Some airlines nevertheless continue tO circle interactivity warily. KLM-Royal Dutch Airlines and Air France are putting the necessary hardware on their long-haul planes, but they're holding off on installing the software until the technology is proven. "We don't want to experiment with our passengers," contends a KLM official.

Source: Institutional Investor
Date: 10/1995
Author(s): Reamy, Lois Madison



------------------------------------------------The airborne arcade.
(interactive entertainment systems in airlines)(includes related article)(Travel II)

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Airlines' interactive entertainment systems let fliers watch video-on-demand, shop, send e-mail, play video games and even gamble.

In the early 1980s ever-solicitous Singapore Airlines had the inspired idea of installing slot machines on its planes to amuse passengers. But aircraft, unlike casinos, are prone to a certain amount of climbing and descending, which caused the machines to tilt and jam. What's more, they created horrific traffic tie-ups in the aisles. The airline soon removed them.

That ill-conceived experiment in in-flight entertainment is far removed from the combination multiplex theater, shopping mall, high-tech office, video arcade and, yes, airborne casino that will soon be bedazzling international airline passengers.

Already, business-class passengers on some Alitalia flights can watch any one of 19 videos-on-demand on screens at their seats. Singapore Airlines premier-class passengers can I use their personal seat screens to request detailed travel information on 16 cities (in three languages). Starting next month British Airways will try its luck with video gaming on select flights (see box). All these are just tests, but future plans for international fliers are almost limitless: By next year air travelers are likely to be shopping electronically, posting and receiving e-mail, teleconferencing in text and making hotel reservations.

What makes the new entertainment systems such an advance over existing ones is interactivity. They operate in the manner of VCRs and personal computers, allowing passengers to select, stop, rewind and otherwise manipulate a variety of programs. Linking up such an interactive system with a digital phone creates a flying mall. Passengers can shop and gamble because they're able to gain instant credit card approval. After browsing through a copious video catalogue, passengers can, with the swipe of a credit card, have a new BMW delivered to them at the airport or a bottle of champagne sent to their host. Flight diverted? Travelers can change a hotel reservation or a flight merely by touching a control.

A spokesman for BE Aerospace, a leader in outfitting aircraft cabins, predicts that by 2000 every wide-body plane will have an interactive system. Karl Laasner, manager of in-flight communications for Swissair, expects video-on-demand to be available from every major airline in three to five years.

Aircraft sufficiently high-tech to support satellite-based phones and interactive systems -- notably, the McDonnell Douglas MD-11, the Airbus A340 and the Boeing 747-400 and 777 -- began coming on-line five years ago. So why has there been virtually no interactivity on the part of airlines before this; "As it turned out, the system was much more complicated than originally expected," says David Sebring, chief engineer of cabin-management systems for Boeing Co.'s 777 division. "The current-generation system uses hundreds of thousands of lines of software code residing in several thousand computers distributed throughout the airplane and connected via a sophisticated network of cables and fiber optics."

A fully integrated interactive entertainment and phone system, including credit card "swipes" and modem jacks, can infact require an average of five and a half computers per seat. On all but the latest model planes (the A340s and 777s), "it could take ten times the amount of [computer] code to run a hightech passenger-entertainment-cabin-management system as it does to operate the cockpit," says Daniel Greene, chief operating officer of Sky Games International, an in-flight-gaming software company based in Las Vegas. Sky Games has linked up with Harrah's Casinos and its parent, Promus Cos., in a joint venture to compete for in-flight video casino business. Even as recently as four years ago, adds Greene, telecommunication was not fully digital. And without digitization, airliners would have had to carry hefty loads of video cassettes to provide the same array of entertainment features as a small ditigal cartridge.

Retrofitting a wide-body with the requisite wiring and hardware, moreover, costs $1.5 million to $3.5 million per plane. (The process costs less when done during manufacturing, but then the system is also harder to update. That's why some 777s actually have less-modern entertainment technology than older planes.) Airlines are haunted by the $70 million that Northwest Airlines and Hughes Avicom International co-invested to equip 62 planes with Hughes's personal-video system in 1992, before the technology had been fully tested. Because of computer programming problems, the system was only 95 percent reliable, says a Northwest spokesman. So Northwest removed the interactive shopping and video-game features and is using just individual screens and multiple channels. (Hughes says it will have an upgraded interactive system in operation on Northwest by next spring.)

Understandably, interactivity pioneers are proceeding in stages. Singapore Airlines began installing Matsushita Avionics Systems' equipment on three 747-400 jumbo "megatop" carriers this past April. It intends to have the hardware on- all 36 of its megatops as well as on six new A340-300s by the end of next year. Singapore's initial interactive venue consists simply of ten Nintendo video games and travel information for 16 cities. But these supplement 12 audio channels and 22 video channels, which are to be equipped with interactive software for screening financial, sports and world news (in text form) by year-end and video-on-demand and electronic shopping by 1997.

