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When It Comes to In-Flight Wi-Fi, Supply Far Exceeds Demand


Rapid technology advancements keep driving in-flight broadband speeds and availability, but passengers seem less than eager to connect.

Increasing data rates, a recent US regulatory simplification, and a steady growth of global in-flight Wi-Fi installations suggest that popularity of onboard Internet access should be booming.

But a number of signs contradict that assumption.

According to the Wall Street Journal, analysts estimate that only 10% of fliers hook up for in-flight Internet; on flights operated by the 100% "Internet-equipped" fleet of Virgin America, the average rate of usage is only 16%. The percentage of US fliers who use their iPads (NASDAQ:AAPL), laptops, and other mobile devices during the flight, is, however, significant at more than 70%, according to a recent survey by IMS Research.

GoGo Inc. the largest in-flight broadband provider in the US, keeps increasing prices and adjusting fee schedules to keep up with its mounting losses. According to its latest filing with the Securities and Exchange Commission, the company lost $9 million on operations in the first half of 2012. Roughly 5% of fliers used GoGo broadband on flights where the service was available.

The situation with onboard wireless broadband is especially dire in global markets, where only a handful of airlines offer expensive in-flight Internet options, primarily on long-haul routes.

European aircraft manufacturer Airbus (EPA:EAD) recently exited from OnAir, one of the largest in-flight connectivity providers. Airbus sold its 33% stake to co-owner SITA, the company providing communication and IT solutions for the air transport industry.
All of Virgin America's planes offer an in-flight Internet connection, but the rate of usage is only 17%.

Boeing (NYSE:BA), the main competitor of Airbus, dropped its similar Connexion project in 2006.

Deutsche Lufthansa (PINK:DLAKY), an online broadband pioneer, said its FlyNet in-flight access equipment had been installed on 80 out of 105 aircraft in its long-haul fleet. The figure is less than 20% of the company's total fleet. No surprise: The cost of installation per plane is estimated at about €330,000 (or $435,000) an investment that's reflected in the high prices passed on to customers.

Passengers of Lufthansa flights are charged €10.95 ($14) for one hour and €19.95 ($26) for 24 hours of Web-surfing while above the ground. Delta Air Lines (NYSE:DAL) offers 24-hour service for just $14, but only on domestic flights.

The difference is no surprise when you look into technology behind each of the services.

GoGo, the provider of in-flight internet to Delta Air Lines and other major US-based carriers, currently relies on the extensive ground cellular tower infrastructure across continental US, so-called air-to-ground (ATG) approach. GoGo equipment for aircraft is relatively inexpensive (around $100,000) and quick to install.

On the other hand, the technology has speed limitations (up to 9.8Mbps) and the connection is obviously unavailable on longer transcontinental flights.
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