Master's Thesis: Airplane Mode

Master’s Thesis
Airplane Mode
Manoela Amaro Mugnaini

Master’s Thesis
Airplane Mode
Manoela Amaro Mugnaini
Master of Business Administration

Creative Leadership
Class of 2008-2010
1. Supervising Tutor: Doug Guthrie
2. Supervising Tutor:
Editing Time From: 01/08/2009
Until: 20/03/2010
Statement of Authorship:
This dissertation is the result of my own work. Material from the published or un-
published work of others, which is referred to in the dissertation, is credited to the
author in the text.
Signature
Sao Paulo, 23.03.2010 Manoela Amaro Mugnaini

Airplane Mode Manoela Amaro Mugnaini
Airplane Mode
Born out of our observations of nature, together with humanity‟s restless desire to
overcome its physical limitations, the fascination of being able to fly long filled
men‟s dreams of soaring above the clouds. Our thoughts take flight. We fly to the
moon. We fly daily without realizing that the simple act of flying makes us key
players in the creation of the melting pot of our world‟s cultures.
From its official launch in October 23 1906 to the more than 100 thousand daily
commercial flights around the world (www.iata.org), commercial aviation carries a
lot more than people and cargo across the planet. On the wings of a commercial
airplane stories, values, beliefs and cultures are constantly being exchanged and
introduced into the fabric of the most diverse social structures.
There‟s something playful, even charming, about the term Airplane Mode (also
known as flight mode). What it represents may not be as endearing. It refers to
the way people feel when they are on board of an airplane. Some dread the
hours to come, others are excitedly looking forward to them but all, once in the
air, will be limited by the space onboard, the food that was selected for them,
someone else‟s movie choices, their pilot‟s skill.
Besides all that, there‟s also the limitation of not being able to communicate with
the world below, with your friends, your co-workers, your family. It takes a toll on
people‟s comfort level and emotions which added to the tension experienced by
everyone on board, regardless of its intensity level, makes communication that
much more desirable.
Not surprisingly, Airplane Mode is now used by young people as slang when re-
ferring to any environment where there isn‟t any type of connectivity.
In this representation of worldwide air traffic over 24 hours (Air traffic from space
http://vimeo.com/9039414 - screenshot below taken from the video) it is possible
to grasp the extent and speed at which the world interconnects through aviation.
In this “social network” in constant movement, in every one of its flights, we leave
IV
behind a little bit of ourselves as we share it with others, and we take with us a lot
of little bits that others have shared with us. We all take with us a new and
enriched vision of the world.
Source: http://vimeo.com/9039414
Ill .1: Air traffic from space
Reading Victor Hugo, eating a steak tartare, listening to Édith Piaf, reflecting on
Truffaut or even corresponding with a dear friend in the French campagne, can
not be compared to the unforgettable insight into the exuberance of King Louis
XIV‟s court that one experiences when visiting the Hall of Mirrors in the Palace of
Versailles. A true understanding of what we call globalization can only be fully
achieved when we experience the world as a giant platform of opportunities and
discoveries that open up to us each time we land at a new destination.
We speak of globalization as a reflection of an increasingly more connected

world, but we often forget that air travel, the “intheairband”, is what in fact makes
real all the perspectives and desires emulated by broadband. Technological ad-
vances are so embedded in our everyday lives that we fail to fully grasp the
amazing experience that it is to travel. In my opinion, it‟s sci-fi stuff! After all, to
date, the desire to be physically teletransported to another part of the Earth and
being able to, in the very same day, greet someone “Good morning” in Portu-
guese but “Good Evening” in German, has not yet been achieved by any other
means faster and safer than by just jumping on an airplane.
V
With due respect to other recent theories about the frenetic pace that turns us
everyday into a giant global village, for aviation the plan from inception has al-
ways been global in ambition and delivery, it has always been a global flight plan.
VI
Table of Contents
List of Illustrations............................................................................................ XI
List of Tables ................................................................................................. XIV
Abbreviations .................................................................................................. XV
1. Introduction .................................................................................................... 1
1.1 Situation .................................................................................................... 1
1.2 Complication ............................................................................................. 2
1.3 Hypothesis ................................................................................................ 3
1.4 Research Methodology ............................................................................. 3
2.1 Market Overview ....................................................................................... 5
2.1.1 The 2004-2008 period ...................................................................... 5
2.1.2 The effects of 2009 economic crisis ................................................. 5
2.1.3 Demand forecast for 2009-2013 period ............................................ 6
2.2 Business Models and Principal Players ..................................................... 7
2.2.1 Business Models .............................................................................. 7
2.2.2 Principal Players .............................................................................. 8
2.3 Airline industry Economics ...................................................................... 12
2.3.1 Key industry ratios and Statistics.................................................... 12
2.3.2 Industry margins ............................................................................ 12
2.3.3 Revenues....................................................................................... 13
2.3.3.1 Passengers fares ........................................................................ 13
2.3.3.2 Cargo transport ........................................................................... 14
2.3.3.3 Ancillary revenues ....................................................................... 14
Source: IATA
.................................................................................................. 16
2.3.4.2 Labor costs ................................................................................. 17
2.3.4.3 Depreciation and amortization ..................................................... 17
2.3.4.4 Maintenance ............................................................................... 18
2.3.4.5 Aircraft rental............................................................................... 18
2.4 Outlook for the following years ................................................................ 19
2.4.1 Open Skies .................................................................................... 19
2.4.2 Consolidation ................................................................................. 20
3. Understanding the IFE Industry .................................................................. 22

3.1 Market Overview ..................................................................................... 22
3.2 Business Model - IFE Challenges Faced by the Airlines .......................... 23
VII
3.2.1 Hardware and Cost Challenges .................................................... 23

3.2.2 Content Challenges....................................................................... 24
3.2.3 Challenges in Current Inflight Telephony and Connectivity ............ 25
3.3 Principal Players ..................................................................................... 26
3.3.1 Industry Interaction ........................................................................ 26
3.3.2 Major Hardware Players ................................................................. 27
3.3.3 Major Content Players.................................................................... 27
3.3.4 Major Service Players .................................................................... 28
3.3.5 Connectivity Players....................................................................... 28
3.4 Outlook For Following Years ................................................................... 29
4. The History of IFE ........................................................................................ 31

4.1 The Beginning ......................................................................................... 31
4.1.1 Before IFE.... Media Events ........................................................... 31
4.1.2 IFE - The Real Beginning ............................................................... 35
4.1.3 A Newly Established Industry ......................................................... 38
4.1.4 A Technology Breakthrough ........................................................... 40
4.1.5 Audio Entertainment....................................................................... 40
4.1.6 A Video Revolution ........................................................................ 41
4.2 The WAEA .............................................................................................. 43
4.3 Beyond Audio and Video and The Introduction of Choice ........................ 44
4.3.1 Beyond Audio and Video ................................................................ 44
4.3.2 A Very Small Idea .......................................................................... 46
4.3.3 Personal Video............................................................................... 47
4.3.4 Portable Players ............................................................................. 48
4.4 Live and Connected ................................................................................ 51
4.4.1 Fax................................................................................................. 52
4.4.2 Real Time Radio and TV ................................................................ 52
4.4.3 Voice and Connectivity................................................................... 53
5. Connectivity ................................................................................................. 57
5.1 Worldwide – Information and Behavior .................................................... 57
5.2 The World of Advertisement and Communication .................................... 61
5.2.1 From physical to virtual .................................................................. 64
5.2.2 Service consumption from fixed to mobile devices ......................... 64
5.2.3 Changing the target of communication initiatives. From groups to
individuals ...................................................................................... 67
5.2.4 Dedicated to Multifunctional Devices .............................................. 67
VIII
5.2.5 Wired to wireless communication ................................................... 69

5.2.6 Unidirectional to interactive means................................................. 70
5.2.7 Communication at the speed of light. Low to high speed
Transmission ................................................................................. 72
5.3 On Board Connectivity ............................................................................ 74
5.3.1 Air-to-ground internet ..................................................................... 74
5.3.2 Satellite-based internet and cell phone .......................................... 78
5.3.3 Hidden revenue opportunities ........................................................ 81
5.3.4 The business case has not been proven yet .................................. 82
6. Conclusion ................................................................................................... 85
6.1 Hypothesis 1 – IFE Industry Rupture ....................................................... 91
6.2 Hypothesis 2 – New Media Platform ........................................................ 93
7. Backup data ................................................................................................. 96

7.1 Interviewees‟ biographies ........................................................................ 96
7.1.1 Alan Pellegrini, CEO, Thales .......................................................... 96
7.1.2 Andrea Brazil Mugnaini, freelancer ................................................ 96
7.1.3 Aristides Cintra, Consultant, Embraer ............................................ 97
7.1.4 Carlos Andre Spagat, CEO, Flap Magazine ................................... 97
7.1.5 Chris Kettering, Director, Goldcare Development, Boeing
Commercial Airplanes .................................................................... 97
7.1.6 Dave Bijur, Director of Capacity, Aircell .......................................... 98
7.1.7 Frances Fiorilo, People and In-Flight Services SVP, Virgin America99
7.1.8 Giovanni Rivetti, CEO, New Content ............................................ 100
7.1.9 Helio Rubens, Aircraft Interiors Design Manager, TAM Airlines .... 100
7.1.10 Hugo Janeba, Marketing VP, Vivo .............................................. 100
7.1.11 John White, Editor, Avion Magazine ........................................... 101
7.1.12 Jose Carrera, CEO, Access Inflight Media ................................. 101
7.1.13 Jose Racowski, Business Units Manager, TAM Airlines ............. 102
7.1.14 Libano Miranda Barroso, CEO, TAM Airlines ............................. 102
7.1.15 Linda Palmer, Senior Vice-President of Buena Vista Non-
Theatrical, Disney ........................................................................ 103
7.1.16 Luiz Falco, CEO, Oi ................................................................... 103
7.1.17 Marco Antonio Bologna, CEO, TAM Executive Aviation ............. 104
7.1.18 Michael Planey, Private Consultant ............................................ 104
7.1.19 Paul Margis, CEO, Panasonic Avionics Corporation .................. 105
7.1.20 Ricardo Guimaraes, CEO, Thymus Branding ............................. 105
7.1.21 Walter Longo, Business Development VP, Young & Rubicam ... 106
IX
8. Bibliography ............................................................................................... 108
10. Addendum ................................................................................................ 111
X
List of Illustrations
Page
Ill. 1 Air traffic from space………………………………………….. V
Ill. 2 Overall industry situation…………………………………….. 3
Ill. 3 Airline industry (USD billion)…………………………………. 6
Ill. 4 Point-to-Point – Hub and Spoke…………………………….. 8
Ill. 5 Passenger traffic per cabin class…………………………… 9
Ill. 6 Operating margins…………………………………………….. 12
Ill. 7 Average pre-tax profit margin (1978-2008)………………… 13
Ill. 8 Share of airline operating costs……………………………... 17
Ill. 9 24-month (after merger) stock price performance………… 21
Ill. 10 Destinations served from London´s Heatrow airport……… 25
Ill. 11 Services and payment flows between Airlines and Con-

tent Providers………………………………………………….
27
Ill. 12 IFE vs IFEC – Number of projected retrofit installations

2008 to 2018…………………………………………………...
31
Ill. 13 IFE vs IFEC – Number of projected total installations 2008

to 2018…………………………………………………...…...
31
Ill. 14 IFE and IFEC – Total number of aircraft installations fore-

casted between 2008 to 2018 – linefit versus retrofit…….
31
Ill. 15 Early television set receiving pictures on a wastern Air

Express flight…………………………………………………..
34
Ill. 16 American Airways flight attendant selecting a radio station 34
Ill. 17 Movie Screen on PanAm´s Stratolines, 1940…………….. 35
Ill. 18 Inflight MotionPictures, pioneer of exhibition systems for

inflight…………………………………………………………..
XI
36
Ill. 19 TWA, Strato Cinema…………………………………………. 37
Ill. 20 By Love Possessed, the first regular inflight movie offered

in July 1961 on TWA………………………………………….
38
Ill. 21 John Wayne reaches up to the sky on this overhead video

screen…………………………………………………………..
40
Ill. 22 Japan Airlines B 747 showing the overhead display sys-

tem for video……………………………………………………
43
Ill. 23 Airshow map display over Japan…………………………… 47
Ill. 24 Bill Boyer holds his dig Eplayer 5500………………………. 50
Ill. 25 Evolution of portables, left to right, top to bottom…………. 51
Ill. 26 A landscape of failures has not curtailed enthusiasm for

in-flight connectivity……………………………………………
53
Ill. 27 jetBlue Airbus with the Live TV satellite randome located

on top of the fuselage…………………………………………
54
Ill. 28 American Airlines and AT&T promote their inflight phone

solution………………………………………………………….
55
Ill. 29 Delta Airlines and jetBlue promote their connectivity solu-

tions……………………………………………………………..
56
Ill. 30 Emirates A380 First Class suite…………………………….. 57
Ill. 31 Society´s evolution…………………………………………… 61
Ill. 32 iPhone + Android Mobile Internet Usage much higher than

Shipment share………………………………………………..
64
Ill. 33 Smartphone covergency 1………………………………….. 69
Ill. 34 Smartphone covergency 2………………………………….. 69
Ill. 35 Mobile phone usage………………………………………….. 70
Ill. 36 Mobile phone usage………………………………………….. 71
XII
Ill. 37 Video tramp evidency………………………………………… 74
Ill. 38 Antenna installed on the aircraft…………………………….. 76
Ill. 39 Aircell´s coverage……………………………………………... 76
Ill. 40 Top Web Sites………………………………………………… 77
Ill. 41 Gogo´s welcome Home Page………………………………. 78
Ill. 42 Virgin Seat Back Cards………………………………………. 78
Ill. 43 Example of Oman Air Communication……………………… 81
Ill. 44 Mobile data traffic growth and global social networking

websites users…………………………………………………
90
XIII
List of Tables
Page
Tab. 1 Key developments in the start and growth of IFE…………. 32
Tab. 2 Milestones – WAEA…………………………………………... 44
Tab. 3 Milestones – Introduction of choice…………………………. 45
Tab. 4 Milestones – Live and connected…………………………… 52
Tab. 5 Example 1 of multi function device………………………….. 66
Tab. 6 Example of biggest rated categories……………………….. 66
Tab. 7 Apple leadership 1……………………………………………. 67
Tab. 8 Apple leadership 2……………………………………………. 68
Tab. 9 Adoption Rates Mobile Internet versus Desktop Internet 89
XIV
Abbreviations
A Text
Breakeven LF Breakeven load factor

CAGR Compound annual growth rate
CASK Cost per available seat kilometer
CRM Customer Relationship Management
IFE Inflight entertainment
LF Load factor
RASK Revenue per available seat kilometer
SVP Senior Vice President
USA United States of America
VP Vice President
Z Text
XV
1. Introduction
1.1 Situation
After the costs of the engines, inflight entertainment (IFE) is the second most
expensive product in the purchase of an airplane; more expensive even than the
avionics on an aircraft.
This may lead one to think that such an investment will result in content systems
and services that will lead to satisfied passengers, going as far as having pas-
sengers willing to pay for the service. But that it is not the case.
IFE is a cost center to the airlines and the service to the passengers delivers a
limited content set and, even then, inconsistently.
These inconsistencies are a directly reflection of the fact that airlines have differ-
ent aged aircraft, each one of them with an IFE technology that may have been
avant-gard of the time that was delivered but is rarely aligned with either older or
newer aircraft in the airline‟s fleet. Unless, of course, the airline has been able to
justify the cost involved in standardizing the IFE systems across its fleet.
The cost to standardize the IFE Systems across the fleet is exorbitant. Because
of two factors: the time the airplane needs to be on the ground to be retrofitted (a
reasonable estimate of $100,000 per day, per aircraft) plus the certification,
equipment and manpower costs associated with installing the new equipment into
older aircraft.
Are the passengers expectations addressed successfully for the airlines that
have been able to justify such fleet standardization costs? No necessarily. The
variety of different cultures and entertainment preferences at any one given time
inside an airplane would require a very effective content provider structure, rea-
sonable content license costs and simple preparation and loading processes to
get the content into the aircraft. The industry, besides charging what are believed
to be high costs, falls short of these requirements as well.
1
Compounding these issues is the fact that the airlines have not been successful
in marketing to potential advertisers the affluent and captive audience that they
bring to the aircraft. Nor have they been successful in making persuasive argu-
ments to will passengers to pay for the content.
These factors mean that IFE is a service that does not live up to passengers‟
content aspirations, and that has never shown a positive ROI for the airlines.
1.2 Complication
Two forces are gaining momentum to significant impact the IFE Industry as it is
today.
The first, is the revolution in connectivity and mobility. The world is quickly turning
into a mobile internet dependent society with significant increases in usage of
portable devices and customized affordable content and applications.
The second is the advent of new connectivity based IFE suppliers that are chal-
lenging the IFE status quo by bringing solutions under which the passenger will
be given the freedom of choice, the airline will have lower costs in hardware in-
vestments and the new suppliers will be willing to share the risk by depending on
passenger usage related sales for their own positive ROI.
How will the industry change in light of these developments?
2
IFE CONNECTIVITY
Complexity Trends
Chapters 2, 3 & 4 Chapter 5
Problem
Source: own illustration Hypothesis

