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Wall Street Journal, Thursday, October 1, 2009
Rimin Dutt
As the debate rages on about the commercial viability of wireless Internet access on planes, one private equity-backed company is among those attempting to bring the technology aboard.
CAI Capital Management-backed AeroSat Corp., which makes airborne mobile Ku-band antennas and related components used to enable wireless systems, has a major installation in the works.
AeroSat and its technology partner Row 44 Inc. will place the antennas on 500 of Southwest Airlines’ Boeing 737s starting in the first quarter of 2010. The companies already have an ongoing trial contract with Alaska Airlines. The antennas and related technology have been approved by the Federal Aviation Administration.
AeroSat and Row44 are trying to tackle at least two issues that have held back a wider rollout of the wireless Internet - surfing speed and price.
The companies’ antenna components hook up with a satellite, powered by Hughes Network Systems LLC, making surfing quality like that of home, said Dale Tingley, a director of CAI Capital Partners. This gives the company an edge over its competitors who mainly use reception from cellular phone towers on the ground, he said.
On price, the companies sell their technology to airlines, which then have the liberty to decide the end-price for the customers. Competitors have a revenue-sharing model with the airlines, which makes pricing adjustments more difficult, according to Tingley.
The technology still won’t be able to tackle the power problem; many planes don’t come equipped with power slots. Tingley sees that as a short-term issue as laptop batteries become more longer-lasting.
“TV is nice to have” but in-flight Internet is more “exciting and longer-term,” Tingley said.
AeroSat’s deal with Southwest will mean a revenue increase of about $70 million to $80 million for the company, which now makes under $10 million from the airline Internet business, said Tingley. Overall, AeroSat’s revenue will likely quintuple, he said.
AeroSat hopes to land at least four to five major airlines by the time this roll-out concludes. “We could end up with other prospects,” said Tingley. AeroSat currently serves Qatar Airways and Kingfisher Airlines in India, which use the antenna for on-board television.
The company’s other investors include AeroEquity Inc., PAR Capital Management and North Atlantic Capital.