• Bloomberg


Starting early next year, travelers on some Lufthansa flights in Europe will be able to surf the web using Wi-Fi that promises speeds and coverage that trounce existing offerings.

The network, which will use Inmarsat PLC’s satellites and Deutsche Telekom AG towers on the ground, aims to let business travelers check the news and vacationers chat with friends as they jet across one of the world’s most crowded airspaces.

While existing in-flight Wi-Fi services rely on either satellites or terrestrial infrastructure, Inmarsat and Telekom say their hybrid approach offers seamless service at a lower cost.

The partnership is one of at least three ventures aiming to help European airlines catch up with their U.S. counterparts. While travelers can surf the internet on about 75 percent of flights in the U.S., according to airline rating site Routehappy, only a handful of airlines in Europe offer the service.

“Globally, the penetration rate for onboard Wi-Fi is in the 3 percent range,” said Brian Pemberton, vice president and general manager at the satellite network provider Iridium Communications Inc. “People are kind of scratching their heads. Can the airlines make money with it? It remains to be seen.”

Inmarsat and Deutsche Telekom say airlines can make money if they use Wi-Fi as a way to increase customer loyalty.

Two other companies are also making this pitch to airlines in Europe: ViaSat Inc., which provides Wi-Fi to the U.S. carrier JetBlue Airways Corp., and Panasonic Corp., which serves United Airlines.

ViaSat plans to wade into the European airline Wi-Fi business after it launches new satellites in 2017 and 2019, and could offer service once the first satellite goes online, CEO Rich Baldridge said.

Panasonic, which currently offers Wi-Fi using rented satellite space, plans to launch its own device to increase coverage, said David Bruner, vice president of global communications service.

While the Inmarsat-Deutsche Telekom offering will provide faster connections than existing inflight Wi-Fi, Via-Sat says its service will be even faster. Inmarsat maintains that cost will be more important than speed. It is preparing to subsidize the installation of equipment on planes, saying the service will catch on in Europe only if airlines offer it free of charge.

“Wi-Fi on board will be free, and telcos and airlines will offer it as an add-on in five to 10 years’ time in order to gain passenger loyalty,” said Rupert Pearce, Inmarsat’s CEO.

Pearce estimates the global market for airline Wi-Fi coverage will be $4 billion to $5 billion a year by the end of the decade. He wants to leverage Inmarsat’s relationships with airlines — more than 90 percent of commercial airplanes worldwide use the company’s satellite-linked safety services — to gain a foothold.

To try to speed adoption, Inmarsat and Deutsche Telekom brought Deutsche Lufthansa AG on board by subsidizing the $250 million cost of installing equipment on its European fleet, Pearce said. GoGo Inc., which provides satellite service to a number of U.S. carriers, has taken a similar approach, sharing revenue with partner carriers once the up-front cost, which it covers, is amortized.

Ground-based systems can cost $100,000 per aircraft to install, while satellite services cost $350,000 to $500,000 per plane, said Tim Farrar, president of TMF Associates and former president of the Mobile Satellite Users Association.

Low-cost carrier EasyJet PLC said it is talking to providers including Inmarsat, and is ready to offer Wi-Fi soon.

Competitor Ryanair Holdings PLC is “waiting on the right technology to facilitate a low-cost entry point so that it is affordable for our customers,” said spokesman Ronan O’Keeffe.

Europe’s lag is due largely to fragmented regulation of satellite spectrum. Wi-Fi providers have to obtain permission in 28 EU member states, Switzerland, Norway and other neighboring countries to avoid gaps in coverage.

Inmarsat said its satellites should cover some of the gaps in Deutsche Telekom’s network, which has permission to build towers in 20 countries.

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