Air India switching to streaming, giving up on embedded IFE

When an airline gives up on embedded entertainment systems for its long-haul fleet that’s bound to raise many questions. Air India expects to do precisely that, converting to a streaming IFE platform across its 777, 787 and A320 planes. The carrier issued an RFP to suppliers on 23 April 2019 and hopes to have the first systems installed before the end of the year.

Improved Experience

With an in-seat system that is broken more often than working it is easy to argue that this move will help improve the passenger experience on board. Air India’s requirements include capability for storing 500+ hours of content on the system, a notable upgrade from the embedded kit. Air India is also demanding a 98% system online rate and 98% login success rate for the streaming IFE platform. Both of those will be a significant improvement from the current offering.

Air India indicates several system design preferences in the RFP, including support for English and Hindi in the end-user application. A hard-wired solution is preferred over a portable/battery option. The system must support pausing playback during PA announcements and offer an app that can be downloaded from the on-board server via the local wifi connection where supported by device manufacturers.

The carrier also indicates a preference for more advanced features, such as integration of a flight attendant call button and reading light control in the app interface. The logistics of managing that operation and properly tying it to individual seat assignments remain unclear.

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The system is also specified to be upgradable to an inflight wifi connectivity option in the future, though the future of that market remains unclear. Suppliers are moving towards offerability of such services. Global Eagle is there today, though now without an airline customer thanks to Jet Airways halting operations. Inmarsat‘s GX Aviation should be there later this year; it is licensed but must still construct its satellite gateway in India. Convincing passengers to pay for such services or generating sufficient advertising revenue to cover the costs remain equally unlikely, however.

Driving Revenues

While the passenger experience aspects of the shift are very real, so are the monetary factors. Air India expects this program to be cost neutral and significantly revenue positive. Vendors are expected to deliver the hardware and software without cost to the airline. They must also to deliver a fixed stream of revenue to Air India on a monthly basis. The largest revenue provider will secure the contract.

Bidder is required to install and commission WI-FI system free of cost on all the aircraft. Bidder is permitted to recover the cost by sourcing the advertisement (equivalent to 20% of IFE content) and inserting the same across all the system. Bidder is required to share a fix amount of revenue every month with Air India. Bidder sharing highest amount of fixed revenue per month will be declared selected.

Not only will Air India realize the revenue shared from the service provider, but the carrier also reserves the option to sell additional advertising content directly, keeping 100% of the revenue generated from those deals.

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Aggressive Timing

Air India expects that the first aircraft will be installed and operational within four months from the signing of the contract. The full complement of hardware must be delivered within seven months of contract award. It is clear that the airline wants to move quickly on this project. Given that it is not spending any capital up front that motivation is easy to justify.

While the supplier will be responsible for installation on the first aircraft of each type (and for obtaining the necessary certifications from Indian regulators) the onward installations will be performed by the airline’s in-house maintenance staff.

Will it fly?

For any vendor this contract presents significant risk. The suppliers must bear 100% of the costs for hardware and software development as well as guaranteeing a recurring revenue stream to the airline with no guarantees of income to offset those costs. The airline has a similar tender out for bid with respect to supplying two years’ worth of coffee cups with advertising on the back; the supplier will bear all risk in that case as well, paying a royalty to the airline for the ability to deliver that service.

In the inflight connectivity market a number of suppliers have chosen to step back from fronting the costs of system installation for airlines. These streaming IFE offerings are significantly less expensive but till come with a price tag such that delivering for Air India’s fleet is a significant investment. Air India’s organizational and financial struggles present uncertainty around the potential long-term value of such contracts for a supplier.