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Author: Tan KW   |   Latest post: Wed, 29 Jan 2020, 3:29 PM


AirAsia looks beyond the pipe for inflight connectivity value

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Selling inflight connectivity packages to passengers proves to be a poor business proposition. Prices are high, take rates are low and the economics rarely deliver a return to justify the investment. So when an airline commits to a full-fleet deployment AND says it can be a revenue positive move that’s worth digging into. AirAsia expects to have 100 aircraft fitted with satellite-based inflight connectivity by the end of 2019, and sees a light at the end of the tunnel, where the investment starts paying off relatively soon.

It was never just about giving a pipe and letting passengers do whatever they want. What we’re more focused on is making sure WiFi is used for other services, e-commerce and advertising. WiFi is used to draw customers to the portal. And on GX it is going to give customers a better experience.

– AirAsia WiFi CEO Sargunan “Guna” Seenivasan

Airlines and suppliers have talked about delivering ancillary services though inflight connectivity for years, but execution has been subpar so far. AirAsia CEO Tony Fernandes is ready to see that change. Some of the changes are low-hanging fruit. The carrier does a solid business with inflight duty free and ancillary sales. Reducing payment fraud has real value to the company. And Fernandes know that is part of the value. But there’s more. Much more. “The WiFi enables us to do payment better, enables us to capture data so we can personalize our information to passengers more, and it’s very useful as a CRM for our own crew and add lots of operational benefits.”

A digital retail offering in the sky

Beyond the payment fixes Fernandes wants to completely change the way the inflight sales process works. “We’re creating a restaurant and retail feeling, we’re not pushing a trolley down the aisle. You shop when you want to, you eat when you want to and how you want to eat.” Just removing the menu from the seatback and making it a digital offering would save significant weight from the AirAsia planes. That cost savings – printing and carrying the magazines – would be a significant boost to the company. The improved passenger experience from getting the carts out of the aisle is another benefit.

Because it built its connectivity solution from the ground up focused on the inflight sales AirAsia WiFi CEO Sargunan “Guna” Seenivasan believes that value win is just around the corner, “We want to digitize the whole experience. If I want to buy a coffee I just go to the portal and buy the coffee. We can be more intelligent in offering the services. And we can understand the individual customers.”

Seenivasan is looking beyond just the inflight sales opportunities. Expanding the catalog to a massively larger range of goods changes the math on the margins significantly. “We can also sell for collection on the ground on arrival or home delivery. With the digital experience you can have an unlimited number of [products] for sale, far more variety than what fits in the cart.” The carrier already has partnerships for the airport pickup option at its home base in Kuala Lumpur, plus Melbourne-Avalon and destinations in the Philippines. Fulfillment is relatively easy. An automated email with the shopping cart list can be dispatched to a partner and fulfilled before the passenger gets to the terminal. Home delivery works similarly, though with different partners.

But is it profitable?

Many airlines are unwilling to experiment too much with their inflight connectivity offerings until the fleet is fully deployed. The problem is sufficiently large that Gogo splits its revenue reporting for global airlines based on whether they’re fully deployed or not, essentially discounting the poor numbers from those airlines still deploying. But that’s not Fernandes’s style. He’s not going to let AirAsia wait, “We can start getting value now; we just have to go for it.”

We’re trying to make the whole experience as seamless as possible. The last thing we want if for passenger to come into the portal then leave it and do whatever they want. We need to make the portal engagement more exciting and more interesting. – Seenivasan

The carrier is working on just “going for it,” even as the results are not quite to the desired levels. Working with Inmarsat the carrier has 14 aircraft fitted with the GX Aviation solution today, on top of 70 that carry the older, slower SwiftBroadband solution. That’s a strong pool of aircraft across which the company is collecting data and selling products. And all that data is supposed to lead to better offers, better sales numbers, better returns. And it is, but not well enough. Seenivasan acknowledges the shortcomings, “Passengers are responding, but not to the level that we want yet. It is not super-impressive yet. We’re working to get better packages and more targeted.”

Part of getting there is, in fact, getting to full fleet deployment. The goal is to hit 100 total frames equipped by the end of 2019 and to complete all planes in all eight of the AirAsia Group carriers by the end of 2020. That is a massive commitment but once his mind is set getting Fernandes to change course is not easy. Neither Seenivasan nor Inmarsat have any intention of trying. The rollout pace will be aggressive but both parties are keen to deliver.

But will all the extra data be enough to generate the profits? Will enough passengers board their flight with plans sufficiently incomplete to generate the on-board excursions/ticket sales or hotel bookings? Will the retail conversions start to tick upwards? Seenivasan knows that the best chance comes from getting the right product offer in front of the the right consumer at the right time (and price). But there’s still always the chance that passengers aren’t going to make that purchase. They might simply decide they don’t need the “it” on offer.

Growing beyond AirAsia

Not only can AirAsia deliver these services on its own planes, but Seenivasan also believes there’s potential to expand the offering to other airlines as well. With Fernandes’s goal of transforming to a digital commerce company rather than just an airline that idea does not seem so far-fetched. And the partnerships AirAsia is building are laying the framework to make it happen. The portal infrastructure can be white-labeled for another airline and the fulfillment infrastructure on the ground could be shared. But that’s a long way down the line. Seenivasan admits the company has to get its own services sorted first.



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