service does make a debut, between take-off and landing, the service would be shut down for anywhere between 33% - 50% of the flight time. So what we are talking about is basically a low bandwidth connection for around 1-1.5 hour. A Facebook update here, an Instagram picture there and some emails for the consultant types (probably without an attachment). Is it worth the price tag?
Final thoughts: Despite all my skepticism, I do hope airlines are able to introduce wifi, if not on the domestic routes, at least on the international long-haul routes. By outsourcing the service to an internet provider, airlines should be able to reduce their investment significantly and by selling ads they should be able to generate additional revenue to make this a viable option. Airlines like Emirates are already providing free internet service even to the economy passengers and that significantly impacts our competitiveness in this cut throat market.