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Inflight connectivity to boost airlines’ revenues

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airplanes

By Denise A. Valdez
Reporter

THE AVAILABILITY of inflight WiFi is seen as a potential income driver to propel ancillary revenues for airlines, as passengers are growing more digital and in constant search of connectivity.

Global mobile satellite communications provider Inmarsat Aviation said in a recent e-mail interview that offering inflight connectivity may open several revenue streams for airlines, such as broadband access charges, e-commerce shopping, digital advertising and premium content.

“Inmarsat’s Sky High Economics study, developed in collaboration with the London School of Economics to analyze the ancillary revenue opportunity for airlines, shows that if more airlines in the Philippines and around the world begin offering inflight connectivity, they stand to benefit from four new revenue streams,” Inmarsat Aviation Vice-President for Asia Pacific (APAC) Chris Rogerson said.

The report, published on Inmarsat Aviation’s website, showed ancillary revenues for airlines have the potential to expand to $30 billion by 2035 due to inflight connectivity.

Mr. Rogerson said given the forecasted growth of passenger volume in Asia Pacific at 3 billion by 2035, airlines from the region stand to benefit the most from the rise of inflight connectivity.




“Fueled by the growing passenger numbers in APAC — the world’s leading growth market for commercial aviation — airlines here will be the biggest beneficiary with the potential to earn $10.3 billion,” Mr. Rogerson said.

He explained that aside from broadband access charges which are the most direct revenue from offering inflight connectivity, it could also be seen as a platform to facilitate e-commerce shopping, digital advertising and on-demand streaming. These extra services would allow airlines to have additional revenue from both passengers and advertisers.

“The inflight e-commerce opportunity for airlines in the Philippines is — needless to say — huge. Airlines can go from selling very limited ranges of things — delivered by air stewards that will inevitably prioritize service over selling — to purchase anything, including onward travel tickets, destination-focused activities, car hire, or just simply shopping on their favorite online stores,” he said.

“As airlines continue to adopt connectivity services, the focus will shift from earning revenue purely from the connectivity service itself, to developing a wider ecosystem that can expand the opportunities for airlines and their passengers.”

In the first quarter, local carriers Philippine Airlines (PAL) and Cebu Pacific both posted an increase in ancillary revenues: PAL’s climbed 22% to P2.8 billion to make up 7% of the company’s total revenues, while Cebu Pacific’s grew 22.7% to P4 billion to comprise 19% of total revenues.

Mr. Rogerson said airlines must take advantage of the fact that per Hootsuite and We Are Social’s latest digital survey covering data from Jan. 2018 to Jan. 2019, 71% of the Philippines’ total population is on the internet, and a Filipino user spends an average of 10 hours and two minutes online every day.

“Today, consumers expect internet access anytime and anywhere — including in the air. Our 2018 Inflight Connectivity Survey found that two thirds (67%) of passengers in Asia Pacific deem inflight WiFi as crucial, and almost nine in ten (86%) would use inflight WiFi if it were available on their next flight, rising to 92% amongst business travelers,” he said.

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