Finally, Something Free From Airlines: Internet Service
CHICAGO (TheStreet) -- Although the airline industry has moved rapidly to a model where it charges fees for nearly every service, it may be headed in the opposite direction in one key area: Internet service.
"Today, there is some mindset that you can charge for Wi-Fi," United (UAL) Chief Financial Officer John Rainey said last week at the Bank of America Merrill Lynch investor conference. "I think candidly, longer term, that may not be the way that product is capitalized on."
Rather, Rainey suggested, it may make more sense to have online retailers cut in the airlines on purchases made by passengers.
"If you look at the possibility to have commercial agreements, you have a captive audience for four hours on a flight," he said. "If that person is going and ordering flowers for their wife or getting dinner reservations or ordering something on Amazon.com, there is commercial possibility there as well.
"I would like to think those commercial possibilities are so abundant there would come a day when we would encourage people to get Wi-Fi and not charge them and have that be an impediment," he said. It is logical for carriers to seek to boost revenue from the use of Wi-Fi because installation is extremely costly, said Jay Sorensen, president of IdeaWorks, which consults on ancillary revenues and branding. "Airlines don't add Wi-Fi for pure financial reasons," Sorensen said. "It's become a sought after amenity that can add market share. So it would make sense to use a free model to boost use and to try to snare revenue from new sources." However, Sorensen added, "Generally, I'm not a big fan of the concept that passengers are frothing at the mouth to buy consumer goods on aircraft." Several carriers are already testing the concept of offering passengers free access to shopping portals. They charge for most Internet access beyond those portals. Delta (DAL) said recently that it will provide passengers with free access to shop on Amazon (AMZN). "Free access to Amazon provides a convenient way to shop online at 30,000 feet for things they want on the ground," said Bob Kupbens, vice president for marketing and digital commerce, in a prepared statement. Delta also provides free access to several other sites including stories from The Wall Street Journal or People magazine. Delta and its regional partners operate about 800 aircraft that are equipped with Wi-Fi, more than any other airline. Delta collects a sales commission from Amazon.
American (AAMRQ.PK) and US Airways (LCC) have similar arrangements. American provides free access to nine sites including StubHub; People magazine; Groupon; Pogo, a site with games, and Gilt, a shipping site. US Airways offers free access to several sites. American said it negotiates financial arrangements separately with each provider. As usual, Southwest (LUV) has an alternate model: it charges $5 per passenger for Internet. Southwest intends to have WiFi on all its airplanes by the first half of 2013. Meanwhile, JetBlue (JBLU) plans to begin installing WiFi on its planes late this year: it has not announced its pricing plans. -- Written by Ted Reed in Charlotte, N.C. >To contact the writer of this article, click here: Ted Reed >To follow the writer on Twitter, go to http://twitter.com/tedreednc.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV