Aeromexico Pioneers IFEC, Connectivity 2.0 in LatAm

Aeromexico is one of the pioneers in Latin America for bringing In-Flight Connectivity (IFC) services to passengers. For example, the airline has done a deal with Netflix which enables passengers to access their Netflix subscription. GCA Link spoke with Rodrigo Llaguno, Aeromexico’s customer experience corporate vice president about the airline’s plans for bringing more connected services to passengers.

GCA LINK: Are you looking to form partnerships with companies in the retail and media sector, for example, when offering new services to passengers? Are you looking to just offer connectivity or bring other connected services to passengers?

Llaguno: We have a partnership with Netflix and we are actively looking at other possible initiatives, whether that is for sharing costs or getting additional revenue. We want to establish partnerships to provide meaningful experiences for customers. You have a set of people sitting on your plane and using your access points to the Internet, so we have a captive audience. So, how do you market the connectivity in the right way? In my opinion, you don’t want to mess with the experience but at the same time, there is a potential revenue opportunity for the airline.

GCA LINK: How is the partnership model with Netflix working out?

Llaguno: It has been good. Passengers have been happy with it. On the other hand, what has been interesting is that on those same aircraft we have early window content in general that you don’t find on Netflix. Some passengers decide even though there is Netflix on board, they prefer to have the early window content rather than sign into their Netflix. That is a kind of a phenomenon that we weren’t expecting. They get on board and see this movie they don’t have; they prefer to watch that instead. We were surprised to see it. We were expecting a larger percentage of passengers to use Netflix. But when you look at the data, people are watching more early window movies.

GCA LINK: What is Aeromexico’s roadmap for offering IFC services in 2017? What is your vision of the concept of the connected aircraft?

Llaguno: We have two suppliers right now. For our wide-bodied fleet (787s), we have Panasonic’s Ku-band. All of the 787s are equipped with that connectivity. We will be receiving more 787-9’s throughout the year. Every 787-9 we will receive this year or next year will be equipped with Panasonic Ku-band connectivity. We are working with Gogo to deploy the 2Ku solution to our 737s-8. At the beginning of the year, we had seven aircraft with 2Ku. They were mainly flying in Mexico and North America. It all depends on how the planning for the rest of the year works, but we will keep on deploying the aircraft that we have in place. I can’t give you a final number for the end of the year but it will be in the teens in terms of aircraft.

GCA LINK: What business model are you implementing? Why do you think it will be successful?

Llaguno: We are working with our partners in terms of revenue sharing agreements. So, we receive part of the revenue they get. But it is not a retail model. Our customers pay a fee for them, and we get a certain percentage of this fee.

GCA LINK: At our Global Connected Aircraft Summit 2016, there was some dispute as to what the best model going forward was in terms of the passenger experience. For example, Patee Sarasin of Nok Air talked about the free model, where as Sabine Hierschbiel of Lufthansa believes airlines will have to charge for access. What is your take on this?

Llaguno: We are in the middle of finalizing a Request for Proposal (RFP) for the Boeing 737 Max aircraft to be delivered next year. So, I have been having a lot of conversations with all of the major suppliers right now. There are several potential avenues in the future in terms of new revenue streams for connected aircraft. These are mainly through advertising and partnerships of non-airline partners. This would potentially allow us to provide services free for a certain group of passengers. That all depends on the strategy we have as an airline.

GCA LINK: How much bandwidth do you think is needed for passengers who are perhaps carrying a number of devices onto the aircraft? Do you believe your systems will be able to cope?

Llaguno: This is the key question that myself and all my other airline colleagues have in mind. It all depends on what supplier you can go with. I think this is always one of the most challenging questions that you deal with. We have 2Ku in our narrow body fleet, and they work perfectly fine right now. But I think in general we are moving towards a streaming world where most of our information, whether you are in the air or on the ground, will reside in the cloud, and you will be streaming and accessing content in a connected environment. Having said that, the bandwidth being used is increasing all the time. But the streaming processes are improving as well. A lot of the suppliers like Netflix are adapting. I think in the future, you will have much more bandwidth, depending on the satellites that are using, but I also believe the streaming processes will be much more efficient.

