Aircell Betting In-Flight Internet Will Fly

CHARLOTTE, N.C. -- Within the next year or two, every major U.S. airline will routinely make wireless Internet available to its domestic passengers, says the industry's leading wireless vendor.

Fran Phillips, senior vice president for airlines at Chicago-based Aircell, says the company's broadband system enabling airlines with Wi-Fi enabled devices such as laptops and smart phones to access the Internet, email accounts and instant messaging will be routinely available by 2010.

"We are in various stages of negotiation with most of the major carriers and talking to all of them," Phillips says.

American(AMR - Cramer's Take - Stockpickr) said Wednesday that it will offer the service on its 15 Boeing 767-200 aircraft, which primarily serve routes from New York's Kennedy Airport to Los Angeles, San Francisco and Miami. Two weeks earlier, Delta(DAL - Cramer's Take - Stockpickr) said it would install Aircell systems on its entire domestic fleet by next summer.

Meanwhile, JetBlue(JBLU - Cramer's Take - Stockpickr) and Continental(CAL - Cramer's Take - Stockpickr) plan to offer LiveTV's Kiteline, a competing service owned by JetBlue that offers email connectivity. And Southwest(LUV - Cramer's Take - Stockpickr) is working with Westlake Village, Ca.-based Row 44 to offer satellite-based wireless service.

"It's going to be a carrier by carrier decision, but you can see clearly that onboard broadband access is the wave of the future," adds David Castelveter, spokesman for the Air Transport Association. "This takes onboard communication to a new level."

Airlines aren't yet certain how much revenue onboard wireless will produce. But passengers on both American and Delta will pay the same $12.95 rates on flights longer than three hours. Delta has also announced a $9.95 rate on shorter flights. Pricing was set in conjunction with Aircell, which has revenue-sharing deals with both carriers. Terms were not disclosed. Virgin America, also an Aircell partner, says it will charge for the service but has not yet set a price. In June, American took the system live for a day, testing it on a New York-Los Angeles round trip. Although the test was not announced in advance, about a third of the passengers carried wireless devices and used the service, says Doug Backelin, in-flight communications and technology manager for American. To gauge their willingness to pay, all passengers were given gift cards, usable for either a wireless hookup or another purchase.

At Delta, "We're rolling Internet out quickly and making access available to customers on about 75 Delta aircraft by the end of the year and expanding to the rest of our domestic mainline fleet, 330 aircraft, by next summer," says spokeswoman Betsy Talton. She maintains that the project is "a low capital investment and high revenue opportunity" for the carrier.

Given that it has deals with the two biggest U.S. carriers, as well as with start-up carrier Virgin America, Aircell appears well-positioned.

In 2006, Aircell won exclusive rights for an air-to-ground broadband spectrum in a Federal Communications Commission auction, paying $31.3 million. Subsequently, the company spent tens of millions of dollars to build antennas at 92 sites, Phillips says. The company, financed by investment banks and private equity firms, has not indicated it has any plans to go public.

Its system has the advantage of adding just 125 pounds of weight to each aircraft that carries it. Because most of the equipment is at the 92 ground sites, installation on the aircraft is quick and most of the system maintenance is performed on the ground, Phillips says.

Aircell's system also has a major shortcoming in that it does not work over water, making it unavailable on the longer, international flights when it would seem to be most desirable. So far, Southwest is the U.S. carrier that plans to test a satellite-based system, rather than a land-based system -- even though it has no international, over-water flights.

Phillips says satellite systems require more weight on the aircraft and more installation time. Still, she says, "we're following what's happening in satellite very closely -- if and when the technology becomes lighter and economical, we will be there."