Launched four years ago, the use of Wi-Fi on U.S. airlines has yet to catch on, with estimates that the wireless technology is still used by only 7 percent of the flying public.
There are a number of reasons: With Wi-Fi cropping up for free in many airports and public locations, passengers don't want to fork over as much as $10 for a flight of a few hours. Passengers also may not know when Wi-Fi is available on a flight since the airlines provide the wireless service on only a small percentage of their planes.
"The 7 percent [of in-flight Wi-Fi users] isn't too bad," said Amy Cravens, an analyst at In-Stat, since 7 percent in 2011 is an increase from 4 percent in 2010. "However, the service isn't profitable at these levels, so everyone is hoping it improves." According to In-Stat, the nation's airlines collected $155 million in charges for onboard Internet service in 2011, and are expected to collect $225 million in 2012.
The service primarily attracts regular business customers who fly long distances and want to stay connected to the ground via email. Monthly unlimited plans cost $40 a month from Wi-Fi in-flight supplier Gogo Unlimited, formerly Aircell.
"Wi-Fi on planes is still relatively expensive and often unreliable," said Jack Gold, an analyst at J. Gold Associates. "As such, most users aren't compelled to connect." A Wi-Fi network on a flight crowded with online business customers can quickly bog down, he noted.
About 16 percent of the North American commercial fleet had Wi-Fi service in 2010, which isn't enough for the general public to get accustomed to expecting Wi-Fi service when they fly, analysts said. "The market is still nascent," Gold added.
One thorny problem is how users are supposed to get laptop and smartphone power when many planes don't have power outlets at passengers' seats. "Wi-Fi and surfing use lots of power," he added.
American Airlines, which is undergoing a major restructuring and has been committed in the past to offering Wi-Fi on its planes, is planning to invest $2 billion a year in renewing its fleet. That money could include more accommodations for Wi-Fi, in-flight entertainment and in-seat power in future planes, analysts predicted. American did not respond to a request for comment.
GoGo has equipped 1,200 commercial aircrafts with Wi-Fi using a plane-to-ground technology. Its customers include American, AirTran, Delta, and Virgin America. After an auspicious start in 2008, GoGo lost out on equipping United with Wi-Fi last fall when the airline committed to a relative newcomer, Panasonic Avionics, which relies on Ku, a plane-to-satellite technology. Analysts said one reason United didn't sign with GoGo was to avoid a long-term contract, underscoring the need of all the airlines to find ways to make in-flight Wi-Fi more profitable sooner rather than later. Equipping a single plane for Wi-Fi can cost more than $100,000, posing a challenge to airlines.
Shortly after losing United to Panasonic, GoGo filed an initial public offering in December to raise cash for expansion and next-generation technologies, including a satellite-based system called Ka. In a statement, GoGo described Ka as a system that "will outperform Ku satellite and will allow GoGo to be the only provider able to meet the full-flight connectivity needs of our airline partners on a cost-effective basis, including regional jets, mainline fleets and international service."