Story URL: http://news.medill.northwestern.edu/chicago/news.aspx?id=214328
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United Wi-Fi

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United Airlines' new satellite Wi-Fi system allows passengers to connect to the Internet during transoceanic flights via laptops, smartphones and tablets.


United Airlines offers new optional services

by Aubrey Pringle
Jan 22, 2013


United's optional services: How much are we talking?

 

In-flight Wi-Fi rates per flight:

Standard speed - $3.99-$14.99

Accelerated speed - $5.99-$19.99

 

BagsVIP rates for deliveries within 40 miles: 

1 bag - $29.95

2 bags - $39.95

3-8 bags - $49.95

 


Travelers now have more amenities to choose from when they fly United Airlines. The company launched two new services in recent weeks in an effort to increase its non-ticket revenues – Wi-Fi on international flights and a luggage delivery program that allows travelers to skip baggage claim.

United is the first U.S.-based international carrier to upgrade to satellite Wi-Fi technology. Not only is the connection faster with Panasonic’s satellite Wi-Fi, but it also maintains Internet connection on long-haul international routes. The air-to-ground systems currently employed by other airlines lose connection when planes are over the ocean.

Last week Chicago-based United Airlines rolled out its first aircraft equipped with satellite-based Wi-Fi. It has announced plans to install it on 300 of its mainline aircraft by the end of the year.

United’s new BagsVIP program also adds to the company’s ancillary revenue, or revenue that comes from optional services.

BagsVIP allows travelers to bypass the baggage claim and have bags delivered directly to their final destination for a set fee so long as the destination is within 40 miles of the airport. United currently offers this service in six cities – Chicago, Los Angeles, Boston, Honolulu and Orlando – but has plans to expand its availability in the coming months.

Non-ticket revenues are becoming increasingly vital to airlines.

“Up until a few years ago, they were not a big part of income,” said airline expert Seth Kaplan.

But now ancillary revenues generate billions of dollars a year for the industry through fees for services such as checked baggage and in-flight snacks and meals.

Kaplan said United’s recent initiatives are a relatively low risk way to raise revenue because both services are completely new to customers.

“Passengers don’t like it when you take away something that used to be included [in ticket price] like checked bags,” Kaplan said. “But passengers don’t complain about paying for Wi-Fi because it’s not something they used to have to pay for.”

Fees from Wi-Fi and BagsVIP will not create nearly as much revenue as checked baggage, but they can still benefit the company.

“If you can market yourself as an airline that offers something that someone else doesn’t, you might get more customers by doing that,” Kaplan said.

The strategy can be a gamble, though, since its success ultimately hinges on whether consumers will be willing to pay extra for a given service.

Chicago businessman and frequent flier Terry Toth said he might pay for United’s new services but only under certain circumstances.

Toth has never paid for Wi-Fi on a flight before though he said being able to connect to the office during long international flights would have its advantages.

“I see the benefit from a business perspective,” Toth said.

When asked if he would use the BagsVIP service, Toth was wary, fearing that his bag might get lost.

“If I knew it could get there reliably, I would do it,” he said.

United may have to prove that its new services are worth the money before travelers decide to spend on them.

“When it comes to ancillary revenues, sometimes they stick and sometimes they don’t,” said Richard Aboulafia, an aviation consultant for Teal Group Corp. in Virginia.

Yet offering new services will rarely have a negative impact on a company, Aboulafia said. Creating more options for customers is typically beneficial. He expects United’s initiatives to pay off despite costs associated with the Wi-Fi system.

“We’re starting to get to the point where technology is paying for itself,” Aboulafia said.