Ill. 2: Overall industry situation
1.3 Hypothesis
The intent of my thesis is to analyze this environment and provide defendable

projections of where the industry will end up in years to come. I defend an out-
come under which two key developments will define the future of the IFE indus-
try:
1) IFE Industry Rupture
2) New Media Platform
1.4 Research Methodology
Several market data were used for the purpose of this study. Data used were
published by regulating agencies or unions, banks and consulting companies.
The highlight of my research was the diagnosis obtained through in-depth inter-
views with 20 "high profile” players in the trends, mobile telephony, aviation and
entertainment industry. The unconventional research methodology was chosen
due to the overall shortage of specialized literature.
3
All findings regarding flight behavior and habits were validated through quantita-
tive research with 2,300 respondents in total.
On the subject of in-depth interviews, this methodology enabled me to learn a

great deal, as well as, to develop a fantastic professional network for my career.
It is thanks to this relationship that I was also able to access several other data
and materials used to substantiate my thesis and ideas.
4
2. Understanding the Aviation Industry
2.1 Market Overview
2.1.1 The 2004-2008 period
The worldwide airlines industry represented total revenues of $467.4 billion in

2008, with a compound annual growth rate (CAGR) of 9.3% for the 2004-2008
period.
In comparison, the American region1 grew with CAGR of 8.4% for 2004-2008
reaching $232.8 billion in 2008; the European2 industry grew with CAGR of 9.3%
over the same period, to reach a value of $133.5; and Asia-Pacific3 grew with
CAGRs of 11.6%, reaching $101.1 billion in 2008.
The number of passengers transported increased with a CAGR of 4.4% between

2004 and 2008, reaching a total of 2.1 billion passengers in 2008.
The domestic segment was the largest for the airlines industry, with a total of 1.4
billion passengers in 2008, representing 66.9% of the industry's volume. Com-
pared, the international segment had 699.9 million passengers in the same pe-
riod, 33.1% of the industry's aggregate volumes.
2.1.2 The effects of 2009 economic crisis
The global economic slowdown strongly impacted worldwide air travel demand
through 2009. A decline in the number of passengers has hurt yields and ham-
pered the airline industry‟s profit outlook.
1
Argentina, Brazil, Canada, Chile, Colombia, Mexico, Venezuela, and the US.
2
Australia, China, Japan, India, Singapore, South Korea and Taiwan.
3
Belgium, Czech Republic, Denmark, France, Germany, Hungary, Italy, Netherlands, Norway, Poland, Roma-
nia, Russia, Spain, Sweden, Ukraine and United Kingdom.
5
According to IATA (International Air Transport Association), in the full-year 2009

the airline industry showed the largest ever post-war decline. Passenger demand
was down 3.5% with an average load factor of 75.6%.
As a result of demand decline, IATA estimates a loss of USD9.4 billion for the
airline industry in 2009.
However, the capacity cuts taken on both the domestic and international sides
markets over the past two years have lessened the severity of fare and yield de-
creases, and can set the stage for significant pricing and yield improvements in
2010 if the global economy starts to recover.
Airline industry (USD billion)

CAGR CAGR
800 04-08 08-13
Asia-Pacific
Europe
609.3
600 Americas
153.3 11.6% 8.7%
467.4
400 101.1
327.5 158.1 9.3% 3.4%
65.2 133.5
200 93.5
297.9 8.4% 5.1%
232.8
168.8
0
2004 2008 2013F
Passengers 1.8 2.1 2.6
Source: Datamonitor
Ill. 3: Airline industry (USD billion)
2.1.3 Demand forecast for 2009-2013 period
The forecast for demand growth of the industry is slowing, with an anticipated
CAGR of 5.4% for the 2008-2013 period, driving the industry to a value of $609.3
billion by the end of 2013.
6
Comparatively, the American, European and Asia- Pacific industries will grow
with CAGRs of 5.1%, 3.4% and 8.7% respectively, over the same period, to
reach respective values of $297.9 billion, $158.1 billion and $153.3 billion in
2013.
The number of passengers transported is expected to rise to 2.6 billion in 2013, a

CAGR of 4.3% for the 2008-2013 period.
“The aviation industry is expected to grow at a rate of 2.5 times the GDP in Brazil,
for the next 20 years”, says Libano Barroso.
2.2 Business Models and Principal Players
2.2.1 Business Models
There are two major models that airlines usually pursue. The first one “Hub and
Spoke” is the one that most traditional carriers tend to follow. This model works
with a “Hub” where passengers are transported to an airport which is not their
final destination and only serves as a connection point (domestic and internation-
al). Airlines use this “Hub” to maximize passenger connection opportunities in
their more complicated route systems. Its purpose is to exponentially offer more
routes to customers, which in turn maximizes airline revenue opportunities. This
model provides a lot of revenue potential but usually leads to a lower utilization of
airplanes since they have to wait for connecting passengers. The average daily
aircraft utilization of this model is around 9 hours per day.
The other model “Point to Point” that most low-cost carriers (Ryanair, Southwest,
etc.) are using is simply based on flying from one city to another city. The aircraft
does not have to wait for connecting passengers and therefore reaches a higher
daily aircraft utilization (average around 11 hours). This higher utilization spreads
out fixed costs over more flying hours and therefore drives down unit cost. This is
one of the reasons why Low-Cost carriers operate with a lower cost base than
traditional carriers.
7
Point-to-Point Hub and Spoke
Source: Delta Airlines
Ill. 4: Point-to-Point – Hub and Spoke
2.2.2 Principal Players
2.2.2.1 Major and national airlines
Major airlines are defined by the U.S. Department of Transportation as carriers

that have more than $1 billion of annual revenues. This definition holds trough for
most of the national legacy carriers. These major national carriers (e.g. Air-
France-KLM, Lufthansa, American, Delta, Qantas, TAM, LAN, etc.) all operate
the “Hub and Spoke” system explained above. National airlines are classified to
have between $100 million and $1billion revenue. Some of the national airlines
limit their service to regional markets (explained later) or offer international ser-
vice via “Hub and Spoke” like the major carriers.
Besides the differences in business models (“hub and spoke” versus “point to
point”), major airlines have other distinguishing factors. First since almost all ma-
jor carriers operate intercontinental routes, average flight time and flight legs are
higher than for regional or standard low-cost airlines. In order to accommodate
domestic and intercontinental flights these carriers use mixed fleets that consist
of narrow body airplanes (B737, A320, etc) that can transport up to 220 passen-
gers and wide body airplanes (B777, B747, A330, A380, etc.) that can transport
up to 850 passengers. Another distinguishing factor is that major airlines gener-
ate a large part of their revenue from premium segments (Business and First
Class). To increase loyalty especially for the most valuable premium segments
major carriers rely on Frequent Flyer Programs that allow passengers to accumu-
late and redeem air miles or points. These Frequent Flyer Programs also allow
8
passengers to accumulate and use miles or points with credit cards, hotel stays,
car rentals, etc. Additionally many programs indentify travellers who fly more than
a few times per year by awarding them different status levels which in turn give
them a number of benefits (e.g. access to business and first class lounges,
check-in and luggage priority, etc.). Frequent Flyer Programs successfully intro-
duced the concept of “switching cost” to an industry that is normally characterized
as highly price-sensitive and low on loyalty. A passenger who uses the services
of a competitor loses the benefits of the loyalty scheme, the equivalent of a
“switching cost”, has been incurred.
Major airlines have been especially hurt by the crisis since the drop in demand
was over proportionally higher in the premium segments (where they usually
have a high exposure). During the crisis many companies revised their travel
policies as part of their cost-cutting efforts and required employees to only travel
coach. Additionally to reduce travel costs further many companies entered into
negotiated travel deals, under which they promise to do most of their travel with a
certain airline in exchange for sharp fare discounts.
Passenger traffic per cabin class
(YoY variation)
15
10
5
Economic
0
class
-5
-10 First/Business
Class
-15
-20
-25
-30
Jan 07
Mar 07
May 07
Jul 07
Sep 07
Nov 07
Jan 08
Mar 08
May 08
Jul 08
Sep 08
Nov 08
Jan 09
Mar 09
May 09
Jul 09
Sep 09
Source: IATA
Ill. 5: Passenger traffic per cabin class
In order to battle for the remaining reduced premium classes segment major air-
lines feverously compete with roomier seats, premium food service, luxurious
airport lounges and in-flight differentiation products, like in-flight entertainment –
9
IFE4 - such as movies, magazines, games, telephones, internet and power out-
lets for recharging laptops.
2.2.2.2 Regional airlines
Regional airlines are defined by the U.S. Department of Transportation as airlines

with revenue less than $100 million. These airlines mostly have smaller planes
and operate shorter distances. Demand for these smaller planes began to take
off in 1995 when the main producers Embraer (Brazil) and Bombardier (Canada)
introduced low-cost jet planes, with 50 to 70 seats for $15 million to $20 million.
Examples of regional carriers are American Eagle, CityFlyer, Air Nostrum, etc.
Major airlines use their regional partners (which can be fully owned subsidiaries
or completely independent companies) to feed their hubs from smaller metropoli-
tan areas that do not have a large enough population or travel demand to warrant
larger jets. Additionally regional airlines are also used to provide off-peak service
when demand is insufficient for an aircraft with more than a 100 seats. Regional
jets can be profitable for such services because their break-even passenger load
factor is only 50% versus a much higher 65% to 85% passenger load factor
needed for large jets. Additionally 70% of regional jet passengers are business
travellers that are in need of more frequent connections to more remote locations.
The relationship between the major airlines and the regional ones is reciprocal.
The major airlines need the regional airlines to gather passengers into their hubs
and the regional carriers depend on major carriers to provide connecting flights at
hub airports for up to 60% of their passengers. Regional carriers managed to
remain largely profitable within the last years mainly due to contracts with major
airlines that reimbursed them for fixed cost plus a guaranteed operating margin.
However regional airlines have been pressured more and more by major airlines
that are looking for another potential source of cost relief to cut rates.
2.2.2.3 Low-Cost Airlines
The term “low-cost” airline originated within the airline industry referring to airlines
with a lower operating cost structure than their competitors. Mostly they fly from
4
IFE has became a huge Industry which is the major subject of this Thesis.
10
“Point to Point” (higher aircraft utilization) without having a more expensive “Hub
and Spoke” system. Low cost carriers have created a unique value proposition
that enables them to unbundle certain service features (less frequency, no meal,
no free drinks, more passengers per flight attendant, no interlining, no code-
sharing, no pre-assigned seating) in exchange for a lower fare. Also the low-cost
carrier does not attempt to connect its network although there may be connecting
nodes. Most successful low-cost airlines focus on a homogenous fleet type (e.g.
Ryanair with only B737). This leads to more purchasing power and cheaper
maintenance and pilot training cost. Additionally some low-cost carriers (e.g.
Ryanair) almost exclusively choose secondary airports that have excess capacity
and charge less for landing and terminal fees. Moreover “Low cost” carriers al-
most entirely focus on own distribution channels and especially the internet for
ticket sales which eliminates commissions and keeps booking costs down.
“These days, either you compete on price or on differentiation” says Libano Bar-
roso.
In the last 10 years, carriers that operated with low costs and low fares were
generally able to cope better with the business environment than regular high-
cost airlines. Southwest (the first “low-cost” airline) has in the last 36 years con-
secutively achieved a positive net income. This is particularly impressive given
the highly cyclical nature of the aviation business and the industry average long-
time pre-tax margin of -1%.
Operating Margins
LCC Traditional
10%
5
LCC average
0 Majors
average
-5
RyanAir
Airtran
American
Air France-KLM
US Airways
British Airways
United
Southwest
Easyjet
Delta
Lufthansa
Jet Blue
VirginBlue
Continental
Source: Bloomberg 2009 reported data
Ill. 6: Operating Margins
11
2.3 Airline industry Economics
2.3.1 Key industry ratios and Statistics
ASK – Available seat kilometer:

ASK is a measure for capacity. It is calculated as: available number of seats x
distance flown.
RPK – Revenue passenger kilometer:

RPK is a measure for traffic. It is calculated as: transported paying passengers x
distance flown.
LF – Load factor:
Load factor is the percentage of seats for sale being utilized by revenue generat-
ing passengers. It is calculated as: RPK/ASK
Breakeven LF – Breakeven load factor:

The passenger load factor that will result in passenger revenues being equal to
operating expenses.
Yield:
Yield is the average revenue from transporting one passenger over one kilome-
ter. It is calculated as: Passenger traffic revenues / RPK
CASK – Cost per available seat kilometer:

CASK represents operating expenses divided by available seat kilometers.
RASK – Revenue per available seat kilometer:

RASK represents operating revenues divided by available seat kilometers.
2.3.2 Industry margins
Historically, the aviation industry exhibits low profit margins. During the 1978-
2008 period, the average pre-tax profit margin of airlines included in the S&P 500
12
index was approximately -1%. In the same period, the average pre-tax profit
margin of all companies included in the S&P 500 was around 9%.
Average pre-tax profit

margin (1978-2008)
10%
9%
8
-1%
-2
S&P 500 Airline industry
Source: Standard & Poors industry report
Ill. 7: Average pre-tax profit margin (1978-2008)
2.3.3 Revenues
Airlines derive most of their revenues from ticket fares charged to passengers,
but there are other sources of revenues, like cargo transport and ancillary servic-
es (with growing importance for many airlines).
2.3.3.1 Passengers fares
Passenger revenues are the primary component of an airline‟s operating reve-

nues, accounting for approximately 80% to 90% of overall operating revenues for
traditional airlines (this percentage can be significant lower for low cost airlines).
The aviation market can be divided into two clearly differentiated segments: lei-
sure travelers, which are very price sensitive, and business travelers, that are
less price sensitive.
13
In order to attend both segments of clients while maximizing the passenger reve-
nues, airlines developed complex revenue management systems, allowing for
charging differentiated prices for seats in the same flight, according to passenger
behavior.
To attract leisure travelers, airlines advertise deeply discounted fares. However,

most passengers do not get these fares as they are limited to a small number of
seats. This way, passengers on the same flight may have booked fares at as
many as a dozen different prices.
Some variables influencing the ticket price include flight load factor in the moment
of purchase, days remaining until departure, day of the week, time of day, num-
ber of days between outbound and inbound flight.
2.3.3.2 Cargo transport
Cargo transport can be understood as a natural adjacency to the passenger air-

lines main business, accounting for approximately 5% to 10% of airline‟s operat-
ing revenues.
Passenger airlines usually attract freight business by offering discounted rates

when compared with those charged by dedicated air freight carriers, relying on
costs synergies with passengers transport.
Major airlines carry significantly more cargo and mail than do regional airlines,
due to aircraft basement space and routes length.
2.3.3.3 Ancillary revenues
In addition to the passenger and cargo business, airlines generate revenues from
services and products that are adjacent to the airlines value chain.
These sources can be divided into three different types: i) selling of frequent flyer
points; ii) selling of “a la carte” services; and iii) commission-based products.
14
The selling of frequent flyer points to commercial partners is probably the most
traditional source of ancillary revenue – and also the most relevant for many air-
lines. Frequent flyer programs were first created during the 1980 decade, as a
mean to attract frequent flyers through the possibility of accrual of miles or points
flown and later redemption of these accumulated miles or points on free tickets.
However, due to the massive growing of these programs, other ways to accumu-
late miles were created through partnerships with companies in other industries,
mainly financial ones (in recent years, there were more miles or points accrued
through cobranded credit cards than for air travelling).
Moreover, there are examples of spin-offs of those programs, such as Aeroplan,

in Canada, and Multiplus, in Brazil. In that case, frequent flyer programs become
a separate company. Their business model is based in buying seats and selling
miles or points to the airlines and other companies, which distribute those miles
or points among their “frequent customers”.
The other two types of ancillary revenues – “a la carte” services and commission-
based products – are relatively new, but have an increasing importance in air-
lines‟ balance sheet. The importance of these revenues is especially significant
among low cost companies, as in the case of the Irish airline Ryanair, which has
approximately 20% of its revenues originated from ancillary services.
The best known example of “a la carte” ancillary revenue is the fee charged by
U.S. airlines to check baggage. American Airlines was the first carrier to charge a
fee for checked baggage, in 2008. This move was later matched by all major U.S.
airlines and, according to U.S. transportation department, checked baggage fees
generated approximately $1.9 billion in revenue for the 10 largest U.S. airlines
during the first three quarters of 2009.
There are a growing number of “a la carte” services offered by airlines, like selling
of in-flight meals and beverages, fee for IFE and on-board internet access and
fee for reservation of seats with extra legroom, commonly known as “premium
economy” classes.
15
Regarding commission-based products, the most important sources are the

commissions earned by airlines on the sale of hotel reservations, car rentals and
travel insurance, primarily from sales on direct channels.
These fees have two aims. First, and most obvious, is the attempt to generate
new revenues. As many passengers do not consider the additional fees when
buying a ticket, the airlines have not seen a large reduction in demand attributa-
ble to them.
The second, is that some additional fees help reducing costs. In the case of
charging for checked baggage, if passengers check fewer bags, then the weight
that the airplane carries is reduced, reducing fuel usage.
2.3.4 Costs
“The airline industry is labor, energy, technology and capital-intensive. There are
many risk variables”, says Libano Barroso. In the last years, fuel costs became a
Share of airline operating costs (%)
100% 100%
100%
33%
80 40%
4%
60 5%
5%
6%
6%
Others
7%
40 20% Aircraft rental
Maintenance
28% Depreciation and
20 amortization
32%
Labor
14% Fuel
0
2001 2008
growing portion of airlines‟ total costs.

