How can airlines make money from mobile services (Part I)?

Many airlines view mobile services as potential money-spinners. At the same time, many mobile service providers believe airlines can offer access to huge numbers of users. This sounds like a match made in heaven ... so, why aren't we seeing more airline branded mobile services?

I think the reason is largely because airlines aren't experts in understanding the mobile services business, and mobile service providers aren't experts in understanding how airlines work. Specifically, I see 3 major issues:

• Headline passenger numbers are misleading


• Mobile service providers offer limited content


• Premium rate mobile services offer appalling margins

Headline passenger numbers are misleading

Although an airline's headline passenger numbers may get mobile service providers drooling, the reality is that an airline has a direct relationship with less than half of its passengers. So, the revenue-shares modelled by mobile service providers, in their financial forecasts, look less attractive to airlines in the cold light of day.

Mobile service providers offer limited content

Most mobile service providers focus on single service solutions (e.g. traffic updates, weather forecasts, mobile quizzes). And, as we've seen, a single mobile service is unlikely to generate sufficient cash to excite an airline. However, airlines can make money by offering a range of content designed to appeal to their diverse passenger base (although choosing who gets what takes real skill).

Premium rate mobile services offer appalling margins

Most mobile service providers use premium rate services to collect payment. Unfortunately, premium rate services offer appalling margins because mobile network operators take such a large share. Working on such thin margins means its almost impossible for both the airline and the mobile service provider to make a decent financial return.

However, there is a model where airlines can make money from mobile services. This model works by:

• sourcing mobile content from multiple suppliers (and potentially outsourcing the running of the service to someone like Mantic Point)


• using intelligence to decide which passengers get offered which services


• taking payment up-front by credit card

I'll explore this model in more detail in the second part of this article.