Virgin America's CEO says airline sees 12 to 15 percent of passengers using in-flight Internet access across airline: As I keep saying, VA has just 28 aircraft (all Airbus A319 and A320s) and flies just 100 scheduled routes per day. However, this number reported by Joe Sharkey in his New York Times travel column is quite useful.
Virgin America's passenger traffic isn't available; it ranks below the top 10 airlines' by passengers that the Bureau of Transportation Statistics reports on monthly. The airline's two Airbus types can carry either 125 or 150 passengers, although configurations can reduce those counts. The airline did report an 81 percent load factor in the fourth quarter of 2008.
If I take a lot of variables into account, let us assume that VA flies roughly 110 people on average on each flight each day given the capacity and load factor. That's about 330,000 per month or 4m per year. (In contrast, No. 10 carrier SkyWest put about 1.4m passengers on its aircraft in each of January and February of this year.)
With average use of 12 to 15 percent across the airline (about double that on San Francisco routes), that should mean on an average day between about 1,300 and 1,700 people use the Aircell Gogo Inflight Internet service. Virgin America has the full current range of pricing: $10 for flights under 3 hours, $13 for three hours or more, $8 for handheld devices, and $6 for red-eye flights. Let's put the average price at about $9, given that Virgin flies a number of shorter flights on the Western seaboard.
So: $9 times 1,300 to 1,700 users equals $12,000 to $15,000 per day, or $4.4m to $5.5m in gross revenue per year. Assuming $100,000 per plane for installation costs and a variety of minor ongoing maintenance costs, that's not a bad ROI. It's unknown what the airline/Aircell split is. Even if the split is 50 to 75 percent to Aircell, the deal isn't bad for VA, which--if this rate of usage persists, and ostensibly increases--has a fast payback, an additional revenue stream, and a customer stickiness tool.
The real question will be, of course, if Delta with over 300 aircraft planned to be equipped by third quarter would see a similar usage rate across the fleet. The numbers wouldn't be bad. Let's assume Delta, with a broader passenger base, might have 8 percent usage, a third to a half less use than VA.
Delta carries about 5m passengers per month (although this includes travelers on some smaller planes that aren't scheduled to get Internet service). 5m times 8 percent gets you about 400,000 users each month or $3.6m in gross revenue per month or $43 million per year. This offsets what should be $30m in installation costs (300 planes times $100,000).
In comparison, Delta brought in $177 million 2008 from baggage fees, although the airline added a $15 fee for the first checked bag late in 2008, which will push revenue up quite a bit.
These numbers are based on a lot of supposition, I'll allow. Still, it's the first time the veil has slipped on anything to do with actual usage rates.