Source: IATA
Ill. 8: Share of airline operating costs (%)
16
2.3.4.1 Fuel costs
Aviation is an energy-intensive industry. In 2008, fuel was the largest single cost
item for the global airline industry. According to IATA – based on a representative
sample of 45 passenger airlines – fuel represented about 32% of the total operat-
ing cost, up from 14% in 2001.
Fuel consumption rate varies greatly across airlines. Along with the number of
engines, the age of carrier‟s fleet also influences fuel usage. Another important
factor is the average flight stage length, as a disproportionate amount of fuel is
burned during takeoff and landing. This way, regional carriers consume more fuel
than long haul carriers.
2.3.4.2 Labor costs
Historically, labor has been airlines‟ largest cost category. However, on recent
years, labor has dropped to the second largest expense due to the rise in fuel
costs.
According to IATA, in 2008 labor represented 20% of the total operating cost,
down from 28% in 2001.
The labor expenses of an airline depend on the labor-intensity of its routes and
on its technology efficiency. Airlines that mostly operate short haul routes have
lower labor costs, as meals are not served on these routes.
A technology-intensive airline – for example, with high percentage of sales

booked on internet and high penetration of self-service check-in – will enjoy high
labor productivity, and, as a result lower labor costs.
Most airline employees are union members. It is common that, at any given time,
an airline might be in negotiations for half dozen or more labor contracts.
2.3.4.3 Depreciation and amortization
In 2008, depreciation and amortization represented about 6% of airlines‟ operat-

ing cost, almost the same percentage as in 2001.
17
The depreciation and the amortization of an aircraft is dependent on how much of

the fleet the airline owns. Also, the accounting method used to account for de-
preciation, can significantly alter this number among airlines.
2.3.4.4 Maintenance
On average, in 2008 airlines spent about 5% of its total operating costs on main-
tenance, almost the same as 2001.
Aircraft age and the amount of work outsourced greatly influences the importance
of maintenance costs. Airlines with younger fleets, which do not require extensive
maintenance, generally have lower maintenance costs.
Most carriers perform routine maintenance, but many outsource heavier repairs
to firms that specialize in such work.
Maintenance costs also depend on aircraft configuration. Supplementary items,

such as IFE systems and ovens, contribute to the increase of costs. This is one
of the reasons why LCC usually do not offer hot meals or IFE other than a maga-
zine.
Doing maintenance also means keeping aircraft on ground, which means that
airlines are not making money during this timeframe. This is a major issue for
airlines, specially because it reduces the opportunities for the ones who plan to
do a retrofit, or simply install a new system on the aircraft – airlines usually avoid
new installations which demand more than an overnight. In that case, these sort
of installations are commonly performed during Check-C, a maintenance proce-
dure which usually takes one week to be finished and is performed each one year
and a half.
2.3.4.5 Aircraft rental
In 2008, aircraft rental represented about 4% of airlines operating costs. Aircraft

may be obtained new, secondhand, or leased. For most carriers, leasing is the
most affordable method of obtaining aircrafts.
18
Most airlines lease the bulk of their aircraft (about 50% of their fleets) from inter-
mediary companies, known as lessors. Lessors can finance the purchase of new
aircraft more cheaply than airlines, based on superior credit ratings.
Lessors then pass on some of the savings to airlines, reducing carriers‟ equip-
ment costs and earning a profit for themselves.
2.4 Outlook for the following years
2.4.1 Open Skies
The rules of international air travel were largely established in 1944 at the Con-
vention on International Civil Aviation, now known as the Chicago Convention.
Signatories to the Convention agree to certain freedoms of the air. Most of the
approximately 130 signatories to this convention as well as many non-signatories
generally observe the first six “Freedoms of the Air.” This first six freedoms deal
with everything from overflying a territory until picking up passengers in a third
country to transport it via home country to another country.
The next two freedoms number seven and eight are generally referred to as an
“Open Skies” agreement. The seventh freedom allows an airline to carry passen-
gers from one country to another country without passing through its home coun-
try. It would be like TAM operating a route between Santiago de Chile and Lima
without any stops in Brazil. In Europe, the seventh freedom is more common-
place with many airlines serving multiple routes among various countries
Once countries have seven freedom agreements between them (along with free-
doms one through six), they are said to have Open Skies.
There is an eighth freedom also known as “full cabotage.” This allows for service
between multiple destinations in a single foreign country. It would allow, for ex-
ample, LAN Chile to operate a flight from Rio de Janeiro to São Paulo and then to
Salvador.
19
Open Skies agreements have the potential to lastingly alternate the competitive
landscape of the aviation industry and are therefore not always welcomed by
national governments. They may feel it is in the national interest to have an air-
line based in their country and may feel that full Open Skies places their domestic
airlines at a disadvantage. There may be significant tax differences or other sav-
ings to be realized by outside airlines that would make for unfair competition.
The most significant agreement so far is the EU-U.S. Open Skies agreement that
gives complete freedom to American carriers but until now restricts EU carriers to
operate intra-American flights. The future trend in aviation goes to lift also this
restriction and to additional Open Skies agreements between further countries.
2.4.2 Consolidation
One of the major drivers in aviation in the last couple of years was consolidation.
Airline mergers in Europe in contrast to the U.S. focused on multiple brand and
one company approach e.g. Lufthansa Group with Swiss and Air France with
KLM. This allowed the airlines to harvest revenue synergies right away and se-
cure cost synergies gradually over time as the operations of the two heritage air-
lines are drawn closer together. This European model is pragmatic and was ef-
fective in coping with the political and social realities of the airline industry, as
well as maintaining the brand values of the contributing businesses. Both Air
France and Lufthansa did see their value improve relative to the market the two
years following the acquisition.
24-month (after merger) stock price performance

125% 117 117
100
88
75
75
Merged
50 airline
EU airline
index
25
0
Air France-KLM (2004) Lufthansa-Swiss (2005)
Source: Bloomberg (Changes in stock price vs. index over 24 month period starting from
end of merger year)
Ill. 9: 24-month (after merger) stock price performance
20
More recently in November 2009 British Airways and Iberia have agreed to a
merger creating Europe‟s third largest airline (sixth largest worldwide). Following
the European model (Air France-KLM and the Lufthansa Group) British and Iberia
will be separate operating companies with distinctive brands.
American consolidation as exemplified by the merger of Delta with Northwest that

creating the largest airline (by traffic) in the world followed a model for complete
integration under a single brand (Delta) and single operating certificate. Delta will
have completed the entire integration of Northwest within the first half of 2010.
Last October Taca and Avianca announced a merger and want to lead the global
industry consolidation trend in the Latin American region. Both companies to-
gether will offer more than a 100 destinations in the Americas.
Looking forward, analysts and airlines executives expect worldwide consolidation

activities to intensify. In the U.S. United Airlines‟ CEO very recently announced
that United (third largest US carrier) is open to merging with a U.S. or foreign
carrier. Moreover U.S. Airways‟ CFO also mentioned that U.S. Airways (fifth larg-
est US carrier) is willing to merge with a U.S. carrier. Lufthansa‟s CEO also fore-
casted continued consolidation in the European airline sector and said that the
European airline market remained fragmented and without consolidation will
loose to US, Asian and Middle East rivals.
21
3. Understanding the IFE Industry
3.1 Market Overview
The world of IFE has two primary customers: the airlines and the passengers.
And it has two major types of suppliers: hardware providers and content provid-
ers. The airlines are found in almost every country of the world. The vast majority
of the suppliers, approximately 80% of them, are located in Southern California,
The other 20% can be found mostly in UK and Singapore with smaller represen-
tations in Germany, Australia and Southern Florida.
Overall the industry does not, or should not, give itself high marks. Airlines are
generally dissatisfied with the costs, with the slow and cumbersome process of
content integration and delivery to the aircraft and, consequently, with the limited
variety of content options that it has available for its passengers. These content
limitations mean that passengers are directly impacted and thus their level of
approval for the current IFE services is also lukewarm, which is witnessed in part
by the fact that IFE comes in as a minor reason for passengers to select a specif-
ic airline for their travel preferences.
As far as suppliers are concerned, the market is controlled by a limited number of

players, operating in a walled garden protected by proprietary technologies and
regulatory restrictions. The cost of entry is high which limits the entrance of new
players. IFE has demonstrated to be a profitable business for the suppliers al-
though their growth is dependant on Airlines‟ own historical volatile performance.
In the following pages we explore in more detail the IFE challenges faced by the
airlines, the different financial elements that impact the business and the industry
outlook up to 2018.
22
3.2 Business Model - IFE Challenges Faced by the Airlines
3.2.1 Hardware and Cost Challenges
“An airline is a huge cash cow! It feeds all of those around it but leaves nothing to
feed itself from. It starts with the airplane manufacturer with absurd profit margins
and it goes from there on down. It is a robbery, a real mugging. A seat that costs
$100,000, or even more? An entertainment system that costs $4million per air-
plane?!”. And with that outburst Marco Bologna, CEO, TAM Executive Aviation,
gave a first insight into the challenges of Inflight Entertainment (IFE) for the airline
industry.
“IFE is an intensive capital business representing the second largest cost in the
purchase of an airplane, right after the engines” (Chris Kettering, Boeing, Director
Goldcare Development). “A cost for which the airlines have not been able to build
a clear ROI argument”.
However, the passengers, and the long time they spend constrained to an air-
plane seat, demand the service! But not so much as to the extent that (generally
speaking) the airlines would have been successful in charging for it, much less to
make it profitable. To the high cost of the original system purchase the airline
then needs to add the costs of content licensing, encoding and integration, con-
tent uploading, weight, maintenance of the systems, software updates and so on.
But is the end product worth it, if not to the airline‟s bottom line, at least to the
satisfaction of the passengers? The answer was a “Yes” in the long-gone days
when movies inflight were a novelty. Now movies, music, video games, TV pro-
grams, they are all becoming an expectation. However, airline fleets, which more
often than not have a mix of brand new all the way up to 15+ year-old aircraft,
therefore new and old IFE technologies, leave the airline hard-pressed to provide
a consistent delivery of both current entertainment and communication technolo-
gy throughout the various types of aircraft in its fleet. They need to update older
aircraft with the newer IFE technologies or risk service.
23
That means the airlines have the additional pressure to retrofit. And retrofitting
means an airplane on the ground for over a week at a cost of over $100,000 per
day (for an A320, for example) just to cover depreciation costs and loss of reve-
nue opportunities. And of course the additional costs for equipment, manpower
and certification.
Certification? An important requirement that ensures that anything that goes into
an airplane has passed stringent tests that minimizes possible failures which may
lead to injuries to passengers. However, Certification also gives the IFE supplier
community an umbrella under which to justify what in the end are exorbitant pric-
es to the airlines. This certification “myth” (as Bologna called it during our inter-
view) also leads to different certifications for the same equipment, one for every
aircraft type. The cost to certify an older airplane with a new IFE system? It can
go as high as $1 million per aircraft type.
3.2.2 Content Challenges
On those rare occasions where an airline has achieved a standardized IFE sys-
tem throughout its fleet, it still needs to determine how its IFE will address the
wide variety of cultural mixes on an airplane at any one given time. Using Lon-
don‟s Heathrow airport as an example, from which 90 different airlines fly to 179
destinations, 92% of its 65.9 million annual passengers are flying internationally
and 37.5% of the passengers are connecting on to destinations beyond London
(www.heathrowairport.com, Media Centre, Facts and Figures). Culturally they all
have their unique entertainment needs and prejudices, and they need the airlines
to address them.
Source: http://en.wikipedia.org/wiki/File:Air_routes_from_LHR.PNG, Author Kransky

Ill.10: Destinations served from London’s Heathrow airport
24
Even for an airline operating in a homogeneous market, such as jetBlue in the

United States, the airline still needs to think of ways to address the different en-
tertainment needs typical of the different age groups onboard, the leisure versus
the business travelers, the ones visiting family, the kid travelling unaccompanied.
jetBlue, with its LiveTV solution of over 30 live channels of TV, plus movies on a
pay-per-view basis came close to resolving this issue. However, theirs is a solu-
tion that works in a market like North America but falls apart in a region with dif-
ferent cultures and content right holders every few thousand miles (such as Eu-
rope and Southern Asia) or where the curvature of the earth limits the perfor-
mance of its satellite antennas such as the Cone Sur (Brazil, Argentina, Uruguay,
Paraguay and Chile) in South America.
The challenge of content right holders in the world of LiveTV is mirrored in the
other IFE systems that require a ground operation that ultimately leads to the
availability of content in the air. In this area too the airline finds itself with its
hands tied to a controlled monopoly of (content and service) providers. Coinci-
dently, they are known as “Content Providers”. These suppliers are required to
meet some special requirements which then give them exclusive distribution con-
tent rights to the Airlines. All for (arguably) good reasons; Movies, considered the
industry‟s most successful form of IFE, are tightly controlled by the Distributors
driven both by a need to manage theatrical, hotel and video market releases
worldwide, as well as to limit their exposure to piracy as anything released to air-
lines reaches the five continents within 24 hours of release.
Another group of players are the laboratories that encode and prepare the con-
tent and the IFE hardware companies‟ media software departments that integrate
it into their systems. The combination of laboratories‟ tight control over content
masters due to piracy fears, and the proprietary nature of the IFE systems soft-
ware lead to another monopoly environment of limited suppliers. And again to
product and services costs that are several times higher than those paid by simi-
lar industries on the ground.
3.2.3 Challenges in Current Inflight Telephony and Connectivity
Telephony, and most recently connectivity, have long been the holy grail that
would bring the airlines an IFE solution that would lead to a service embraced by
25
all, passengers and airlines alike: The former because it would give them the
option of choice in the air, the latter because it would be able to make money for
the service. So far the variety of failures in the past 20 years have shown this to
be nothing more than just a promise. And today the industry still faces itself hav-
ing to chose from solutions that either do not deliver a pipeline large enough to
accommodate projected future demand, or do not operate seamless throughout
the airline‟s full network, or are not yet fully approved by the regulatory bodies.
Worst, usage data has not shown this to be an open and shut case for offering a
profitable or breakeven service.
3.3 Principal Players
Several different players have to come together for the airline to be able to get to
the point where it has the content available for the passengers, as shown in the
graphic below. The entire process of selecting content, preparing it and deliver-
ing it to the airline requires at least two months. Depending on the airline‟s de-
fined content update frequency, which is negatively impacted by the high cost of
these processes, the content is often outdated by the time it is first offered to the
passengers. And this process repeats itself month after month.
3.3.1 Industry Interaction
Source:
Ill.11: Services and payment flows between Airlines and Content Providers
26
3.3.2 Major Hardware Players
• digEcor
• LiveTV, LLC
• Lumexis Corporation
• Panasonic Avionics Corporation
• Rockwell Collins
• Thales Avionics Inc.
• The IMS Company
3.3.3 Major Content Players
• ABC Marketing and Distribution

• Australian Broadcasting Corporation
• BBC Worldwide Television
• CBS Studios International
• Deutsche Welle
• Discovery Communications, LLC
• DTI Software (Games)
• Emphasis Media Ltd.
• Entertainment In Motion
• FBC Media
• France Vision Services
• FremantleMedia Ltd.
• HBO
• IMG Media
• Inflight Television International/EuroNews
• National Geographic Television International
• NBC Universal
• NHK Global Media Services, Inc.
• Nintendo of America Inc.
• Paramount Pictures
• Sony Pictures Releasing
• Terry Steiner International
• Turner Inflight Services
• Twentieth Century Fox Film Corporation / Fox In Flight
27
• Walt Disney Studios Motion Pictures Non-Theatrical

• Warner Bros. Distributing Inc.
3.3.4 Major Service Players
• Access Inflight Media

• Atlas Air Film + Media Service GmbH
• Cine Magnetics Digital
• Crest Digital
• IFE Services Ltd.
• IMDC (Consulting)
• Inflight Productions Ltd.
• Ink
• Interact
• Lufthansa Technik AG
• Pace Communications
• Post Modern Edit, LLC
• SmartJog
• Spafax
• Stellar Inflight
3.3.5 Connectivity Players
• AeroMobile
• Aircell LLC
• ARINC
• LiveTV, LLC
• OnAir
• Panasonic Avionics Corporation
• Rockwell Collins
• Row 44
• Thales Avionics Inc.
• The IMS Company
28
3.4 Outlook For Following Years
The following forecasts relate to both brand new airplanes that arrive from the
aircraft manufacturer already with new systems (linefit), as well as used aircraft
that go through a retrofit process to have newer technologies installed (retrofit).
The information breaks down between aircraft installed only with standard IFE
systems (such as AVOD) and aircraft installed with either a connectivity system
or both an IFE and a connectivity system.
Ill.12: IFE vs IFEC - Number of projected retrofit installations 2008 to 2018
29
Ill. 13: IFE vs IFEC - Number of projected total installations 2008 to 2018
Sources: for three charts above: Panasonic, Thales, Boeing, Airbus and IMDC
Ill. 14: IFE and IFEC total number of aircraft installations forecasted be-
tween 2008 and 2018 – linefit versus retrofit
30
4. The History of IFE
4.1 The Beginning
Industry Firsts
1921 First Inflight Movie - Aeromarine Airways showed HOWDY CHICAGO
to its passengers as the amphibian airplane flew around Chicago.
1932 First Inflight TV - A "media event" on Western Air Express Fokker F-10
aircraft
1961 Customized Reels - David Flexer of Inflight Motion Pictures develops

16mm film system for commercial aircraft. Mechanics required to
change 30-inch-diameter film reels.
1961 Movies - Commercial Flight Introduction – Domestic USA - First

feature film exhibited on a regularly scheduled commercial airline flight
(TWA B707) MGM's By Love Possessed, with Lana Turner and Efrem
Zimbalist Jr.
1962 Movies - Commercial Flight Introduction - International– Pakistan

