Fri "The Australian"
Pay-TV to get a ride on Virgin
Steve Creedy
November 05, 2004
VIRGIN Blue believes an ambitious plan to introduce live subscription television to Australian air travellers will add no more than 1 per cent to its cost base.
But it hopes this will be more than offset by an increase in revenue as bored passengers pay up to $5 to tune in to 24 channels of Foxtel beamed in by Austar satellite.
Virgin believes its Live2air system will act as a drawcard and position it as a market leader in domestic inflight entertainment.
The system from US company LiveTV is similar to those successfully offered in North America by carriers such as JetBlue, Westjet and Frontier.
Chief executive Brett Godfrey said the pricing reflected Virgin Blue's philosophy of providing extras such as lounges in a cost-neutral way and was not expecting to make a big profit from it.
"As long as it makes more than it costs, we'll be exceptionally happy," he said.
"I think our shareholders will be happy with it. I think the market will be happy with it and I think the consumers will be ecstatic about it."
Live2air will allow travellers to swipe a credit card and access live sport, news, business and entertainment on seat-back screens.
Virgin will also be able to charge for advertising on the system if it so chooses.
Frontier, which also charges for the service but has shorter stage lengths than Virgin, makes a profit on the service with a take-up of 40 to 50 per cent of passengers. A LiveTV presentation said load factors on Frontier jumped 11 per cent in the first month after the system became available.
LiveTV said a study found that two-thirds of business travellers and 75 per cent of leisure travellers would choose an airline that offered the system over one that did not.
Virgin's seven-year turn-key contract includes installation, maintenance and upgrading of the system as well as exclusive local rights for three years.
The technology uses a patented dual-polarised antenna to allow a moving jet to lock on to the satellite signal at 40,000ft.
Mr Godfrey said the airline had been working on the project for four years and focus groups indicated that it would be well regarded.
"It's a fantastic product addition, particularly on longer sectors and particularly if you're travelling during the business news (cycle) for people who want to get stock exchange closings," he said.
The first fitted aircraft is due to be rolled out in the middle of next year. The airline is now moving to get the system certified by the Civil Aviation Safety Authority.
Mr Godfrey said Virgin was still deciding whether to modify planes during annual overhauls or do the work "nose-to-tail" in a few months.
He said the airline would install the television in every seat, or about 8000 across the fleet, because it did not believe it was practical to install it in just some planes.
Foxtel chief executive Kim Williams said the Virgin system was a "wonderful exhibition" of the company's product.
Asked if Foxtel would make money on the deal, he said: "We won't lose any."
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