British Airways plans a three-month phase-in beginning next month of its interactive entertainment system. Passengers flying the London-Hong Kong and London-Johannesburg routes will be able to play video poker, blackjack and other games of chance. (BA insists that it will work in conjunction with credit card issuers to limit airborne gamblers' outlays: "We wouldn't want anyone to lose all of his vacation money," notes a spokesman. One possible form of chips: frequent-flier miles.) BA's other kick off attractions: teletext news, computer games and do-it-yourself music programming that allows fliers to choose from more than 1,000 titles. BA hopes to have 85 planes interactive by the end of'96. Video-on-demand, incoming fax and phone, and seat-to-seat calls are to follow.

Unlike Singapore Airlines and British Airways, Alitalia has yet to integrate its in-flight entertainment system with satellite phones. But last summer it put the first video-on-demand system aloft for a trial run on an MD-11: 19 titles, including movies and videos of major sporting events, plus computer games. Video selections are downloaded digitally into seat-based computers within three seconds. On this system, supplied by Interactive Flight Technologies, a passenger can play a video game on a small screen that is inset into his seat screen while simultaneouslY watching a movie. And at nine and a half inches (measured diagonally), the main screen is at least twice the size of those in use today.

The interactive horizon is in fact aswarm with air traffic these days. American Airlines will soon start testing interactive video games and "flight tracking" (wherein passengers' computers monitor the flight's progress) on a 767-300 flying transatlantic and Latin American long hauls. Virgin Atlantic intends to augment its on-board video games (which use Hughes Avicom hardware) by adding interactive features similar to those of Singapore Airlines and BA. And the seven 777s ordered by the United Arab Emirates' flag carrier may have cameras mounted outside that will film the landscape directly below, then project the scene onto personal screens, beginning next spring.

Some airlines nevertheless continue tO circle interactivity warily. KLM-Royal Dutch Airlines and Air France are putting the necessary hardware on their long-haul planes, but they're holding off on installing the software until the technology is proven. "We don't want to experiment with our passengers," contends a KLM official.

The next technowave aloft: live television. New York City-based AirTV has developed a system whose on-board components weigh less than 100 pounds and which enables planes to receive TV signals with only a modest antenna It was tested on a Swissair MD-11 flying a Tokyo-to-Zurich flight. AirTV's ambitious plan is to launch a relay system of three or four satellites around the globe to beam four to eight channels of sports, news, business, entertainment and shopping to planes. "Anything [shown in real time] will go over" with passengers, declared Swissair's Laasner after riding the test flight (which picked up CNN). The picture, he adds, "was dearer than at home." AirTV chairman John Larkin, who insists that live TV would be less expensive for airlines to offer than full interactive programs, says his company's version will be in operation by 1998.

Swissair sounds like a future customer of AirTV. But for now it is concentrating on telecommunications rather than on Larry King. The airline is completing the installation of satellite-based telephones on all of its MD-11s and 747s. The advent of nonstop, 14-hour-plus flights makes telephones a necessity, says a company spokesman. For Swissair passengers at least, keeping in touch with the office is apparently deemed a higher priority than being entertained. it

RELATED ARTICLE: Sky-high box office prices?

As British Airways sees it, the small-stakes video gaming that it London-Hong Kong and London-Johannesburg flight amenity, not a new revenue source." Thus BA's income from gambling (the house's customary share, split with the software vendor) and other pay-per-use amusements is intended only to offset the accompanying costs -- chiefly, the projected $120 million for putting interactive systems on 85 planes. In the same spirit. Singapore Airline, which is testing video games and onscreen destination information on three of its 747s, isn't "charging for anything except the telephone" during the shakedown period.

Such magnanimity may not last, however. It costs the airlines at least $1.5 million to retrofit a single wide-body airplane for interactivity. They must also factor in both the cargo displaced by the entertainment system (which could weigh one ton) and the greater fuel consumption. With airlines' profit margins already as thin as the ozone layer, many carriers are exploring various ways to raise box office revenues from the captive audiences aboard their wide-bodies. Pay-per-view movies and nicking a percentage from video shopping and telecommunications exchanges are obvious money raisers. Muses Joseph Ozimek, director of product marketing for Boeing Co.: "Say an airline charges $5 for a movie. Five dollars times 150 seats times 30 percent demand times three flights a day times 3G5 days a year...." Virgin Atlantic now charges economy-class passengers [pounds] 4 (and premier-class, nothing) for two hours of Super-Nintendo, suggesting how other airlines might at least price video games.

The big moneymaker for airlines promises to be gaming. Every wide-body airliner wired for interactivity could earn roughly $2 million a year from its high-tech entertainment --half of that from gaming -- estimates a spokesman for BE Aerospace, which provides cabin hardware. Karl Laasner, manager of in-flight communications for Swiss-air, reckons that without income from "money games," airlines stand to lose $1 million to $2 million per year per plane from interactive systems, no matter what fees they charge. One catch for U.S. carriers: Washington forbids gambling on American carriers and on foreign airlines' flights into and out of the country.

1995 Institutional Investor Inc.

>The big moneymaker for airlines promises to be gaming.<

Wrong. The swissair passengers that survived the entertainment system did not opt to gamble. It was a dismal failure...