International Airlines becomes the first international carrier to show
movies inflight.
1962 Personal Headsets - AVID Airline Products develops and manufac-

tures the first pneumatic headset used onboard the airlines and pro-
vides them to TWA for system wide implementation in 1963
1971 Cassettes - Trans Com develops the 8mm film cassette. Flight atten-
dants could now change movies inflight and add short subject pro-
gramming.
1978 VHS - Bell & Howell (Avicom Division) markets first video-tape system
(VHS)
Source: www.waea.org, Historical Firsts
Tab. 1: Key Developments in the start and growth of IFE
4.1.1 Before IFE.... Media Events
Controversy still exists today about the exact date when inflight entertainment
was first introduced on an airplane. The fact is... inflight "entertainment" for pas-
senger enjoyment was not the prime motivation of the earliest airborne presenta-
31
tions. As a matter of record, the term "inflight media event" is a much more accu-
rate label to describe the purpose of the first onboard entertainment efforts. In an
era when air travel was highly romanticized, the general public eagerly grasped
every detail about the fledgling aviation industry. Clever ways of directing atten-
tion to this new industry abounded. Enterprising airlines, press agents, and public
relations firms devised a number of events to take advantage of the public's un-
quenchable hunger for news concerning this exciting and glamorous new form of
transportation.
The earliest validated instance of inflight movies took place in 1921 when Aero-
marine Airways showed a movie promoting Chicago to its passengers on a num-
ber of flights during the city‟s “Pageant of Progress.” The flights departed from
Chicago‟s Navy Pier and the 11-passenger Curtis F5L amphibian or hydroplane
Santa Maria flew passengers around the area at low altitudes and 90 miles per
hour. A screen was hung in the forecabin, power was supplied by an electric light
socket, and a DeVry suitcase projector was secured to a table in the aisle. As
sightseeing passengers flew above Chicago, the city‟s highlights appeared on the
movie screen. There were no concerns related to sound … “talkies” were years in
the future.
Another validated instance involved a WWI bomber converted to commercial

passenger use. The 12-passenger airplane was fitted with a movie screen and
showed a black and white silent film, THE LOST WORLD, during a 30-minute
flight that took off from an airfield near London. That took place in 1925.
Early inflight entertainment included live singers, musicians, fashion shows, etc.
All performances were designed to become media events within themselves, not
specifically to entertain passengers. The press was invited, flash bulbs popped,
and newspapers and magazines throughout the world held their readers in rapt
fascination with news of these events in the sky. The presence of the steady
drone of noisy aircraft engines did not affect the media's raving reviews of these
early innovative forms of air-borne entertainment. In another instance, archival
photographs from May 21, 1932, show an early television set receiving pictures
aloft on a Western AirExpress flight. The airplane was a Fokker F-10 and the
presentation involved the young Hollywood starlet Lorreta Young (one of the key
engineers behind this dated event was none other than Mr. Herbert Hoover, Jr.,
32
the son of the then-US President). In the 30s radios also made their way to the
inflight environment of airlines like American Airways (American Airlines), requir-
ing a flight attendant to be responsible for selecting the stations along the routes.
Source: Beating the Odds, The First 60 Years of Western Airlines, 1926 - 1935
Ill. 15: Early television set receiving pictures on a Wastern Air Express
flight
Source: Silverbird, The American Airlines Story
Ill. 16: American Airways flight attendant selecting a radio station
Film showings were soon added as another onboard media event to attract atten-
tion to the growing industry. Records of the earliest films shown on aircraft are
validated in airline archives around the world and date from the early 1930's. Ear-
ly photos show a filmprojector set up in the aisle of the airplane, and the film pro-
jected on a home movie screen erected in the forward section of the cabin. One
memorable Pan Am photo from 1940shows the cabin of one of its Boeing 307
33
Stratoliners with a large video screen at the front bulkhead. Multiplex or hard-
wired sound distribution systems were unheard of at that time, so the sound was-
blasted from strategically placed loudspeakers that matched the roaring propeller
driving engines decibel for decibel.
Source: “Passenger Aircraft and Their Interiors, 1910-2006“, by John Stroud
Ill. 17: Movie Screen on PanAm’s Stratoliner, 1940
In 1941 an early flight seeking to again capitalize on media coverage featured the
premier of a now long forgotten movie epic and the "live" appearance of Veronica
Lake, a Hollywood star known for her sultry aura and "peek-a-boo" hairstyle. This
entertainment event was held during a special flight of a Navy cargo plane that
circled New York City for three hours while the press was entertained,wined, and
dined. News of this unique and exciting event added to the public's growing ob-
session with the developing airline industry.
In 1948, Pan American World Airways advertised "Movies 7,000 feet above the
Atlantic". A special gimmick was devised to attractmedia coverage of the inflight
presentation of the movie "Stagecoach". A team of horses pulling a stagecoach
galloped up to the aircraft while it was waiting on the tarmac at Idlewild Airport
(now JFK) and delivered a 16mm print of the movie. The press loved it! During
the flight that followed, a projector was set up in the aisle, and the stewardesses
ran the film and served refreshments during the changing of the reels. All the
while, the piston engines were drowning out much of the movie's soundtrack
(headsets were not yet being used behind the cockpit). Nevertheless, it was quite
an event.
34
4.1.2 IFE - The Real Beginning
Along came a man whose name was David Flexer. He had a long time "movie-
house" theatrical background, enjoyed movies, and understood the mechanics of
projectors. He had a brilliant idea while he was making a transcontinental flight.
He thought that movies, presented professionally on an airplane, would be a
wonderful way for passengers to enjoy a flight even more and reduce tedium in
the process.
At this time also, in classrooms and businesses across America, thousands of

projectionists in the proverbial audio-visual clubs and departments rolled either
Bell & Howell self-threading 16 mm projectors or Kodak Pageant projectors into
2classrooms and boardrooms. Bell & Howell had the edge because their projec-
tor grabbed a piece of film and drove it through an elaborate self-threading
process. But sometimes, the front end of that film was "chewed up", and film li-
braries throughout the country were forever replacing the long leaders at the
head of those films to compensate for the "chew-up" factor. The more adept pro-
jectionists in schools and company A/V departments were using the Kodak Pa-
geant projectors. They were more complicated, had to be threaded manually, and
a proper film-tensioning loop had to be formed. However, those projectors were
as "good as gold", and they worked very well.
David Flexer studied the systems and decided that the basic works of the Kodak
Pageant projector system were the best available. He formed a company called
Inflight Motion Pictures, Inc. and engineered an aircraft projection system that
adapted that Kodak projection mechanism and fit it into a shallow ceiling area of
an aircraft interior. To avoid the dilemma of changing 3 or 4 16mm film reels dur-
ing a movie presentation, Flexer spliced all the film together and put it on giant
26" diameter reels. Films were normally run in a vertical reel fashion, but he
opted for a ceiling mounted horizontal feed and take-up reel system. The tech-
nique was ingenious, and it worked relatively well.
35
Source: www.scripophily.net
Ill. 18: Inflight Motion Pictures, pioneer of exhibition systems for inflight
TWA was the first airline in the world to commit to Flexer's innovation. They truly
walked away with the title of being the first airlinein the world to show movies on
regularly scheduled service. The jet era was then beginning. The Boeing 707 was
flying, the DC 8 was introduced, and the speed champion Convair 880 was intro-
duced. These were heady times. Today, trivia and movie buffs alike confirm that
in 1961 TWA was the first real exhibitor of inflight movies. That first movie was
the relatively risqué (for that day) "ByLove Possessed" starring Lana Turner and
Efram Zimbalist, Jr, and was the first step that built TWA‟s Stratocinema Inflight
Movies service. The official title to the first non-US carrier showing a regularlys-
cheduled film onboard goes to Pakistan International. They began that service in
May 1962.
Source: www.scripophily.net
Ill. 19: TWA, Strato Cinema
36
Sources: Collection Carlos Spagat and www.moviegoods.com
Ill. 20: By Love Possessed, the first regular inflightmovie offered in July
1961 on TWA
Despite film breaks and mechanical problems, the Inflight Motion Pictures sys-
tems were working. Stories are told about unsuspectingmechanics that, while
carrying the large and cumbersome movie reels onboard the aircraft, were blown
off the boarding stairs when high winds suddenly caught the oversized surfaces
of the reel cases.
Nothing stirs the pot in the airline industry like competition. By this time black and
white television was well established. Americanand Pan Am opted to install a
video system by placing black and white TV monitors on their airplanes. Twenty
or more monitors per aircraft were installed, and passengers viewed movies on
this unique closed circuit system. This was an era far before the days of solid
state circuit boards and light weight systems. Aviation fuel was cheap, and the
commercial airline world hadn't really given a thoughtto such buzzwords as "fuel-
37
burn" and "weight-penalty". Because these systems were heavy, difficult to main-
tain, and because color television was becoming popular, it was a short-lived
period.
One of the unique developments of the time was an American Airlines system
that Bell & Howell was commissioned to produce. "Astrocolor" was a most unique
system. This system involved a 30" reel of 16mm film that was stored in a for-
ward cabinet and was threaded through a series of film monitors located
throughout the airplane. There were twenty or more monitors on the airplane,
andpassengers saw the film image (and heard the sound) as it was projected
through their nearest monitor. The film started out from theforward, starboard
section of the airplane and followed a 260' path that involved six 90-degree turns.
On some aircraft, the film trail approached three hundred feet. What this meant
was that a first class passenger sitting in a seat on the port side would see
scenes and hear sound 7 1/2 minutes after the passenger on the starboard side
of the airplane had experienced it. It was marvelously innovative... but it was also
short-lived.
4.1.3 A Newly Established Industry
As the 1960's came to a close, inflight movies were becoming a way of commer-
cial aviation life. In the United States, there were movies on American, TWA, Pan
Am, United, Continental, National, Western, and Braniff. Eastern and Delta were
much later entrantsinto the inflight movie arena. Internationally, movies were be-
ing shown on Pakistan International, Air France, China Air, Aerolineas Argenti-
nas, Philippine, SAS, Swissair, and UTA.
The inflight movie business was growing, and airline passengers were enjoying
this relatively new medium. It was becoming obvious to a few that money could
be made in manufacturing and selling the systems and also in distributing the
movies to the airlines while collecting a fee for each presentation. A multiplex
sound (MUX) distribution system that permitted a single pair of wires to carry
many channels of programming to a seat was developed, and a Passenger Con-
trol Unit (PCU) was becoming a common sight on the seats and armrests on
larger aircraft. It is quickly read and quickly said but the importance of the "MUX"
system and the development of the "PCUs" are major stories within themselves
38
and were most critical to those early years of development. The pneumatic, ste-
thoscope type headset was also becoming commonplace, and, beside the mov-
ies, passengers were enjoying stereo music channels.The corporate name of
AVID was very primary in those early years. It was all beginning to represent a
possibly profitable newindustry (although the profit potential for airlines remains a
big question mark). In Hollywood, there were more than a few studios that were
becoming aware of this potentially new and remunerative market.
Sources: Histoire des Hostesses de L‟Air, Les Filles du Ciel, by Alain Pluckers Ugalde and Du May
Ill. 21: John Wayne reaches up to the sky on this overhead video screen
At this time, long before the acronym of IFE (Inflight Entertainment) was common,
the acronym IMP (Inflight Motion Pictures) was frequently used. Their primary
competition was the Avicom Division of Bell and Howell in Chicago. One of the
young engineers at that company, Dick Bertagna, and his associate, Bob Kitson,
had been behind many of those innovative first moves into the new industry.
Pan Am and TWA were both operating across the Atlantic, and both were show-
ing movies. It was creating great concern among their competitors who were not
showing movies. IATA (International Air Transport Association) considered the
39
growing complaintsand eventually decided that movies could not be shown

across the Atlantic. That ruling, however, was in conflict with restraint of trade
legislation in the United States so the I.A.T.A. ruling was then amended to forbid
the inclusion of movie costs in a passenger's fare ... thus was born the first movie
charge for passengers who chose to watch the movie.
4.1.4 A Technology Breakthrough
The inflight entertainment industry was about to be "scooped". Several entrepre-

neurs in California decided not to be intimidated by Mr. Flexer in New York. He
had done an admirable job of introducing inflight movies onboard airplanes, but
those cumbersome, largereels of 16mm film were a constant problem. Enter the
much smaller format of Super 8mm film. A system of loading more compact8mm
film into a cassette was developed. Using it was easy and not too far removed
from the ease of placing a VHS cassette into a slot and having a VCR play it. It
was no longer necessary for aircraft mechanics or film technicians to come on-
board an airplane at the conclusion of every flight and change those large film
reels. The new California company worked out a much smaller projection system,
and the simple, self-feeding, endless loop type cartridge revolutionized the indus-
try. That company, known as Trans Com, expanded greatly as a result of their
innovative 8mm system. With their 8mm system and, later, video systems, Trans
Com became thelargest supplier of inflight entertainment hardware and pro-
gramming to the world's airlines. In the early days of this company, Sundstrand
Corporation had a major investment in Trans Com and, to protect that invest-
ment, they assigned one of their young bright corporate stars to lead that new
enterprise. Enter onto the scene, a Mr. John Landstrom. One of the earliest and
most astute things thatLandstrom did was to lure Bob Kitson from Bell & Howell
to Trans Com.
4.1.5 Audio Entertainment
With the development of the "Mux" systems and the various IFE systems, the
development of audio entertainment systems should also be mentioned. Airplane
passengers enjoyed listening to music programs, and a host of new, relatively
small music programmingcompanies got into the IFE business. At the same time,
the licensing companies of ASCAP, BMI, SESAC, and the Harry Fox Agency
40
became involved. Around the world, other licensing entities followed their lead.
The pioneer audio entertainment company was JohnDoremus in Chicago (his
name and personality were inseparable from his company name) and his magni-
ficent voice and entrepreneurial skills launched a new base of companies. Bill-
board/Music In The Air followed as did a grouping of other companies: Inflight
Radio in London (which later became Inflight Productions), AEI in California, Ho-
rizon Audio Creations in Canada, Trans Com in California, and a few others,
some of which have since faded.
4.1.6 A Video Revolution
Just as David Flexer was a pioneer, the individuals at Trans Com were innova-
tors. Similarly, the entrepreneurs at Bell & Howell were anxious to expand into
this new inflight entertainment area. They had already been working on those
early systems in competition with Inflight Motion Pictures.
As time moved on, the aggressive personality of Dick Bertagna was becoming
stronger and stronger at Bell & Howell. They worked out an arrangement with
Panasonic (Matsushita) in Japan that resulted in the introduction of video players
and projectors into theaircraft interior. The installation of new technology video
systems represented as major a breakthrough for Inflight Entertainment asdid the
introduction of the jet aircraft into passenger travel. Incidentally, at this time in
history, the acronym for inflight entertainment, "IFE"was beginning to be estab-
lished.
Film can be a very fragile thing. In those early days of IFE, stable, mylar based
film didn't exist, and the problem of transporting a large reel of acetate film
through a projector‟s transport mechanism and sound system was a major chal-
lenge. The technical challenges of making that 8mm self-fed cartridge system
work were awesome. When video was introduced, the percentage of successful
movieshowings on the world's airline jumped from 70 and 80%, to 98 and 99%.
Video projection systems could not compete with the color and brilliance of a light
shown through 16mm or even 8mm film stock, but that was a small price to pay
for the flexibility of the videocassette. That flexibility ushered in the option of
"Welcome Aboard" and "Safety" videos, "Duty Free" presentations, "Video Maga-
41
zines", "Boarding" videos, and a wide range of other creative and innovative pro-
gramming shown on Overhead video displays. By the late 1970's, it was obvious
to all that video was the way to go.
Sources: The Garden Jet – Japan Airlines‟ B747, Carlos Spagat collection
Ill. 22: Japan Airlines B747 showing the Overhead display system for video
Bell & Howell in Chicago was a most conservative company and had less and
less faith in the profitability of this new enterprise of inflight entertainment. An
entrepreneur, whose name, not so strangely, was Dick Bertagna, obtained finan-
cial backing and bought out of the company. "Avicom" was born, later to be pur-
chased by Lockheed and later to be purchased by Hughes ... although it was
almost purchased by Matsushita (but that's another story. An additional informa-
tional aside is that Rockwell Collins, a major contractor in the aviation and aero-
space industry became entranced with the IFE industry in 1997 and, by the end
of the year, purchased Avicom anddiscarded the name). Trans Com developed a
competitive video system, and Inflight Motion Pictures, Inc. eventually went out
ofbusiness. Video was taking over the industry (except for a number of cash-
strapped airlines who continued to use their 8mm film systems until just a few
years ago). In mid-2000, Rockwell Collins continued its growth spurt and pur-
chased Trans Com (then Sony Trans Com) and that name disappeared
42
4.2 The WAEA
Industry Firsts
1978 AEA – The Airline Entertainment Association formed and held its
first conference in Palm Springs.
1985 WAEA - AEA changes name to WAEA (World Airline Entertain-
ment Association) to better reflect the global nature of the industry
Source: www.waea.org,
Tab. 2: Milestones – WAEA
In 1979, a number of vendors and airlines felt that the emerging industry could be
well served by a formal association. The goal of the association would be to
serve as an open forum and to enhance communication between all members.
Cindy Tarver of Billboard/Music In The Air, marshaled a group of supporting ven-
dors and airlines. They planned a conference that was held in Palm Springs, Cali-
fornia, and it was most successful. Itlaid the framework for an international asso-
ciation of airlines and vendors and became known as the Airline Entertainment
Association. At that first grouping, an informal assemblage designated Claus
Jensen of Thai International to be their first Chairman and Topper Van Avery of
Western Airlines to be the first President.
Months later, John Doremus in Chicago hosted an all day meeting to hash out
the Bylaws for the newly formed group. Unofficially, months before at that first
Palm Springs meeting, the grouping got together and planned an organization.
Officially, on that day inChicago, the Airline Entertainment Association, the AEA,
was born.
Several years later, in 1985, in an attempt to recognize the international nature of

the organization, the AEA, the Airline Entertainment Association voted to change
its name to the WAEA, the World Airline Entertainment Association. Since its
founding 31 years ago, theWAEA has remained a singular and unique prosce-
nium for the airlines of the world and the suppliers to this industry that provide
passengers with repose, relaxation, and recreation.
43
4.3 Beyond Audio and Video and The Introduction of Choice
Industry Firsts
1958 Inflight Magazines – First reference found about an Inflight Magazine:
Trans Canada Airways (Air Canada), Volume 1, # 1, April 1958
1962 Individual Monitors - American & Pan Am install TV monitors in first
class of a Lockheed Electra Aircraft.
1975 Games - Braniff Airways introduces Atari video games onboard flights.
1979 Electronic Headsets - "Electronic" headphones introduced on selected