If you look at Ka-band or Ku-band, it is a challenge. If you speak to Ku-band suppliers, they basically put on the table that they have a bigger set of satellites that you can rely upon, and then it is a case of their technology that you have on board to use that satellite, and how they are trying to get high throughput beams to a Ku environment. On the other hand, Ka-band satellites are much more powerful. So, it is quite an interesting question. We are definitely getting closer to what we have on the ground. It is always a challenge. Given the regulation and safety requirements, we as the airline industry move at a slower pace. But the gap is closing to what we had two years ago. Also, looking at Intelsat and OneWeb, you can now bring Low Earth Orbit (LEO) into the equation.

GCA LINK: As an airline, do you have a good understanding of the different types of satellite technology available?

Llaguno: We are getting better at it, but to be honest with you the airlines in general would benefit a lot if there was a neutral authority to give us some benchmarks from an experience point of view. There are so many variables. You have things like the type of coverage, the modem etc. There are a lot of factors. We have had to learn a lot in terms of satellite technology. Also, we have conversations with colleagues in other airlines asking them about their experience and what they think about different things. Every single supplier tells their own story. Having someone with their own neutral evaluation process or some kind of benchmark information would be very useful for the airlines.

GCA LINK: What are your main initiatives in terms of bringing improved services to customers here?

Llaguno: The next frontier is managing customer information and customer data throughout the company, and tying that to all the touchpoints, in particular for the aircraft. If you have a customer database, the way you interact with your passengers will change. You can tailor certain things in terms of entertainment to provide them a better service on board because flight attendants can tap into that database. I think you can tie these pieces together, which is kind of happening now in the real world. Every time you have a website that knows you, such as Amazon, Facebook or Netflix, they know your history, your geography, and they feed you things for you to watch and buy. The airline industry will be connected. When you think about a connected aircraft right now, you think about a passenger connecting to the internet, but at the same time you will have access to that connected passenger. So, if you can tie those things together, it becomes similar to what you have on the web. It will take a lot of time for these airlines, as we are dealing with an old IT infrastructure, but it also depends on the size of the airline in terms of getting all this information together. I think this is where the power lies in the future.

GCA LINK: A number of airlines have now launched these services. What have been your learnings from the market so far?

Llaguno: I think it all depends on the region and where you fly. In Latin America and North America, as well as Europe, it is still in the early stages so it does require a lot of involvement from several areas within the company and suppliers to provide a reliable service. Regardless of who you fly with, sometimes it works really well; sometimes, it doesn’t work well at all. So, you really have to work hard with your suppliers to have a reliable service. There is a lot of moving parts. There are a lot of things could go wrong. So, for example, if one of your antennas goes dark, and you need to replace that antenna, you may have that antenna available but you need to plan availability to replace it, and that could impact your schedule. Or the coverage in that particular region was saturated, so you don’t connect passengers at the speeds you usually provide. So, it is still very early stages. That has also been my experience when talking to several carriers.

GCA LINK: Do you believe airlines have a lot to learn from other industries in terms of improving the overall passenger experience? Where do they need to get better?

Llaguno: We can always learn from other industries, but at the same time, I think other industries could also learn from the airline world. I have a friend who works for the hospitality sector, and who used to work for the airline world, and I asked him the difference between the two. He summed up by saying, in the hospitality world, I have a little more time to address when something goes wrong. We are learning from hotels in the way they offer tailored experiences, and how they are trying to differentiate themselves, even for connectivity. We looked at the tier and speed approach. But I also think it is more valuable when industries stick together and they learn from each other. We are really getting connected when it comes to travel. The more we can work together to deliver a seamless experience for customers, the better for us. For example, a lot of airlines have talked about delivering your bags to your hotel. Why would you wait for them at the carousel? That requires logistics. Imagine going to fly for a meeting, having that meeting, and when you have finished, your bag is in your room. That is a big value proposition. But it requires the hotel and airline to work together.

GCA LINK: How do you see the market for IFC services for passengers developing over the next 12 months? What would constitute a successful year for Aeromexico in this area?

Llaguno: For us, a successful year would involve the continued deployment of 2Ku system that we have with Gogo. We are happy with it and we are trying to deploy as many aircraft as we can over the next 12 months. We need to finalize our decisions for the Boeing 737 Max in the next few weeks. We definitely want to have a better service in those airplanes. But having said that, I want to minimize the customer experience gap between the different suppliers that I have. One of the things we are figuring out is how do we choose the right partner for the Boeing 737 Max? That would represent a successful year for us. The market is getting more mature. In Latin America, we are an early adopter, but in a global context, we are more in the middle. It will be interesting to see what happens with those LEO satellites. We will be interested to see what happens in the near future.