Can This Plan Save the Airlines?

Pay-to-play Wi-Fi access has helped to make Starbucks (Nasdaq: SBUX  ) a popular destination. Can it do the same for airlines? Many carriers are betting that it will.

The New York Times reports that all big carriers save for Continental Airlines (NYSE: CAL  ) are investing in in-flight wireless access as a revenue enhancer. Of course, airlines have talked about this for years now. What makes the Times story different is that contractors are retrofitting aircraft as I write, and for $100,000 per plane in the case of AMR's (NYSE: AMR  ) American Airlines.

Southwest Airlines (NYSE: LUV  ) may be spending even more than that with Row44, the Times reports. The company's satellite-delivered in-flight service offers broadband access and live TV delivered over Internet Protocol (IP). Call it the cruising altitude version of Verizon's (NYSE: VZ  ) and AT&T's (NYSE: T  ) fast-growing cable replacement services.

Skeptics wonder if passengers will pay for Wi-Fi, yet executives are apparently eager for access. A poll released on Tuesday and sponsored by the Wi-Fi Alliance, a trade group, says that more than three-quarters of travelers surveyed would choose a carrier based on whether it offered in-flight Wi-Fi service, and more than half would wait a day to travel if it meant being able to connect in the air.

Those are impressive numbers, to be sure. But I wonder if the relatively small sample size -- 480 frequent business travelers, including 150 who used in-flight Wi-Fi during travel the week of Aug. 11-18 -- skew the results. Would most business travelers pay $12.95 to get on the Web while in the air? That's debatable, I think. So-called "take rates" reported by carriers offering in-flight Wi-Fi suggest that fewer than 10% of passengers choose to pay for the service when given the choice, the Times reports.

Carriers need as many revenue-generating ideas as they can get, and, over the long haul, Wi-Fi access seems to be as good as any. But given the cost, time, and existing data, the short-term benefits of wireless access may prove to be as ephemeral as the connections themselves.

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Fool contributor Tim Beyers didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool owns shares of Starbucks and is also on Twitter as @TheMotleyFool. The Fool's disclosure policy asks that you please stow your tray tables for take-off.


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  • Report this Comment On September 03, 2009, at 8:51 PM, mariks1701 wrote:

    You Guys are truly fools. I am truly surprised you didn't figure out how to bash Boeing in the same article. Between bashing Cal & Boeing do you ever do anything else.

    On board WI-FI is just going to bring on the inevitable some obnoxious guy sitting next to you for 3 hours on Skype talking loudly or a college or high kid chatting back and forth with the boyfriend or girlfriend "oh I miss you pookey" Enjoy your flight!!!!

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