aircraft and premium cabins (Air France, Air Canada, Pan Am), replac-
ing "pneumatic" headphones.
1985 Audio Selections - Avicom introduces the first audio player system,
based on the Philips Tape Cassette technology.
198? Airshow – Introduced commercially in xxxx Airshow brought location
based navigation information including maps, temperature, distance etc
1989 In-Seat Video First Class - American Airlines makes first fleet-wide
installation of in-seat video in first class (Avicom).
1989 Noise-cancellation headphones - First IFE noise-cancellation head-
phones introduced by Sennheiser.
1991 In-Seat Video Cabin wide - Virgin Atlantic Airways offers seat-back
video in all classes (including economy).
1996 In-Seat Power - First installation of Inseat Power Outlets, on Delta Air
Lines
1997 Interactive AVOD - Swissair installs first inflight interactive Audio-
Video-On-Demand entertainment system.
2000 Portables – DVD - First fleet wide introduction of hand-held DVD-
players on American Airlines and Swissair
2003 Portables – HD - Alaska Airlines in October 2003 introduces DigePlay-
ers‟ portable, hard-drive based, AVOD
Tab. 3: Milestones – Introduction of Choice
4.3.1 Beyond Audio and Video
Many other new and in some cases innovative options have gradually been add-
ed to the mix of IFE solutions, gradually increasing passengers control and varie-
ty of entertainment and communication solutions. And one of the oldest was the
first to allow the passenger to determine when it would make use of it during the
flight: the inflight magazine.
44
Information about the first inflight magazine is clouded by the fact that in some
cases they grew out of service, instructional and marketing brochures that the
airlines offered their passengers. However, we know that by 1958 Trans Canada
Airways (Air Canada) was offering an inflight magazine that had its first edition in
April of that year. Inflight magazines have been consistently successful in IFE
because they combine a series of benefits to both the passenger and the airline:
variety of topics, ability to use anytime during the flight including taking it home, a
platform to strengthen the airline brand and initiatives and bring in revenues from
advertising sales.
Advertising sales have also successfully found a home in IFE‟s video platforms
with the integration of commercial "spots" into,and sponsorships of TV programs
presented by airlines. The revenue that this commercial time generates offsets
the costs that airlines are incurring for part of their video content costs. Most air-
lines in the world utilize some form of commercial sponsorship.
One of the most popular IFE solutions is the Airshow which started to be offered
to the airline industry even before GPS based devices used for car navigation
became generally available in 1990 with the Acura Legend. First introduced on
name of airline in 19xx, Airshow, linked to the inertial guidance systems in the
aircraft cockpit and displayed in the main cabin screen or on a personal screen,
allowed passengers to observe their airplane's relative location on the globe and
receive reference information about their relative flight speed, outside tempera-
tures, elapsed time since take-off, etc. Although its effectiveness may be argued,
Airshow also provided the first options to automatically link advertising and video
content displayed on the screens to the location being flown over by the aircraft
at any one given time.
45
Source: Rockwell Collins
Ill. 23: Airshow map display over Japan
Exterior mounted cameras, while still not widely available in aircraft or in passen-
gers‟ screens for that matter, came into existence as far back as 1965 as re-
ported by Life‟s Alan Levy about his experience flying on an American Airlines
transcon flight from Los Angeles. These cameras provide live images of the
views in front and below the aircraft during take-off, landing and everything in-
between. As time has progressed, the sophistication and quality of these ground
images has been progressively enhanced.
Noise cancellation technology came into military aircraft cockpits in the late
1980‟s and then became commonplace in commercial and private jet cockpits
around the world. Now, that technology has entered passenger cabins, with the
likes of Bose and Sennheiser headphones. Travelers on a number of airlines
have the luxury of using that premium amenity to listen to movies, audio pro-
gramming or just to “listen” to silence on noise reduction headsets while they
read, work, or sleep.
4.3.2 A Very Small Idea
In the early eighties, a creative businessman (Arn Steventon) with an engineering

background was returning from the Boeing 757 rollout in Seattle. As he sat on the
aircraft and the movie played, his mind wandered, and he thought about the new,
miniature liquid crystal diode (LCD) TV screen that was just being introduced into
the consumer electronics market. He pondered the possibilities of putting that
small screen onto the aircraft seatback that he faced. At that time, it was a very
small screen ... 2.5 inches in diagonalmeasurement ... but he was doggedly de-
46
termined and pursued his concept. He eventually parlayed his idea into a small
company that was later bought by much larger and richer firms. His company
Airvision was purchased by Warner, then half sold to Philips, then all sold to Phi-
lips, then all sold to BE. His idea on that flight from Seattle generated the next
major revolution in inflight entertainment... the personal video screen. His "small"
idea set the stage for the next stepping-stone in the inflight entertainment arena.
4.3.3 Personal Video
Many airlines throughout the world are now flying with fold-up, swing-out, or
seatback mounted or LCD video screens. There are three basic types of in-seat
screen systems: the personal playback system, the distributed system and the
audio and video on demand (AVOD) system.
The personal playback system was the original solution but it has pretty much
lost the race to the other two because it was heavier and suffered from a higher
probabilityof mechanical failures. It involved one small screen system and a per-
sonal playback unit at every seat that permitted the passenger to insert a minia-
ture videocassette of choice (of hi Band 8 format) and play it, stop it, reverse it,
etc. at his or her discretion.
The distributed system has a personal screen and a tuning mechanism that af-
fords dialing between a multitude of scheduled programs being broadcast from
central playback systems. Movies can be viewed, instructional tapes can be
watched, and the passenger can select other programming options. The distri-
buted system's advantages of lesser weight and mechanical problems proved to
be more popular than the personal playback system.But it has a strong disadvan-
tage: with the distributed system the passengers must wait for the timing of a
program's presentation.
Audio and Video on Demand came to address this problem.AVOD isa digitally
based system that involves a playback of programming in digital bit format (rather
than the normal analog style) and, when the inflight passenger presses a button,
a small "black box" beneath the seat begins to gather digital bits of the desired
program. Within a very short time, those digital bits will gather into the program
and the passenger can enjoy the program at discretion. That includes starting,
47
pausing, etc. AVOD is now commonplace in the IFE industry and rare is the wide
body aircraft that is delivered without such a system. It addresses the disadvan-
tages of a distributed video system and adds the advantages of the personally
controlled systems.But it has four significant disadvantages: (1) Capital cost in
the millions per aircraft; (2)Single failure points can bring down the IFE in a whole
seating zone, if not the whole system on the aircraft; (3) Content integrationtakes
an average 60 days; (4)Although lighter than the personal player it still features
avariety of wires, servers and seat boxes forcing airlines to pay a premium
weightpenalty. Ergo the portable players.
4.3.4 Portable Players
Portable players first appeared in the world of IFE as Sony cassette players that
eventually lost to the DVD players introduced by American Airlines in 1999. In the
meantime the outside world started to get into portable digital solutions, first with
the MPMan audio player from Sahean Information Systems, then the iPod in
2001 and finally the first truly PMP (Portable Media Player) from Archos in
2002.The airline industry saw an opportunity to address some of the AVOD‟s
disadvantages via the PMPs. Actually, not the airline industry but Bill Boyer Jr.,
an entrepreneurial-minded baggage handler from Alaska Airlines that read about
the problems on the company‟s employee website and conceived of a portable
hard-disk based video on demand media player that could be used inflight. He
got financially and technical backing and soon offered the DigEplayer to his em-
ployer. By October of 2003 Alaska Airlines was flying it on its long-haul flights.
48
Source: Seattle Post-Intelligencer, Phul H. Webber
Ill. 24: Bill Boyer holds his digEplayer 5500
Similar PMP solutions have since been offered by other suppliers and imple-
mented in a variety of airlines around the world using them either as a full AVOD
service or as back-up units for when a screen in an AVOD system fails.The port-
able AVOD players are battery-powered portables featuring LCD screens that
range from 5” to 12”and with up to 10 hours of play capacity. However, they too
come with drawbacks the bigger of which are the extra onboard space required to
store the players and the logistical support needed to recharge batteries, load
and offload the units from the airplanes.IMS‟ Rave is looking to resolve this by
offering an hybrid portable solution: wired to the seat for power, but each unit
completely independent of the others for content giving the crew the option to
replace them during the flight.
49
Sources: IMS, digECor, Panasonic
Ill. 25: Evolution of portables, left to right, top to bottom: Sony Video Walk-
man, AA’s Pioneer DVD Player, digEplayer 5500, IMS PEA, Panasonic PMP,
Archos 706 (IMS) on armrest, IMS Rave
50
4.4 Live and Connected
Industry Firsts
1984 Inflight Telephone - Airfone introduces the world's first in-
flight telephone system on American Airlines. (Nearly 5000
aircraft worldwide have telephone service by 2000.)
1992 Inflight Passenger Telefax tested–ASI‟s telefax tested on a
Qantas B747-400 the first Cabin Crew Terminal connected to
the Inmarsat cockpit Datalink accessing the SITA terrestrial
network providing global Inflight Passenger Telefax capabili-
ty.
1993 Inflight Fax Commercial Implementation - Avtech's Fac-
simile units installed on Singapore Airlines
1996 Live Television - Live television premiered on a Delta Air
Lines B767 to support the Atlanta Olympics.
2000 LiveTV Fleet wide - In April JetBlue introduces live (via sa-
tellite) inflight television fleet wide in all cabins.
2001 First Inflight E-mail transmission: Air Canada during a
B767 "Press Demonstration" flight, 17 January 2001 from
Montreal to Toronto using Tenzing‟s email / internet solution
2004 Internet and Email - Lufthansa German Airlines, on 17 May
2004, launched the Connexion By Boeing real-time, wireless-
based high-speed Internet connectivity service on an A340-
300 flying the Munich-to-Los Angeles route.
2004 CellularTelephones - Test- American Airlines, on 15 July
2004 , flew a “proof of concept” demonstration flight during
which passengers could use personal (CDMA) cellular
phones inflight to make voice calls to the ground (using
QUALCOMM's pico cell system).
2005 Global Live Television - Singapore Airlines, in July 2005,
introduced four channels of live television (BBC World, Eu-
roNews, Eurosports, CNBC) on international flights via an in-
flight broadband connection (using the Connexion By Boeing
system) wirelessly to passengers' notebook computers.
2008 Voice Calls – Implemented – Emirates offering Aeromo-
bile‟s connectivity solution
Tab. 4: Milestones – Live and Connected
IFE solutions that rely on some type of connection between the aircraft and the
ground have had a rather difficult time staying aloft. Unfulfilled projections of de-
51
mand, usage and revenues, as well as higher than expected costs to the airlines
have left behind a graveyard of solutions backed up by strong names such as
Boeing (Connexion by Boeing), Verizon and GTE (Airfone), AT&T (AT&T Inflight
Phones), British Telcom (JetFone), ARINC and Telenor (Aeromobile) and Airbus
(Tenzing). Others, such as real time television have had moderate success due
to limitations on the markets that their technology and content solutions allow
them to operate.
Source: LiveTV
Ill. 26: A landscape of failures has not curtailed enthusiasm for in-flight
connectivity
4.4.1 Fax
In 1992 the fax became airborne. ASItested on a Qantas B747-400 the first Ca-
bin Crew Terminal connected to the Inmarsat cockpit Datalink accessing the SI-
TA terrestrial network providing global Inflight Passenger Telefax capability. The
availability of fax solutions was next installed commercially on Singapore Airlines
in 2003.However, demand for faxes did not materialize and have represented a
failed business model.
4.4.2 Real Time Radio and TV
USA Today Sky Radio pioneered broadcasting live news and sports from a studio
in Arlington, Virginia. This specialized programming was uplinked to a satellite
52
that broadcasted a wide pattern. Equipped Delta, Northwest, and United aircraft
picked up those satellite signals, and passengers received “live" audio program-
ming. USA Today discontinued that operation but the concept hasnow returned in
the form of live audio and video broadcasting and is now a reality in the US.
LiveTV and Panasonic have been successful in delivering real time TV transmis-
sions in the North American market and Australia. They have been less success-
ful in Europe (Air One) and Brazil (Azul) as satellite “footprints” and licensing en-
tanglements continue to restrict global broadcasting.
The service itself has generally been well received by passengers. LiveTV‟s sa-
tellite solution was a key component in JetBlue‟s service positioning and growth
in the aviation industry. (However, it led to the rather unusual situation in 2005
when a jetBlue aircraft circled Southern California for hours, crippled by a faulty
landing gear, while inside its cabin 140 passengers watched their own life-and-
death drama unfolding on live television).Other LiveTV customers include North
American carriers such as WestJet (Canada), Frontier, Continental and Air Tran
and Australia‟s Virgin Blue. Panasonic‟s customers include Delta and Virgin
America.
Source: LiveTV
Ill. 27: jetBlue Airbus with the LiveTV satellite randome located on top of
the fuselage
4.4.3 Voice and Connectivity
Inflight connectivity first came to the industry in 1984 when Airfone was intro-
53
duced by American, Delta, United and US Airways. That initial inflght telephony
took the form of bulkhead-mounted telephone units and was followed by corded
seat phones – all of which required a credit card (and a high price). Originally
forecasted to be a significant source of revenues for the carriers that version of
telephony – with the singles exception of Boston / New York / Washington D.C.
shuttle service – never really caught on with passengers in sufficient enough
numbers to make it financially viable. Subsequent providers like British Telcom‟s
JetPhone had a similar fate. More recently, the huge investments made by Tenz-
ing and Connexion by Boeing now stand only as IFE history footnotes and addi-
tional examples of multi-million dollar attempts to reach that long-sought goal of
bringing communication to the airline passenger…. But unable to make it all
work.
Source: American Airlines IFE Guide Rhythm and Views from February 1998
Ill. 28: American Airlines and AT&T promote their inflight phone solution
Almost a quarter of a century after those bulkhead-mounted Airfone units, 16

commercial airlines are currently offering inflight connectivity to their passengers,
with approximately half-dozen more carriers about to join that group in the near
future. Passengers on those carriers with laptop computers, blackberries,
iPhones, and a wide variety of cellular phones now have the ability to stay in
touch while cruising at 30,000 feet above the earth.
54
Switzerland-based OnAir, with Airbus and Sita as its main investors, is the pro-
vider for TAP Portugal, Ryanair, British Airways, Royal Jordanian, Qatar Airways,
Oman Air, and Wataniya Airways. In additionit was other airlines, such as TAM
Brazilian Airlines, under “test” agreements.
UK-headquartered AeroMobile has had a tumultuous start to 2010 losing investor

ARINC whileworking on coming out of its administration placement (UK‟s chapter
11). Aeromobile‟s customers include Emirates and Malaysia Airlines.
And rounding up the list are US-based Row 44, LiveTV and Aircell.Aircell is com-
ing off a strong year providing connectivity (but not voice communication) to Air
Canada, Air Tran, American, Delta, and Virgin America. By the end of 2009 Air-
cell had over 700 aircraft installed with their Gogo solution. Seattle‟s Row 44 has
an agreement to install its connectivity solutions on all of Southwest Airlines jets.
And this month traded a loss of Alaska Airlines with a new signing of Mango Air-
lines from South Africa. LiveTV, with jetBlue as its client offers basic email and
messaging connectivity platform.
Source: Aircell and LiveTV
Ill. 29: Delta Airlines and jetBlue promote their connectivity solutions
55
The digital revolution, coupled with Wi-Fi, has been the key to turning the long
sought goal of inflight passenger connectivity into everyday reality, and predic-
tions that inflight connectivity and telephony will be common on most commercial
aircraft in the foreseeable future now seem to have a solid ring of validity. Several
of the carriers mentioned above are still in trials, but the majority has made major
commitments to the service and have learned many unexpected lessons during
the introduction of service to their passengers. A learning curve is being estab-
lished, and carriers will watch closely what that learning curve will reveal.
Major airlines such as Emirates and Lufthansa now offer a full range of IFE ser-
vices and have made connectivity commitments in their more expensive aircraft.
In the A380 airlines like Emirates and Singapore offer true luxury where IFEC
plays a significant role. And a significant cost. What is coming next?
Source: Emirates promotionalbrochure
Ill. 30: Emirates A380 First Class suite
56
5. Connectivity
5.1 Worldwide – Information and Behavior
There are several ways to analyze connectivity, but the objective of this research
is to emulate physical transportation, to date provided by the transportation indus-
try (with emphasis on aviation), with mind transport, enabled by connectivity.
What did actually happen?
Five hundred years ago, culture and information were only accessible to the cler-
gy. Three hundred years ago, it was accessible to the noble. One hundred years
ago it was accessible to the rich. Thirty years ago it was accessible to those living
in big cities. Nowadays everyone has home access to the Washington Library.
In Brazil, accessibility to information has also become a means for Inclusion and
Development; “Those who are connected are able to live better and to accom-
plish more. With prepaid mobile phones we are creating opportunities, as people
are provided with a window to the outside world, through which they can educate
themselves and connect with people. In São Paulo, when you wanted to speak
with your gardener, you‟d have to leave him a note at his local bar, right on the
way into a slum, and he‟d get your message. Nowadays, he has a mobile phone.
He‟s acquired a new address, which is his mobile number. And he currently has a
network, so that if he‟s not available, he‟ll recommend someone”, says Hugo Ja-
neba.
Universalization of information also creates new opportunities in the knowledge

field. “We‟re no longer ignoring Einsteins from Bangladesh, who used to have no
access to information and were, therefore, unknown to the world. Universalization
of, literally, physical opportunities was part of this connectivity package deal.
People can now see and be seen”, says Walter Longo.
Another feature is remodeling geographic perception. I used to think of myself as

Brazilian, and my friends were Brazilian. Now, I‟m from São Paulo and from the
57
world at the same time. Connectivity has increased my awareness of my own

neighborhood, my job, and has overthrown boundaries.
If we think closely, we used to see God as: omniscient, omnipotent, omnipresent.

