Delta CEO Ed Bastian is looking to make high-speed speed wi-fi internet free within two years. That’s a smart move.
Speaking to Barron’s, Bastian stated:
One initiative is rolling out high-speed Wi-Fi on its aircraft. A majority of Delta planes now have it, but it costs $16 a day for North American travel, or $599.99 for an annual pass. “Our goal is to make Wi-Fi free with high-speed quality. It will take another year or two to make that happen.
Gary Leff, of View from the Wing, explains why this makes sense:
Offering inflight internet without extra charge is not something that costs hundreds of millions to give away free, it’s something that you make more money selling as part of a bundle, in this case bundled with the airline ticket.
He uses a cable TV analogy, arguing that bundling increases revenue…and aggregate welfare.
Thus, the question is can Delta charge more for airline tickets if it offers free high-speed internet as part of the package?
I must admit, I’m skeptical. The good news is that with the new generation of high-speed internet onboard, bandwidth is no longer a primary concern. Thus, with the supply issue resolved, there is no longer rationing driven by demand for a scarce resource.
But most travelers seem very happy to forgo any sort of comfort to save a few bucks on airfare. How else has Spirit done so remarkably well?
I think where Delta will win is not with the occasional price-sensitive flyers who will suddenly choose Delta because of free internet onboard. Instead, it will be from road warriors on the margin who have some say in their flight choices. I call these men and women “marginal” travelers because they are in a position to choose schedule over loyalty and must be incentivized to stick to one carrier.
Free high-speed internet may do exactly that. Speaking for myself, I would be far less likely to deviate from United if it offered consistent and free high-speed internet (I spend several hundred dollars per year on in-flight internet). There might well have been no Alaska/American trip last weekend, where the internet failed on both flights.
CONCLUSION
Delta may see a short-term loss in ancillary revenue if it makes onboard wi-fi free, but it will reap the rewards of a happier and more loyal frequent flyer base. This will drive even more revenue than from selling wi-fi and therefore this move strikes me as a smart one.
(H/T: Rene’s Points)
DL flier here, frequent business traveler (consultant). The bane of my existence is having to buy wifi passes on every flight I’m on and expense individually to different clients based on the project I was traveling for. Would love to see this integrated into ticket price – would simplify my life – and that of countless other consultants and business travelers – immensely.
If they made it very easy to connect to and reliable, I would 100% shift business because of it.
On domestic flights, wifi is the most important thing to me. AA makes it ridiculously complicated to connect (and reconnect over and over each flight). I’m 23… I know how to work technology; I can’t imagine how older people deal with it.
If I could walk onto a plane and be connected until I walk off… that’s HUGE. Bake that directly into a fare where I don’t have a separate receipt to expense for each flight or the monthly gogo bill, even better.
Alvin, get a T Mobile premium phone contract and the wifi is free. Then you can just expense that fee a basic overhead.
I am a Delta Diamond Medallion member and have been every year since the inception of the Diamond program. I am a consultant who flies domestically for business and frankly, I never use wifi on airplanes. That said, I might use it if it were “free” but raising ticket prices to pay for it doesn’t really make it free. Delta’s fares are already higher than their mainline competitors, e.g., United, in my experience. Ultimately, those fares are paid by my clients and their travel reimbursement policies come into play. So, depending upon how much of a fare premium Delta charges, “free” internet that I cannot unbundle could actually cause me to fly other carriers.