US ultra low-cost carrier Allegiant Air tiptoes into IFE as proof of concept

Allegiant Air, an ultra-low cost carrier headquartered in Las Vegas, and Row 44, announced an agreement yesterday to equip the airline’s Boeing 757-200s with wireless IFE, enabling the carrier to offer entertainment to passengers for the first time.

Entry-into-service is slated for next year. Allegiant currently operates four 757s and will add two more next year when these come off lease to a European carrier. Allegiant owns all the aircraft. The carrier acquired the 757s to expand its service to Hawaii.

Row 44 and Allegiant have a prior relationship that encouraged the airline to tiptoe into an area of the passenger experience that heretofore hasn’t fit into the carrier’s strategic operating model and for which there remains scepticism.

Row 44 is “a group we know extremely well”, Allegiant president Andrew Levy tells the APEX editor’s blog. “One of our largest investors, PAR Capital, is one of the backers of this business so we’ve been talking to them for a while. We have a structure with this agreement that is extremely low risk. They really wanted to have a proving ground for a concept and flying long routes to Hawaii is something in a relatively small fleet … that gave them a platform to prove out this product. It gives us a way to test it and see what kind of revenue it will generate. We’ll see how it does.”

Allegiant will be the first commercial airline to offer Row 44′s video on demand (VOD) service, a wireless, streaming device-based entertainment platform that operates without satellite.

It’s the wireless feature that prompted Allegiant to consider this form of IFE.

“One thing we’ve never believed in is wiring airplanes, going to the expense of not only putting the stuff onto the airplane to begin with but the additional weight and the maintenance that you continually have to do,” says Levy. “We just don’t think it pays off. In this case, it’s server-based and Wi-Fi inside the airplanes. The infrastructure requirements are extremely limited. As a result, we think there’s opportunity to generate some profits by selling the product. It’s just going to depend on the percentage of folks who find it worth buying.”

Levy says the airline has observed IFE video service on other carriers, drawing mixed conclusions.

“What JetBlue has done with it has been terrific,” he says. “They decided ‘day one’ not to charge for it. That was a debate they were having internally. Certainly it’s a nice feature and people really value it. What’s interesting is will they value it when it’s unbundled and it’s not free. How many people actually choose to pay for it? I think Frontier [Airlines’] experience, and this is anecdotal, is that the take isn’t all that great. I fly Frontier every so often and there’re not a huge number of people that are paying for that. For us, it’s a way to make money. If it doesn’t prove to make money, then we’ll go back to no IFE.”

Distance is a driver of the attractiveness of IFE. Short-haul routes tend to limit interest while long-haul service, such as that to Hawaii may prove pay-per-IFE viable. But Levy even then has his doubts.

“One of the things that’s happened over the last several years is that with the iPad and the iPhone, people can bring their own entertainment with them. That’s part of our scepticism with IFE. My kids will watch TV or a movie on their iPhones and be perfectly happy,” he says.

Levy says that Allegiant will offer a lot of content “so that if you don’t bring your own, or if you have your own but see something there that’s being offered and you want to see, hopefully that will be attractive enough for people to reach in their wallet”.

The experiment will also determine whether Allegiant installs the system on 19 Airbus A319s it is acquiring on the used market.

“If it works really well, then sure,” says Levy. “If you are targeting a different customer, then it’s almost an amenity. It’s a way that airlines compete with one another. Our [ULCC leisure] business is just not that one. For us, IFE has to be a profit center. If it’s not a profit center, then we’re just not interested. That’s why we’ve never pursued IFE to date. This one had the opportunity to check all the boxes. We’re willing to give it a shot and see how it goes.”

The 757s will have seat pitches of 31in, 30in and 28in with new slimline seats, as will the A319s. The 28in pitched seats will be sold at a lower price than the others. One industry observer thinks IFE is a way to distract people’s minds from such tight seat pitches.

“There’s probably something to be said for that,” Levy concedes. “It depends on how you use it.”

People are obsessed with getting that lowest price point.