Today‟s connectivity enables anyone to be those things [even if virtually]. Nowa-
days we can “play God”, which has also had a huge impact on religions, accord-
ing to Walter Longo.
Another interesting aspect is the possibility to see whatever you want, whenever
you feel like it. On one hand, it grants us access to everything, and on the other,
it disqualifies the media and entertainment industry as we know it today. Why do I
have to get home early to watch “24”, if I can watch it at Hulu.com?
“Connectivity is fantastic! Being connected has become a thrill. It reminds us of

old day packs, of the notion of belonging to a group”, says Giovanni Rivetti. It is
now related to basic needs. Having access to information and communication
anytime, anywhere makes us feel productive and certain of being mobile, of be-
ing free and in control at the same time.
“My business is global, is 24/7, with resources around the world that need to be in
contact with me. It is knowing that they can and they are”, said Alan Pellegrini.
I don‟t go anywhere without my laptop, including holidays. I feel comfortable be-
cause I know what‟s going on around me. If I don‟t know what‟s going on I am not
in control; said Linda Palmer.
And, since its invention, a lot has changed in the world. Products, services, hab-
its; that is, the way we do things. It‟s brought down entire segments, and the ones
which survived had to change drastically or reinvent themselves. According to
Giovanni, “At first, connectivity changed the way we do things. We would no
longer make photoliths, we started making digital files; we abandoned the type-
writer and adopted keyboards. From now on, it‟ll change the very products we
use. We‟ve started talking about ditching paper magazines, as magazines will all
be digital. In the past, the most reliable criterion to assess an artist‟s success was
the amount of CDs he/she would sell… we can‟t think like that anymore”.
58
Knowledge has become democratic and affects not only the corporate world, but
society as a whole. It‟s unquestionable that the educational system is now in
check, as well as the whole consumption structure, because future generations
will not tolerate impositions.
“The old system is what I call one-size-fits-all, one-way broadcast learning. It was
designed for the Industrial Age, when the industry needed workers who did what
they were told. The teacher was the sage, and he or she was supposed to deliver
knowledge to the grateful students, who were expected to write down the sage‟s
words and deliver it back to them, often word for word, in exams if they wanted to
score an A. Unsual questions were not appreciated.
Some leading educators are calling for this kind of massive change; one of these
is Richard Sweeney, university librarian at the New Jersey Institute of Technolo-
gy. He says the education model has to change to suit this generation of stu-
dents. Smart but impatient, they like to collaborate and they reject one-way lec-
tures, he notes. While some educators view this as pandering to a generation,
Sweeney is firm: “They wnat to learn, but they want to learn o”nly what they have
to learn, and they want to learn it in a style that is Best for them. – Grown Up
Digital – Chapter 5 -The Net Generation as learners.
“Connectivity is much more about the present generation than about devices. The
iphone is just a detail. What really matters is that there‟s a culture behind it, and
people whose mindset belong to several people at a time. While my son is on the
computer, there are five screens opened at a time, and MSN is on at the same
time. This is hard for me. I do one thing at a time. Kids hop from one application
to the next on the computer as we used to do with our remote controls. Steve
Jobs‟ creative insight was to put it all in one high visibility business. But the real
driving force behing this is demand” says Luiz Falco.
Thymus Branding, a Brazilian consultancy firm specialized in branding, has de-

veloped a simple graphic method to show society‟s evolutionary stages:
59
Concepts A) Knowledge
B) Director
• A) Society C) Interdependency
• B) Career D) Autonomy
• C) Evolution E) Maturity
• D) Relationship F) Philosophical
with others
• E) Individual A) Industrial
• F) Aspects B) Manager
C) Independency
D) Heteronomy
E) Youth
F) Emotional
A) Agriculture
B) Technical
C) Dependency
D) Anomy
E) Childhood
F) Physical
Source: Thymus Branding

Ill. 31: Society´s evolution
“We‟ve evolved from an agricultural society, a society essentially centered on

survival, which used very rudimentary technology to produce and establish rela-
tionships. The Church and the State could not be told apart, and they‟d tutor so-
cial relationships and grant no individual rights. The most important asset was
land.
Industrial society invented engines and accelerated History. It created plants, and
cities as we know today followed. High demographics. Conflicting relationships as
in youth: Between people – black and white, for instance; between social classes
– the rich and the poor; and between society and the environment. The Church
and the State became separate and Companies were born. Social issues sur-
rounded relationships. The individual with rights, responsibilities and wishes was
born. Laws, social movements, ideologies, wars… Material well being became
the ultimate standard of evolution as race, and, at the same time, there‟s shame
for entire populations‟ basic needs were not being met. Humanity stepped on the
Moon and saw the planet for the first time.
The society of knowledge, armed with Information and Communication Tech-

nologies, rushes through time and eliminates distances in social relationships,
which ultimaltely leads to globalization. New paradigms replace the old ones:
interconnected society, the power of the individual, customization. The State now
shares its responsibilities regarding common welfare with society: NGOs and
60
Socially Aware Companies are born. The uncertainty about the future leads to
concerns about sustainable development”, says Ricardo Guimarães.
Regardless of all its impacts, we‟re left with a society of highly explored and
evolved content, cooperation and transparency values.
To date, everyone who invested on physical rather than content production are
experiencing the negative impacts of their choices.
Nonetheless, at the end of the day, this impact is extremely positive as, taking the
recording industry as a classic example, music becomes central to the industry
and consumers benefit from this change.
“Connectivity has propelled the arts, not the corporate structure which controls
the production means” says Ricardo Guimarães.
5.2 The World of Advertisement and Communication
In the business world, business model paradigms in general and specifically in

advertisement – attracting and cultivating customers – are being profoundly ques-
tioned. Paradigms, such as “the customer is always right”, “reductions sell,
whereas advertisement creates the company‟s image”, “new media don‟t over-
power old media”, among others. Nowadays, customers don‟t know what they
want, because they‟re not aware of everything they may want. There are cur-
rently sales initiatives which are able to create an image, such as Jack Daniel‟s
Club, in which participants are awarded with a squared centimeter of the whisky‟s
distillery. We now have the Internet, a media featuring all the advantages of
printed media - the fact that it can be edited by the customer, that is, consumed
when and how he/she sees fit, and being more qualified – and electronic media –
the fact that it's broad and instant.
Up until now, a communication professional would have to choose, according to

the customer‟s intentions, between reach and qualification. If the goal was to
reach millions of people with generic and impersonal messages, he/she would
have to choose high reach media such as TV, radio, newspapers or magazines.
If the goal was to communicate more specific content to thousands of people, the
right choice would be segmented media, such as direct marketing, event spon-
sorship, etc. It used to be referred to as “Sophie‟s choice” (after the movie
Sophie‟s Choice).
61
Internet enables advertisement to be broad in the first instance, and reach many,
and, at the same time, to be specific, in the third instance. It‟s still not as effective,
but I believe it's only a matter of time. So, perhaps, this new media will defeat the
paradigm and drastically reduce the relevance of others. The replacement proc-
ess tends to be increasingly faster and broader. It shall be the main media one
day. According to Walter Longo, “Brands will have to change their game tactics.
Whereas before bowling used to be their game: There‟d be a sender (the player),
funds (the size of the ball), a message (the aim) and you‟d try to knock down as
many pins (people) as possible; Now we‟re playing pinball. You‟ll throw the ball
and it‟ll come back to you with a different strength. The relationship is no longer
from two distinct points towards several. It changes the way we do marketing, the
understanding of this relationship, the type of product, the way we use media…”
Blogs and social networks have been attracting massive amounts of resources
from advertisers, for instance. It used to be more of an individual activity and it‟s
now becoming a corporate activity. But they have not yet become effective media
for advertising, because the right formats have not yet been designed.
There‟s another exclusive advantage to the Internet. It is the only media which
enables information, communication and transactions through the same channel.
This is unprecedented in the history of communication.
Mobile marketing is becoming increasingly more effective, as technologies ad-

vance and spread. iPhones, before 3G, already account for half of mobile Inter-
net access in Brazil, and there are only 300 thousand devices about; which is in
line with what‟s happening in the rest of the world (see figure below). “The avail-
ability of technology increases use and efficiency”, according to Walter Longo
62
Source: Morgan Stanley Research, The Mobile Internet Report, December 15, 2009
Ill. 32: iPhone + Android Mobile Internet usage much higher than Shipment
share
It is noteworthy, however, that I‟m not only talking about the Internet. I‟m talking
about the Internet and its “offspring”; other media equally capable of reaching
many and just as qualified, such as the outernet, podcasting, advergames, and
others. All of them are Internet based, but over time they‟re gaining momentum
and overpowering traditional media. They already feature the highest growth
rates in revenue (between 45% and 80% per annum, against 5% to 10% for con-
ventional media – source: Y&R Brasil). Note: because new media were intro-
duced later in Brazil, they‟re more widespread abroad. However, their growth
rates are comparable to foreign countries‟ (investments on Internet advertisement
increased by 45% in 2007 in relation to 2006; against the 9% growth featured by
the average overall market growth according to the Inter Meios research).
“The world of Advertisement and Communication has seen the fundamental

overall changes taking place: the audience is not good when it‟s not attentive.
Society as a whole is Attention Deficit Disorder (ADD) positive. No one pays at-
tention due to the number of claims being made. This poses a challenge to the
advertisement industry and a great opportunity for the content industry, which
needs to produce increasingly more exclusive and customized content; says Wal-
ter Longo.
63
Over the past years we‟ve watched the communication industry go through sev-
eral changes; and based on Sergio Mugnaini‟s Masters Thesis, Luddi-
ties@communicationIndustry - 2009, I was able to gather relevant information
and classify them into eight large groups, in order to exemplify these changes:
5.2.1 From physical to virtual
The construction of a virtual world gained momentum especially after the dawn of
the Internet. Within the context of this new world, new ways of performing regular
tasks from the real world have been created, and not infrequently the task actual-
ly became simpler to the end user. In respect to financial transactions, for in-
stance, all banks made services available through online platforms, which made
the lives of many easier and avoided the time wasted waiting in long cues at the
bank. E-commerce services transformed commerce as a whole; In 1994, Jeffrey
Bezos created Amazon (www.amazon.com) and, for the first time, people were
able to buy real products through virtual purchase activities.
The paradigm switch from the physical to the virtual world was not available only
for services, especially entertainment platforms. In 2003, however, the world wit-
nessed the birth of You Tube (www.youtube.com), through which users were able
to exchange experiences through videos often recorded by users themselves.
5.2.2 Service consumption from fixed to mobile devices
As paradigms were being challenged, technology progressed. And the result of

this progress can be defined in one word as “mobility”. Mobile devices are be-
coming increasingly more important to people's lives. It is already possible to
carry your most important information and interests – as well as access others‟ –
on these modern telephone devices, and even video game consoles.
In many cases, the communication industry was able to keep up with this com-
munication paradigm transformation through designing new formats for their re-
spective electronic devices. These new formats allow for much more than adver-
tisement per se. The iPhone, for instance, allows for several brands to create
applications and distribute them freely to iPhone users.
64
These applications enable users to access games, maps, travel guides, radio
stations and countless other products and services through a single device.
Tab. 5: Example 1 of multi function device
Tab. 6: Example of biggest rated categories
65
And, the biggest upside from users‟ perspective is comfort, whereas to manufac-
turers, it represents loyalty (and consequently sales); and to operators, increased
traffic.
Tab. 7: Apple leadership1
I believe we‟re able to establish a direct relationship between the number of ap-
plications and the data traffic they generate. I don‟t think it‟s a coincidence that
the iPhone holds the record number of applications‟ download, as well as, fea-
tures a much higher rate of data consumption in relation to other smartphones in
all categories assessed.
66
Tab. 8: Apple leadership2
5.2.3 Changing the target of communication initiatives. From groups to in-

dividuals
As new technologies reshape people‟s behavior, mainly due to mobility and use
of mobile devices, brands are redirecting their communication initiatives to indi-
viduals; unlike they used to do when they focused their attention on groups. TV is
still the most prominent mass communication channel; however, brands such as
Facebook and MySpace are exploiting their actions differently. “We're still facing
challenges to create databases which relate directly to the front end, so that we
can understand consumers' aspirations. Nonetheless, the tendency is to seek
granularity (degree of detail available through a database), to pinpoint individu-
als” said Falco
5.2.4 Dedicated to Multifunctional Devices
From table radiosets to portable radios; from the old analogic record players to
the walkman, the discman or the iPod; from the table telephone set (fixed and
collective) to the Mobile phone (mobile and personal); from the mainframe to the
PC, the laptop or the palmtop; from the TV set to the portable DVD player; from
the old camera to the digital camera embedded in your mobile phone; from all of
the above to the smartphone.
67
Ill. 33: Smartphone convergency 1
Ill. 34: Smartphone convergency 2
These myriad of applications will change consumers‟ behaviour when we analyze

data consumption.
68
Ill. 35: Mobile phone usage
5.2.5 Wired to wireless communication
Bluetooth, Wi-Fi, Wi-Max, Wi-Mesh, UWB (ultrawide band) were the broadband
wireless networks which revolutionized mobile communication over the past
years. Try picturing the changes we‟ll witness when these wireless networks
merge with cable or wired networks, creating hybrid IMS (IP Multimedia Subsys-
tems) networks.
Around 2015, broadband networks (B-Nets) shall interconnect houses, schools,

hotels, offices, banks, restaurants, airports, stadiums and malls. Communication
will flow across the planet through seamless networks, as metal, optical and wire-
less networks are integrated to current networks.
According to experts, including Ben Verwaayen, former British Telecom CEO and
Chairman (currently Alcatel-Lucent‟s CEO), hybrid broadband networks will con-
nect most human beings in the next 10 years.
The following graph shows that mobile telephony has reached virtually 100% of
the population. Brazil follows suit as mobile telephony has reached 91.33% of the
population (Data from Anatel and IBGE, based on Jan/10).
69
One way to assess wireless penetration is to look into the rapid spread of 3G and
Wi-Fi technology:
Ill. 36: Mobile phone usage
5.2.6 Unidirectional to interactive means
The role of communication has been going through enormous changes. Nowa-
days, one is able to advertise in an elevator, behind an airplane seat or thorugh a
specialized blog. A free iPhone application is often followed by supporting ads;
that is, when the application content itself is not used as media.
Traditional communication channels are regarded as unidirectional, that is, their

goal is to pass on to consumers one or more messages, according to a pre-
established format. Traditional communication channels are the radio, printed
press (newspapers and magazines) and television. For those who work only with
these traditional media, it is virtually unheard of to start a conversation with con-
sumers.
After the Internet was created, it became feasible to actually pursue a conversa-
tion with consumers. Nowadays, brands are able to uphold a bidirectional rela-
tionship with their customers. Hence, customers are able to debate among them-
selves and with brands, interacting with them through digital means. Therefore,
digital means of communication are regarded as interactive.
70
In 1964, the philosopher of the age of electronics, as Marshall McLuhan best

known, set forth a theory stating that the means is the message. In his book,
“Understanding Media: the extensions of man”, MacLuhan defended that means
of communication are extensions of man, and demonstrated how they've led us
to the audiovisual-tactile, tribe-segregated and cosmic world of the electronic
age.
However, the MacLuhanian theory dates from the 60s and a lot of water has
gone under that bridge, as stated by Andrea Brazil Mugnaini in her article “O
McLuhan que nos perdoe” (“I‟m sorry McLuhan”) (MUGNAINI; 2008).
“I believe the media to be only a space where opportunities abound to send or

create messages. Nowadays, in 2008, we rely on a much broader range of me-
dia than what was available in the 60s. Besides the traditional means, such as
newspapers and the TV, there‟s also the Internet, smartphones, iPods, Interac-
tive TV, analogic and digital means, and they all dwell in the same environment.
However the vehicle, means or media, is only the most superficial aspect of the
process in the sense that it's the first thing the receptor notices in the communi-
cation process (MUGNAINI; 2008)”.
“The most promising future for media is to have captive audiences: on board, in
elevators, while waiting at bank cues. Traditional media have created a culture of
interruption: in exchange for the information I provide you I interrupt you to draw
your attention to my product, which pays for your entertainment. That‟s because it
used to be the only way to get people‟s attention. On the other hand, IFE works
in the opposite direction: I‟ve already been interrupted, so what I can do is to re-
duce the frustration it creates. While one disturbs productive time, the other re-
duces the stress of inevitably wasting time. For that reason, IFE and digital media
out of home have gained momentum and are more persuasive than most tradi-
tional media: besides informing, they also provide a service. In the elevator it
makes me less shy, on the airplane it reduces tension and stress, it functions as
a nanny to my children, etc. Ultimately, it plays a role in improving the quality of
people‟s lives” says Walter Longo.
71
“Medias are technologies which would have been emptied of meaning, if it

weren‟t for the messages flowing through them. The key element in this process
is, therefore, the message; what‟s created to be broadcasted through the media.
The means is not the message. It is no longer about analogic and digital means
coexisting, it‟s about them converging. New technologies will not be accountable
for the so expected convergence of media, rather, it will be rendered by the mes-
sages we, creative professionals, create (MUGNAINI; 2008)”.
5.2.7 Communication at the speed of light. Low to high speed Transmission
Optical fibers increase information transmission capacity to unprecedented le-

