Air-To-Ground Phone UseOn The Rise

<H1> Air-To-Ground Phone UseOn The Rise</H1>By Jay Campbell

As in-flight telecommunications services improve in quality, increase in availability and decrease in price, business travelers are stepping up their use of phones, data connections and faxing capabilities to stay productive in the air.

The most popular of these services remains the telephone. GTE Airfone, the leading provider of such services to the airlines, estimates that in 1996, 17 million calls will be placed over its system. That's up from 15 million last year and 13.9 million in 1994.

While competitor AT&T Wireless would not reveal how many calls were actually placed through its system, it did say there was an 87 percent increase in minutes used last year over 1994. AT&T expected a 93 percent year-over-year increase in 1996.

Northwest Airlines said that in 1994, 3 million minutes of phone time were used, and 4.2 million are projected for 1996. TWA said about 30 percent of business travelers use the services and estimated that to grow to 50 percent by next July.

This continuing increase in usage is a function of several trends. First, prices have been restructured to help make airplane phones more affordable to business travelers and their companies.

Earlier this year, GTE Airfone introduced a flat fee of $15, replacing the $2.50 set-up charge and $2.79-per-minute fee that was running costs up too high. The change is especially helpful for those passengers who have found that the most beneficial in-flight service is the ability to sign on to their companies' e-mail systems using laptops. GTE also is offering a special calling card, good for December only, which gives the user unlimited service for $24.95.

AT&T Wireless and In-Flight Phone Corp. (IFPC) have not matched the $15 flat fee, and in fact have upped their per-minute cost to $2.99 from $2.50. In response to the flat fee, IFPC has introduced new weekend prices-a $5.99 flat charge for calls less than 2 minutes and a $9.99 flat fee for calls between 2 and 10 minutes. Calls longer than 10 minutes return to normal rates.

But AT&T and IFPC, like GTE, are restructuring their pricing for corporate customers by offering volume discount programs (<I>BTN</I>, Feb. 12, Sept. 9). AT&T Wireless has added a second option to its Air Gold program, allowing companies to pay 99 cents per minute with a monthly charge of $25 per enrollee. AT&T Wireless' original corporate program, offering a 25 percent discount, remains intact. Both programs offer monthly management reports detailing who called whom and how much it cost. IFPC will launch a corporate program by mailing informational packages mainly to Continental's and America West's corporate customers in November. GTE Airfone has landed 22 corporate contracts, up from eight in March, and now offers information on the program at its Website.

The corporate discount programs will reduce costs for some corporations, but there is some question as to how much value they provide, because usage is a function of availability on a given airline.

For example, Hewlett-Packard, which signed on with GTE, is benefiting from the deal because its travelers prefer United Airlines. The company has reportedly cut in-flight phone costs from $42,000 to $36,000 per month.

However, a company that uses mostly American Airlines could not strike a deal with GTE because GTE isn't on AA. As a result, there's little direct competition among GTE, IFPC and AT&T Wireless for corporate business.

"I've been a little skeptical of those programs," said Christopher McGinnis, president of the Atlanta-based Travel Skills Group consultancy and publisher of <I>Ticket</I>, a newsletter for business travelers. "For big companies and companies whose employees all have laptops, a corporate discount program could be worthwhile. But the customer for these telecommunications companies is really the airline."

Most corporate travel managers at GTE's clients didn't respond to requests for information on the programs, presumably because it's still too early to measure the impact. At H-P, the program has been rolled into the company's calling card program, and the card is used to pay for the in-flight services, among others.

"Using our own calling card, which is sourced by a third-party, has been very beneficial for the end users," said Kathy Edwards, H-P's voice services manager. "Each month they get an e-mail on their usage and they don't have to wait for their Amex bill to expense the calls."

According to H-P corporate travel MIS manager Jeff Kurn, the discount program is a plus because of the savings coupled with productivity gains. "If you're on a 6 1/2-hour flight, it's down time for business," Kurn said. "So we encourage people to log on for e-mail or use the phone."

In addition to restructured pricing, the availability of in-flight services continues to grow, according to a recent <I>BTN </I>survey of the airlines. Delta said 80 percent of its planes are now equipped, and it expects that figure to reach 100 percent by the end of next year. Southwest already has 100 percent availability. Alaska Airlines, America West and TWA have the vast majority of their planes equipped and said they expect to reach 100 percent availability by the end of 1997. Northwest, now at 77 percent, estimated year-end 1997 availability of 81 percent. American and United did not respond.

In spite of the growth, some observers noted that because the systems are not yet universally available, business travelers still do not feel they can rely on them. Some have found themselves asking the airline or travel agent whether there is a phone on board, and some travelers won't fly airlines that don't have them.

"I've heard people complain that certain airlines don't have phones on their planes," McGinnis said. "Kiwi International doesn't have them, and that's a reason some travel managers are saying they can't put people on Kiwi. On the New York-Atlanta route, you have a lot of talkers."

Smaller airlines, however, aren't the only ones with this problem. USAir and Continental also are behind in terms of in-flight communications installation. The two carriers originally contracted with IFPC, which ran into trouble in keeping up with its installation schedule. IFPC, which is available on America West, lost USAir as a customer in June when the carrier signed on with GTE Airfone.

GTE has installed the Airfone on more than 25 USAir planes and will be averaging 10 per week.

USAir said it would be 100 percent equipped by the end of 1997. Continental, which considered dropping IFPC but stuck with the company, is now at 30 percent and plans to reach 100 percent by year-end 1997.

Perhaps most interesting about IFPC is that more than a few observers contend that its FlightLink system is the best of the three. However, quality means little when the system isn't there.

The final trend contributing to increased usage is that the quality of the services is continuing to improve.

Older analog telephones, which have been phased out over several years, don't exist in the domestic market.

As of September, only the higher-quality digital systems are available on U.S. carriers. The Federal Communications Commission required the change as part of its initial approval of the digital systems. Although that certainly doesn't mean the airborne telephones are as clear as what travelers use on the ground, business travelers have noticed considerable gains. The data transmission also is imperfect, but providers are making amends when something goes wrong.

"A lot of people are logging on in airplanes now," said McGinnis. "The quality isn't quite there, but it's getting better. Some people are getting cut off, but if that happens and you call GTE, they're happy to hook you up again for free."

What's next, then, for in-flight services? Generally, the ultimate goal is to provide a flight experience that brings the comforts of a living room and the productivity of an office to the airline seat.

In terms of productivity, the most significant development will be the installation of power sources for laptop computers.

In August, Delta Air Lines became the first airline to introduce laptop power in-flight, although only in the first-class section of one aircraft for now. American Airlines also is planning to introduce laptop power, and several carriers have personnel on a committee of the World Airline Entertainment Association, which is studying ways to standardize the services.

In terms of information, the in-flight telecommunications providers continue to expand their services. IFPC, for example, just added a weather service to its system and is negotiating with two daily news services.

Live Television

The next big change in information services, however, might be live television on the plane.

Delta recently began a test of live TV on one of its aircraft, offering dozens of cable channels using hardware provided by Hughes Avicom. According to IFPC, Continental has contracted to have live TV installed on 300 aircraft next summer.

Said Judy Jordan, Delta's director of brand management, "our research tells us that when customers are not working in flight, they want to be informed and entertained.