American Airlines President: Wifi Shouldn’t Be Free

For more than six years I’ve been saying that inflight internet will eventually be free. Since I started making that prediction JetBlue introduced free inflight internet, Aer Lingus has announced usage-capped free wifi, and Delta’s CEO has started saying it’s going to happen.

In some sense free is the wrong word. It’s not that the airlines will give this away. Instead once bandwidth is no longer a constraint, selling internet access will be bundled in with the ticket purchase. I’ve even explained the math and economics behind why this is a profit-maximizing strategy for companies with products that have a low marginal cost to deliver to the additional consumer. It works just like cable television bundling and no one argues your cable company is giving CNN away for free alongside ESPN.

Qatar Airways has a new promotion for free onboard wifi on specific routes (they do not yet offer wifi fleet-wide). Online bookings made by November 14 for travel through February 28 will receive a code for free internet.

American Airlines though is not prepared to see free wifi as the future. Speaking at an employee Q&A Crew News session airline President Robert Isom had this to say to a question about the remark by Delta’s CEO that internet will become free in the future.

In terms of anybody talking about free wifi that’s fantastic. If you talk abut ground based systems today it’s something where the business model again as I mentioned you pay the more for the worse service you get. That’s not a good model.

The issue we’ll all face is that that bandwidth, that satellite wifi serice, it’s not cheap. Think about what you do on the ground now put it in a plane and then track satellites in a plane. So what you’re talking about ultimately is something that would be an expenditure of hundreds of millions of dollars and it’s something we have to think about in terms of what do customers expect, what do they get for that, what advantages does it bring in addition to live TV that we will be giving free, that we are giving free, and also stored content on the plane.

So it’s something that we are out there and making sure we’re conscious of. The intent though and the model that we have is that we will be charging for wifi. As we go forward of course we’ll be conscious of the marketplace and make sure we do the right thing.

Isom sees free wifi as an expense in the hundreds of millions of dollars. They aren’t going to lead the industry to deliver this. However he acknowledges that they could be forced there if other major airlines do.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

More articles by Gary Leff »

Comments

  1. “Isom sees free wifi as an expense in the hundreds of millions of dollars. They aren’t going to lead the industry to deliver this. However he acknowledges that they could be forced there if other major airlines do.”

    AA – never the leader.

  2. Exactly the same as what was said by every hotel chain 20 years ago. Yet over time the market dictated that WiFi be free, without regard to what the CEO of Hilton thought about the issue. The brilliance of capitalism is that it doesn’t care what any one market participant wants or prefers, but rather represents the total sum of desires of millions of economic actors seeking to satisfy what they want together with those trying to meet those demands. Also interesting is that like the airline industry, the demand for free WiFi was from the bottom up, starting at less expensive brands and filtering up to practically every hotel in the developed world.

  3. Well, certainly if my experience this week is any indication, I don’t know why anyone would pay for the wifi AA is providing outside of the ViaSat product. The gogo is becoming practically useless-they clearly didn’t increase the bandwidth when they rolled out the ‘free streaming’ product & drastically increased the number of people using it on each flight. But then again they seem to think they can do everything on the cheap, so this doesn’t surprise me.

  4. This is a prime example of the tragedy of the commons at work. Make it free and all the idiots who decide to watch Netflix rather than stored content will quickly swamp any airborne system available today.

  5. This is so mind bogglingly stupid. They’re happy to take the savings of removing IFE but are stingy with power outlets and WiFi. Clearly AA sees it’s primary competitors as Frontier and
    Spirit.

  6. @controller1 – AA hasn’t been the leader in pretty much anything for a while, and the America West management team has seemed good with that. Rather a sad change from the company that invented the frequent flier program, along with many other innovations.

Leave a Reply

Your email address will not be published. Required fields are marked *