vels. In theory, in about 2015, when optical frequencies are expected to be used
to their maximum capacity, a single optical fiber will be able to transmit enormous
amounts of information, something between 400 and 600 terabits per second.
At this speed range, it will be possible to transfer the whole content of the US
Congress Library, the largest library in the world, in 2.1 seconds.
This trend shall move towards meeting consumers' desires and the new habits of
consumption through the Internet. According to Cisco, Internet traffic is expected
to grow over 10-fold.
This growth may be related to increased traffic of video files, which traditionally
require higher bandwidths.
72
Ill. 37: Video tramp evidency
5.2.8 Open and closed protocols
Software is intelligence embedded in chips. They become more important every-

day, exponentially, in all areas of human activity. Around 2025, the most common
and popular software shall be search engines or Internet research software. In-
formation Technology (IT) cannot exist without software. Either as operating sys-
tems or applications, software are responsible for making computers and thou-
sands of other appliances and devices – such as PDAs, mobile phones, digital
cameras, iPods, sat navs, Internet browsers, spreadsheets, text processors,
communication systems – work and perform practical tasks.
The great paradigm shift is related to copyrights. Currently, there‟s an increasing

number of software, operating systems and services built on open source plat-
forms, which are designed not by a person alone, but by countless people, who
add services to the work and help developing platforms known as Creative
Commons.
73
Creative Commons is a non-profitable project which makes flexible licenses

available to intellectual work. Like Creative Commons there are several other
successful projects. In the field of communications, several advertisers have
been taking advantage of this “co-creation” of initiatives, more widely known as
web 2.0.
Web 2.0 was a term coined in 2004 by an American company, O'Reilly Media, in
order to refer to the second generation of communities and services, based on
the concept that the “Web is a platform”. This platform entails wikis, folksonomy
based applications, social networks and Information Technology through which
users themselves build, discuss platforms, and keep them self-sustainable, not in
need of centralized management. Websites such as Wikipedia, Google, YouTube
and Facebook may be regarded as the best examples of phase 2.0.
5.3 On Board Connectivity
From passengers‟ perspective, up until 3 years ago on board connectivity used to

be restricted to satellite phones on their seats or near the toilets.
For the past three years, the aviation market has seen the launch of several on
board connectivity products and services, which are listed in the following para-
graph.
5.3.1 Air-to-ground internet
After winning the FCC auction for air-to-ground broadband frequencies in 2006 in
the USA, Aircell became the major provider of Wi-Fi communications to airlines
and business aviation based on air-to-ground communications.
74
Source: Aircell
Ill. 38: Antenna installed on the aircraft
Aircell‟s system already covers the entire continental U.S. and it recently an-
nounced an expansion through Canada.
It is composed of ground antennas that communicate with the aircraft, which is

also equipped with an external antenna and an internal one to offer wifi signal.
The system is currently installed through a retrofit process for single aisle aircraft.
Source: Aircell
Ill. 39: Aircell’s coverage
Its biggest upside is the connection speed: passengers are able to browse the
Web; access online music, games, podcasts and webcasts; send and receive e-
mail; and connect to virtual private networks while flying. The promised easy-to-
use service provides passengers with full Internet access on any Wi-Fi-equipped
laptop or personal electronic device at speeds similar to wireless mobile broad-
band services on the ground.
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Source: Aircell
Ill. 40: Top Web Sites
The service is provided by Gogo and offered at a cost of $4.95 and up, based on
the flight length and device used (it is possible to purchase it for the whole flight
for a fee of around US$ 13 in some airlines – for a six hour flight).
Once the aircraft reaches 10,000 feet and the crew gives the okay to turn on
portable electronic devices, passengers can log on the system. They are wel-
comed by a home page where they have to fill their personal and credit card in-
formation.
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Source: Aircell
Ill. 41: Gogo’s Welcome Home Page
Source: Aircell
Ill. 42: Virgin Seat Back Cards
77
Once the credit card transaction is confirmed, the access is granted and the user
receives and e-mail with the receipt.
On the other hand, its biggest downside is that the system is not available once
the aircraft reaches the ocean, limiting the service to domestic flights. Moreover,
the only country that offers that ground antenna infra-structure is the USA. “They
don't have the technical capabitlity to offer them onboard internationally at this
time. They don't have the ability to offer transoceanic service”, says Michael Pla-
ney.
Therefore, Aircell is currently focused in offering its services to North American

carriers: Virgin America, United Airlines, American Airlines, Delta, AirTran and Air
Canada. Alaska Airlines, Continental and US Airways have also announced
commitments to offer this service. The current amount of aircraft which the sys-
tem is installed is 760. It is estimated by the end of 2010 that they will have 1500
aircraft flying with this system.
JetBlue also offers an air-to-ground wireless solution, provided by LiveTV, called

BetaBlue. But instead of a full internet experience, they offer a very limited ser-
vice. Basically, passengers can only access their e-mails with their mobile devic-
es, with no attachments. Their belief is that, above all, the service needs to be
free for the passenger. Thus, it should be as cheap as possible to the airline. It
means less power systems and antennas.
5.3.2 Satellite-based internet and cell phone
The other emerging connectivity technology is satellite-based.
The major player in this sector is OnAir, a joint venture between Airbus and SITA,
offering inflight mobile telephony (GSM standard) and wi-fi internet.
It is the only connectivity solution that is linefit & retrofit selectable on Airbus A320
& A330/A340/A350/A380 aircraft in the market.
The linefit offerability is, maybe, the biggest upside for the airlines, since the sys-
tem can be part of the aircraft leasing agreement, with less impact to the airline‟s
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cash flow. Also, it reduces the risk of certification and does not force the airline to
stop the aircraft to have the system installed. “Retrofit programs are far more dif-
ficult to resolve the business case due to a shorter payback timeline, out-of-
service requirements for the aircraft, and the difficulty of installing new networking
hardware on the aircraft (Andrew Kemmetmueller, IMDC, 2010)”
Another upside is the satellite coverage, that virtually covers 100% percent of the
planet (except in Polar Regions).
Its system allows up to 12 simultaneous voice calls, unlimited SMS and e-mail on
smartphones. Passengers can then receive and make calls, check their voice
mail, send and receive text and multimedia messages, and access emails and
websites.
Aircraft are equipped with “No Mobile” signs (similar to “No Smoking” and “Fasten
Seatbelts” signs). As soon as those signs are off, OnAir name appears on the
mobile screen as the network connection is obtained.
Phone services are of a roaming nature, as on a foreign network. Users must

then dial the full international numbers and are billed directly by their mobile op-
erators, at international roaming rates. Depending on the operator, the rates
could reach US$ 10/minute for voice, and around US$ 0,50 for SMS.
With the Wi-Fi network access, the process of logging onto the internet is similar
to public Wi-Fi hotspots. Passengers can access the internet, webmail to retrieve
and send emails from a web-based email account, webchat to exchange instant
messages.
At Oman Air, middle east carrier, for example, the rates for the mobile and Inter-
net connectivity are fixed as follows: Passenger price plan for Internet on laptops
(Wi-Fi), would be (pilot pricing) $29.95 for 26 MB per flight. Additional usage
would be at $ 0.006 per KB, for the webmail (only body copy) would be at $ 9.95
and for the attachments it would be $.006 (per flight). For the Webchat the rate
would be $ 4.95 for unlimited access (per flight).
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GSM and internet signal are provided by Swift BroadBand solution from Inmarsat
satellites, which provide true broadband speeds up to 432 kbps.
Recently, Oman Air became the first airline in the world to offer both mobile and
broadband internet on board its flights. OnAir‟s other clients (already flying or in
the process of implementing) are AirAsia, airblue, bmi, Libyan Airlines, Qatar air-
ways, Royal Jordanian, Ryanair, Shenzhen Airlines, TAM Airlines, TAP, wataniya
airways, British Airways, Egyptair, Hong Kong Airlines, Kingfisher Airlines, Qan-
tas, Saudi Arabian Airlines.
Source: OnAir
Ill. 43: Example of Oman Air communication
Aeromobile, OnAir‟s competitor, offers a similar value proposition for its custom-
ers. The system is offered in partnership with Panasonic Avionics Corporation,
but they have less announced commitments. They currently have commitments
from Malaysia, Emirates, V Australia and are under negotiation with Lufthansa.
Aeromobile‟s difference from OnAir is that it offers the GSM phone service and
PAC is responsible for offering the internet solution, called eXconnect, based on
Ku-Band satellites.
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According to Andrew Kemmetmueler, “Ku-Band is recognized as a very attractive

option to deliver significant bandwidth to client users over satellite. Unlike Iridium
and Inmarsat solutions, where the satellites are operated by a single provider,
Ku-Band is provided by a number of different operators. Depending on the geo-
graphical location, different providers are capable of offering the service. For an
airline, there is a need to either integrate service from multiple Ku-Band opera-
tors, or select an aggregator like Panasonic who has secured service over a large
coverage area. Ku-Band is attractive for its ability to offer very high speeds (20 +
Mbps) to the end user. This has been particularly attractive to commercial and
business aviation, given the desire to support high-speed applications such as
television and other streaming video (Andrew Kemmetmueller, IMDC, 2010)”.
Row44, another inflight connectivity player, has also chosen Ku-Band solution
and is offering its services as a turnkey service provider. Alaska Airlines per-
formed some tests with Row44, but decided to move to Aircell. So far, Southwest
Airlines is Row44‟s key customer.
5.3.3 Hidden revenue opportunities
Inflight Connectivity also allows the implementation of value-added services, such

as:
 Inflight credit card authorization, reducing fraud history on onboard shop-
ping
 Telemedicine, reducing diversion strictly to serious health cases
 Targeted advertising and promotion
 Personalized customer care: limousine services at destination, connection
flight booking etc
 Real time surveys
Applications like these are still under development and airlines have no clear
view on the size of the potential revenue pie.
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5.3.4 The business case has not been proven yet
The whole aviation industry believes that inflight connectivity is to become a must
have. Everyone agrees that inflight experience is a key loyalty factor. “Loyalty is
important for an airline because getting a new customer is much more expensive
than retaining an old one. So you want them to come back, you want them to
have a good experience. IFE provides a panacea for them to get from A to B as
painless as possible. The better the IFE, the better the experience is”, says Linda
Palmer. [Despite Linda‟s quote refers to IFE as Inflight Entertainment, I took the
liberty to expand the concept and refer to inflight experience.]
However, as I have explained in the beginning of this Thesis, aviation industry is

a capital-intensive market. Thus, every move has to be carefully analyzed and
agreed among different internal directories (especially Marketing, Financial,
Supply Chain etc). It basically means that every decision has to be supported by
a business case. Otherwise, the airline company may go bankrupt due to the
simplest decision.
This situation is harder for inflight connectivity because the market is brand new.
There is still not sufficient data for airlines to make the investment decision.
The ones who have already decided to go ahead are finding out how the service
works (and how much money it generates) on an empiric basis.
“From the US perspective, 90% of what determines the success of connectivity is

the length of the flight. The focus in the US is on short haul because people se-
riously miscalculated where the business model would be more effective to start
with. It was also affected by the main provider of that connectivity, Aircell, offering
deals to get the systems onboard” says Michal Planey.
The feedback passengers give is that they love connectivity, but they are not will-
ing to pay for it, especially for internet access. Passengers do not care that the
airline has to make huge investments to make inflight connectivity possible. They
are already used to having it for free in Starbucks. “Any change in charging for
the service leads to precipitously drops in usage rates. Once people have to pay
for the service people just think that they don't really need it. They don't think of it
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and paying for it for a 6 hour service. They think of it as paying that money for the
20 minutes they will use it as they will after go and watch a movie. The promotion
marketing is incumbent on the airlines in some cases and in some cases on the
service provider. It is generally believed that in the case of American Airlines and
Delta, the supplier gave the product away believing that it would make up for it on
the revenue side. Supplier is being forced to reduce the pricing to the passen-
gers, but the price reduction has not increased the revenue by the same percen-
tage. It was a disaster as a business model”, says Michal Planey.
Some may say that this situation can be overcome through media sales or spon-
sorship. Although this statement seems to be valid, it makes me recall the begin-
ning of the internet – and its bubble in the early 2000s. So far, people have seen
some moves in the industry such as the free access offered by Google in Virgin
America‟s flights, but there is no steady relationship established yet.
Regarding onboard telephony, suppliers defend that companies will make money
from business passengers‟ usage, since they usually have corporate phones and
do not care as much about how much money they spend on it. Leisure passen-
gers will likely be SMS heavy users because it is cheaper.
Although international roaming rates may be acceptable in places like Europe,

where more people are used to travel abroad on a regular basis, it is still a ques-
tion mark for larger countries, such as Brazil, with a high percentage of domestic
flights. Will the passengers accept this value proposition? Some hope that the
answer will be „yes‟ and that, eventually, mobile operators will offer onboard
minute packages for some subscription plans, just like they do on the ground. So,
for US$ 100, you could get 1000 minutes on the ground, 50 SMS and, maybe, 10
minutes onboard.
Since it is still difficult to prove the business case, many airlines are signing test-
ing agreements, for periods from 6 months to 2 years. In that timeframe, airlines
intend to get feedback from their passengers (specially regarding etiquette) and
usage statistics, to prove the return on investment.
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For OnAir solution, also, the available traffic bandwith for the whole airplane limits
the passengers‟ experience. Applications which demand more bandwith, such as,
videos, voip and even larger attached files in e-mails may not be available.
Besides the fact that it is disappointing from the passenger‟s perspective, it

represents a challenge for airlines. The “under promise to over deliver” strategy
will be hardly achieved. That will be especially disappointing for the marketing
professionals, who are dreaming of a new blast differentiator to be able to speak
of.
On the other hand, the Ku-Band solution, which claims itself to be better and
cheaper, does not offer quality consistency, especially for long haul flights, where
passengers would have more time to use connectivity.
On one hand (system), you have coverage, but not enough speed and it is rela-
tively expensive. On the other, you have speed and price, but not enough cover-
age.
There is no doubt that passengers are prepared to consume onboard connectivi-

ty. They already do it on the ground – and it is increasing on a daily basis. Con-
nectivity will be the next frontier for inflight experience, but there are some key
factors that need to be addressed, especially pricing and level of service.
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6. Conclusion
THE WORLD IS CHANGING
Tesarac – is a word coined by writer Shel Silverstein to describe a certain type of

historical unfolding, a moment when paradigms – social, cultural, economic –
are destroyed and replaced by others. During a tesarac society submerges in
chaos and confusion until a new order settles everything into place.
The Renaissance and the Industrial Revolution are examples of two previous
tesaracs.
“In the world we live in, when we were finally able to learn all the answers, the
questions changed. This is not only how you feel, but how everybody feels. We
are in the middle of a Tesarac. The most important thing in the world is no longer
knowledge, it is now adaptability. A few companies have understood that there‟s
no point in having answers, because they do not exist. Instead, they need to
adapt as the plot unfolds. In face of signals, trends that surround me, I discover
my role and adapt. Never the theory of the evolution of species was so funda-
mental. Never being adaptable and understanding that things change exponen-
tially – If we do not understand this and prepare our foundations, we won‟t sur-
vive. The large business segments are like the dinosaurs who didn‟t understand
that the meteor in Mexico was bringing about an ice age". - Said Walter Longo.
Several arguments lead me to believe Connectivity has not realized its full poten-
tial yet. Society still stumbles on process and a certain degree of resistance due
to coexisting different technologies and generations. However, it is clear that the
next generations are much more opened to these technologies.
We know their potentital and strength are unquestionable, and it is, therefore, up
to time to ensure they integrate the world as a whole. As stated above, certain
sectors have been through ruptures followed by continuous evolution, while oth-
ers are moving towards greater resolution. It is the case of the In Flight Enter-
tainemnt Industry.
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At this stage of this study, I‟m confident enough to summarize the subject into two
main leading fronts: hardware and content. Nowadays, these two fronts are both
highly developed with the best practices, profitability and well positioned as high
tech players.
“IFE is Avionics meets Hollywood. On the aviation side: lots of processes, big
legacy of dealing with authorities, airplane manufacturers, regulations, making
reliable systems vs Hollywood which focus on speed to market. The opportunity
is how to make the platform robust when you bring the two together” says Paul
Margis.
Nonetheless, in my opinion, when we put these two players together, at the ser-
vice of Aviation, the result is catastrophic.
This journey is highly dependent on other factors. It consists in a good example

of the empirical moment we‟re living in, which depends on moral, social, beha-
vioral, sexual changes, and etc. According to Walter Longo, “it is as if we were
looking at a subway map and each line were a human behavioral trend: the glo-
balization tram, which stops at the elderly population station, the social class up-
grade station”. There are several trams, and one of the most important is connec-
tivity‟s, which brings you closer to whom you like, further to whom you like,
changes family habits, values, etc.
In practice, IFE has not managed to keep up with all of these trams and nowa-
days offers a solution which doesn‟t meet the expectations and needs of passen-
gers.
Recently, the IFE industry is being questioned by part of its main customers, air-
lines. Suppliers, mainly hardware supplies, who had up until now been protected
by a highly regulated environemnt, will have to adapt to the rise of portable de-
vices.
“So this whole certification thing is supported by manufacturers who want certifi-
cation so that other electronic device manufacturers are not able to compete with
them. This whole certification thing restricts the market. Entertainment is a magic
moment during a flight. If it‟s not available, passengers just seat there, looking up,
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with nothing to do. But what is the trend? It‟s down with wires. The trend is to be
fully wireless. That‟s where airlines should bet their money. The trend is to go for
portable. If I have my own, why use that one there? Why should I watch “UP” for
the tenth time? It is much easier for me to be an iTunes‟ customer and bring my
movies, my iPod, listen to my own songs. My PDA has everything, music, space,
images and even video”, says Marco Bologna.
Nowadays, portable devices can already be viewed as competitors for the tradi-
tional IFE provided by airlines, such as magazines and films made available
through inseat video systems. All of the people interviewed in this study claimed
to use devices, such as ipods or laptops, during flights.
The recent Passengers‟ Onboard Habits quantitative research has confirmed this
trend. Between domestic and international flights, over 35% of passengers are
already carrying their own entertainment (including laptops, ebooks, ipods, books
and magazines). If we look into domestic flights alone, this percentage goes up to
over 50%.
In this case, from airlines‟ perspective, we can safely say that portable devices
can already be viewed as substitutes for traditional IFE. After all, someone who
watches a movies in his/her own iPod, will no longer read the magazine or watch
the movie provided by the airline.
Two fast moving developments are gaining momentum which will put the histori-
cally laggard IFE systems and solutions into check: (1) rapid growth of mobile
connectivity users across all classes and demographics that have lead them to
create their own new habits for consuming entertainment; (2) and aggressive
suppliers bringing connectivity solutions to the airline industry.
(1) Rapid growth of mobile connectivity users
“Power is in information and connectivity is our door to it. As pressures mount

