Aircell loses a customer

Most of the news regarding in-flight internet connectivity these days has been about airlines adding connectivity to their fleets. There has been one notable exception to that trend, however, and the news there continues to be unsettling. Continental Airlines announced shortly before the new year that they would be implementing both the Aircell gogo product and the LiveTV Kiteline product on their fleet this year. The goal was to have a true comparative trial and determine which product would best serve their customers. Aircraft were initially expected to be equipped in Q2 2010.

That date slipped and then, in something of a surprise move, the LiveTV Kiteline product was binned when the provider failed to produce a cost-effective and functional antenna to meet their connectivity needs. That move left Continental with only their gogo trial, scheduled to be installed on the carrier’s Boeing 757-300 fleet this summer and live in the Q3/Q4 timeframe. That deployment has now been delayed indefinitely according to an internal memo circulated within the company today:

CO pauses Gogo Inflight Internet project
CO is reviewing its options for inflight wireless connectivity in the context of the merger integration-planning process. As a result, CO is going to postpone the initial Gogo Inflight Internet installations, which were planned for the 757-300 fleet, so that CO can determine its inflight Internet connectivity solutions in the context of a merged carrier. The company will announce future decisions about Internet connectivity once they are made.

Neither Aircell nor Continental were available for comment tonight; I’m hoping to get more details from them tomorrow.

Considering that United Airlines already has begun deployment of the Aircell product on their p.s. 757-200 fleet the claim regarding the merger affecting connectivity is a bit thin. Then again, they don’t really need a reason to decide to not spend a lot of capital on a product if they can get away with not having it on board. Even if Aircell is willing to front the cash for the install, which they are according to a Runway Girl report, the airlines are essentially “working off” those costs for most of the initial life of the product. Continental has a similar arrangement with LiveTV and the hardware being installed for the in-flight television product, but without the expectation of ever having to pay off the loan. LiveTV has simply assumed the costs. It appears that Continental is still somewhat apprehensive about assuming the debt load without any evidence that offering the connectivity can drive sufficient incremental revenue on either the ticket sales or the per-session pricing.

In the end it is the customers who lose with respect to connectivity. Hard to know whether that will actually affect passenger loads or revenues – all current evidence suggests the answer is no – but the lack of choice is still not good. As Continental and United move forward in the merger they are already removing one competitor from the industry, in many ways making it easier for a customer to jump ship, particularly if the amenities are better with the other carrier. Too much focus on debt management may prove to be a poor decision in the long term.

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