continuously for people to produce ever faster we stay connected to deliver on
that demand” (Luis Falco, CEO Oi). Weekends are no longer sacred, a quick
peak at the Blackberry before breakfast is a time saver, pretty much all of us take
our smartphones along on our vacations. 24/7 is a reality, one filled with connec-
87
tions to work, family and friends, apps that facilitate our lives, allow us to play,
brings us the information we need.
Mobile internet is at a growth rate that simply obliterated desktop internet adop-
tion rates. Stanley Morgan‟s “The Mobile Internet Report”, released in December
of 2009, brought together some remarkable numbers that demonstrated this
growth trend. By the 9th quarter after its introduction AOL desktop internet had
reached 7 million users; Netscape 11 million; Japan‟s NTT Docomo mobile inter-
net eclipsed both of them with 25 million; and the combined iPhone and iTouch
from Apple reached 55 million.
Tab. 9: Adoption Rates Mobile Internet versus Desktop Internet
Other connectivity dependant solutions have shown just as remarkable growth

strength over the past year:
 Global social networking websites reached 830 million users in the past
year, a 20% year over year (y/y) growth
 YouTube global users reached 466 million, a growth of 35% y/y
 Hulu in the United States grew 77%, reaching 42 million users
 Online video users consumed 169% more video minutes reaching a
whopping 109 billion minutes
 Mobile data traffic is expected to rise 66x by 2013
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Ill. 44: Mobile data traffic growth and global social networking
websites users
“Mobility is the underlying force behind social network, behind thousands of Ap-
ple’s iPhone and iTouch applications. The people expect it everywhere, 24/7.
And nowhere do they have more idle, unused time than when in inflight, when
they can afford to explore these tools at leisure. And this means a unique oppor-
tunity for advertisers to reach this valuable audience. These two factors, time and
opportunity will conjure up to bring a significant change to the Airplane Mode, if
not an end to it” said Jose Racowski, TAM‟s Business Units Manager.
Besides that, Walter Longo states that “The future of media lies on captive au-
diences (on board, in elevators, waiting on bank cues). Traditional media have
created a culture of interruption: in exchange for the information I provide you I
interrupt you to draw your attention to my product, which pays for your entertain-
ment; because that's how you'd get people's attention. Whereas IFE, works in the
opposite direction: I‟ve already been interrupted so what I can do is reduce the
frustration this interruption has created. Whereas one interferes with your produc-
tive time, the other reduces the stress of wasting time. This is why IFE and digital
out of home media have come to stay and are much more persuasive than tradi-
tional media; besides informing, they also provide a service. In the elevator it
makes me less shy, on the airplane it reduces tension and stress, it functions as
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a nanny to my children, etc. It plays a part in improving the quality of people‟s

lives.
In addition to that, Walter Long states that “The great future opportunities of the
media platforms is the future of captive audiences (inflight, in elevators, at the
check-out counter lines). The traditional medias of today created the industry of
interruption: I will give you the information but in compensation I interrupt you to
call your attention to the products that pay for your entertainment. That is how
they went about getting someone’s attention. On the other hand IFE functions in
the inverse direction: I have already been interrupted and what I am being given
is an opportunity to reduce the frustration of that interruption. While one interferes
with the value of my time, the other reduces the stress of time already being inter-
fered with. It is because of these that IFE and the out-of-home digital media have
strength and have a power of persuasion that is bigger than the traditional me-
dias because, besides informing, they provide a service: in the elevator it gets rid
of my shyness, in the airplane it reduces my level of stress as if were a nanny. It
has a task of improving people’s lives”.
(2) Aggressive suppliers bringing connectivity solutions to the airline in-

dustry
In the history of connectivity onboard there was a trend to one solution and one
company taking over the opportunity for a time until the positive projections of the
investors were turned into dust when confronted by the low usage, the technical
limitations and the cost of those connectivity solutions.
The past year has seen a significant change to the trend as AirCell, Row44, Li-
veTV with its Betablue, OnAir and Aeromobile are all aggressively going after the
airline market at the same time and with different technologies. They are suc-
ceeding in getting the airlines‟ attention, particularly in the last 12 months, a pe-
riod in which aircraft equipped with connectivity (using the USA as an example),
went from the low 100s to close to 800.
And these suppliers are not only offering solutions that get inflight entertainment
better aligned with the trends outside of the aircraft environment, they are also
willing to share on the risk, if not take it all up upon to themselves.
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The new connectivity suppliers are basically coming up with solutions that will
eventually threaten the standard IFE systems. These two factors, rapid growth of
connected and mobile internet users and the entrance of new players challenging
the standard IFE systems, provides the framework and environment that leads to
the to hypothesis in my Thesis:
1. IFE industry rupture

2. A new media platform
6.1 Hypothesis 1 – IFE Industry Rupture
“Until such a time as broadband becomes a reality onboard, the IFE business
model is not going to change” said Linda Palmer.
It just so happens that connectivity in today‟s world has already given birth to
consumer behavior changes, turning him to a mobile user.
The first to feel the impact of these changes will be the airlines themselves as
passengers start to bring onboard their own forms of entertainment instead of
those provided by the airline in which they happen to be flying. There will be a
natural evolution into the future, particularly the content itself which will become
highly customized, it will be exclusive and it will be branded – opening the way to
Hypothesis 2 which we address later.
We know that a large number of passengers already use their own devices and
materials that cater to their personal tastes. What they bring and consume on-
board varies according to flight length but all signals point towards a change that
goes beyond developments in the IFE industry.
In the past airline passengers keenly made preparations prior to getting on an

airplane. There was the glamour and the anticipation of flight. The entertainment
system offered unique and fresh content, in cases even movies that had not yet
premiered outside of Hollywood. Since then aviation has changed drastically, but
access to information and entertainment consumption has changed even more.
The culture of information made content ever more accessible, if not free, and
suitable for the needs of single individuals.
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Therefore it is a lost battle to work on selecting content for passengers, because

no matter how fat the budget may be, it will never be able to attend to the needs
of each one of the many types of passengers that each airline has in each of its
flights.
And the situation becomes exponentially more aggravating when you consider
the complexity and costs that the industry of IFE (hardware, content…) demand,
compared to the mediocre level of I-N-F-L-I-G-H-T- E-N-T-E-R-T-A-I-N-M-E-N-T
that the airlines end up getting and offering their passengers in today‟s world.
We also know that from the airlines‟ perspective, it has never been possible to
accurately measure ROI in IFE. In the beginning the investment was justified as a
differentiation factor.
Thus, we are coming to a converging point where the IFE by itself becomes ex-
tremely unattractive when compared to portable entertainment devices – that are
already in the market and each day become more complete and affordable, this
both from an hardware as well as a content perspective, all of this from a massive
global penetration perspective.
And this is a global tendency that can only grow when you consider the size, the
demographic representation and the consumption power of the Y and Z genera-
tions, as we have touched on previously on this Thesis work.
From the perspective of the hardware providers, there is a belief that the combi-
nation of the different technologies is already aligned. In other words, they argue
that the IFE in the current model will survive together with the new connectivity
technologies. The bet is that the need for the two systems will grow concurrently,
for both airline and passenger.
However, when the problem of broadband onboard is fully addressed, the chal-
lenges for the industry will be even larger. The airlines will make use of the tech-
nologies for many other tasks beyond entertainment, such as the Electronic Flight
Bag (a group of data and information needed for the technical crew to prepare
the flight plan), that today is done manually. In addition, will facilitate processes in
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operational activities, as well as the loading of content on the aircraft. All of these
will narrow down even more the need for proprietary software and expertise of
the IFE suppliers for things such as encoding and integration.
Passengers will have access to any type of content, at any time they want.
Meaning that if the whole model does not change, the systems in the format they
are being projected for today, will be scorned by the passengers – much to the
delight of the airlines that will see in that the concretization that they don‟t need to
invest on the current IFE technology.
Who has kept on using the typewriter or the laptops because they needed to?
And so it will be for the current IFE system solutions.
6.2 Hypothesis 2 – New Media Platform
The world is connected. The airplane will be connected. Connectivity is IFE‟s last
chance to prove that it can provide its airline customers with a ROI on the million
dollar IFE investments made annually by the airlines. The industry is quickly gain-
ing new, connectivity-based competitors. The brighter IFE suppliers of today have
already started to adjust their long term plans to accommodate this. The others
are likely to become part of a History chapter of a future inflight entertainment
and communication Thesis.
The powerful, global inflight media channel that places the frequent flyer in the
productive chain that gravitates around the world of aviation, from global brands
to local mom-and-pop businesses, using connectivity as the conduit, will attract
both the advertiser that needs to embrace the world, as well as the one that just
wants the visitors to a local convention to come to its diner for a homemade meal.
As we have seen throughout this document the future of media revenues lies not
in standard broadcast media, but in media with captive audiences. And for these
captive audiences the content providers need to offer a service that brings value
to the audience: in the elevator it helps me lose my shyness, in the airplane it
reduces my stress, works as my nanny. It has a function of improving my life at
the moment I consume it. By doing that, inflight entertainment successfully deliv-
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ers on its mission of (1) helping the passenger spend the time, (2) adding value
to the passenger‟s interaction with the system and (3) attracting revenues from
passengers and advertisers.
With connectivity onboard we will create applications that will give the passen-
gers access to a new platform dedicated to the travelling public. Not just the in-
flight magazine available on the aircraft that month but to the combined informa-
tion of all previous editions of the magazine. The passenger will be able to down-
load content, as well as contribute content to it. It will pull in the combined intelli-
gence of the world of airline passengers, made current through connectivity. And
this will translate into a significant increase in commercial slots and advertisers: a
larger audience that does not disappear at the end of the one-month cycle, and
segmented audiences for those that want to reach a particular market niche.
There will be many other types of content and applications that the passenger will
be able to download. The inflight environment will be available as a “gas station”
where the passenger can go to “fill up” his personal entertainment device. Some
of the content will be purchased, some of it will be sponsored and some will use
the platform to market itself. And all will need to bring value to the passenger.
This same sort of solutions will be considered for similar publications that airlines
offer the passengers, such as IFE guide, kids magazines and daily newspapers.
This will offer the airlines the opportunity to eliminate the huge cost of printing
and the weight penalty that these publications represent to them.
One of the areas that has seen a level of success in the inflight environment for
many years has been the sale of Duty Free and product sales through catalogues
like SkyMall. Driven by the force and opportunities offered by connectivity, pas-
sengers will be able to select from a much wider variety of suppliers and cata-
logues, they will be able to drill down to more details on the items they wish to
purchase and airlines will be able to charge a toll from the sellers to gain access
to this valuable audience in a captive environment.
Tactical advertising campaigns, today shut out from the inflight audience because
of IFE‟s lengthy timelines (in audio, video and print) which limits ads to mostly
institutionalized advertising, will now have a home in the inflight environment.
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Hotels will be able to promote weekend specials, retail stores electronic sales,
rent-a-car companies new upgrade offers. The ads will be loaded on the day
they start to air, and come off according to the advertiser‟s timeline and not those
of the airlines.
And then there is the force of the social media, yet unexplored in the inflight envi-
ronment and just discovering its true potential outside of it. From the creation of a
social media network of all people flying at any one given time to the creation of
Facebook, Tweeter and iPhone applications specific to the needs of the traveling
public, the inflight environment is ripe for exploration.
Connectivity, besides its technical capabilities, is also bringing new blood and
fresh ideas into the staid world of IFE while the creative world of publicity and
advertising further contributes to it, awaken to the value of a world network of a
captive inflight audience. In the process they are shocking into action capable IFE
professionals that have not seen this level of threat and opportunity for some
time. This combination of creative forces, youth exuberance, and stirred mature
aviation and IFE know how will see it to it that passengers have real chance to
improved inflight experiences; that advertisers are able to associate their brands
with valued services; and that airlines will finally be able to see a positive ROI on
their IFE investments.
I talked about inflight entertainment as the marriage of two of the most enchant-
ing industries in the world, Hollywood and Aviation. Clearly over the past 10 years
the world has also become enthralled by all of the surprises and new discoveries
that connectivity gives life to everyday. Connectivity, Hollywood and Aviation now
join and give birth to the new IFE, Inflight Experience. And to the beginning of the
end of the Airplane Mode.
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7. Backup data
7.1 Interviewees’ biographies
Interviewees appear in alphabetical order.
7.1.1 Alan Pellegrini, CEO, Thales
Alan Pellegrini has been an executive in the aerospace industry for nearly two
decades, leading both large and entrepreneurial businesses. Alan currently
serves as Chief Executive of Thales' In-Flight Entertainment and Communica-
tions business and has been in this role for the past three years. Prior to joining
Thales, Alan was CEO of Innovative Media Services (IMS) Inc., a high-growth
company focused on adapting new technologies to the airline passenger envi-
ronment. Before IMS, Alan served as Senior VP at Panasonic Avionics, the in-
dustry's leading IFE provider. Alan was President of Tenzing Communications
Inc. (now OnAir Inc.), a pioneer in the aviation communications business, and VP
Marketing, Sales and Customer Support at Rockwell Collins, where he led these
activities for all commercial avionics and IFE businesses. Alan began his aero-
space career with Hughes Electronics, where in his last assignment he was VP
sales and Marketing for their IFE subsidiary. Alan holds an MBA from the Mar-
shall School at the University of Southern California, an MS in Engineering, and a
BS in Mathematics from UCLA. He resides with his family in Southern California.
7.1.2 Andrea Brazil Mugnaini, freelancer
Andrea Brazil Mugnaini has a Masters Degree in visual arts by ECA - USP
(2007). She holds an undergraduate degree in Industrial Design with emphasis
on Visual Programming by the Federal University of Bahia (1998). Andrea works
in Advertisement, especialized in Art Design and Direction, mainly focusing on
the following themes: Internet advertisement and design and direct marketing.
She used to be a Creation Director at Grey Interactive, where she was in charge
of accounts such as Mercedes Benz, Pedigree and Oracle; as well as, a Creation
Supervisor at Ogvily One, where she was in charge of accounts such as IBM,
Unilever and Banco Real.
96
7.1.3 Aristides Cintra, Consultant, Embraer
Graduated in Electrical Engineering, Aristides Cintra started working in the aero-

nautical industry in 1984, at Embraer. He accumulated experience working in
military and civil projects, developing, installing and certifying electric genera-
tion/distribution systems, associated to core aeronautical systems, such as hy-
draulics, fueld, reverse and engine. In 1997, he decided to move to the USA to
work for a japanese company, developing and certifying STC processes for big
airlines. In 2002, he came back to Embraer and got specialized into IFE and
Connectivity. He currently works for Embraer, as a consultant and facilitator of
technology affairs for Commercial, Executive Aviation and Defense Business
Units.
7.1.4 Carlos Andre Spagat, CEO, Flap Magazine
Carlos has been the editor in chief of the most important Aviation magazine in
Latin America, Flap International, for almost 48 years.
He has extensive knowledge of the business and is one of the most well travelled
magazine editors in his trade. His collection of leafets and menus, dating from
1927, is certainly one of the most extensive in the world, and enables him to ad-
vise the many players interested in this specific segment of aviation.
He‟s passionate about marketing and catering, which are subjects in which he
excells.
As a collaborator to many international magazines, he usually uses his files to

help authors write books about aviation, especially on the subject of airlines‟ his-
tory.
7.1.5 Chris Kettering, Director, Goldcare Development, Boeing Commercial

Airplanes
Chris Kettering is director of GOLDCARE Development, Boeing Commercial Air-

planes. His primary responsibilities include developing the information system,
processes, and procedures for the 787 GOLDCARE maintenance and materials
service. In addition, he leads 787 RFID service ready. Kettering's focus has
97
been to improve business performance by matching technology and information

innovation with customer-centered development and rigorous program manage-
ment.
Since joining Boeing in 1986 Kettering has held a series of engineering, market-
ing, and management positions in Commercial Airplanes. Prior to re-joining
Commercial Airplanes, he was the Director, Air Traffic Management. As an early
member of the 777 team Kettering was involved in the 777 aerodynamic wing
design and wind-tunnel testing. He also managed software system development
and supported design-build teams, sales campaigns, flight-testing and certifica-
tion.
During 1998 Kettering held a three-month guest management position at BMW

AG in Munich, Germany. In this position he benchmarked process re-
engineering, production development, manufacturing, marketing and supplier
management. In 1993 he worked for five months at British Airways Flight Opera-
tions and Engineering in London studying all facets of the day-to-day operation of
the airline.
Kettering holds a bachelor of science degree in aeronautical engineering from
California Polytechnic State University in San Luis Obispo, Calif.
7.1.6 Dave Bijur, Director of Capacity, Aircell
Dave Bijur joined Aircell in 2007 as Director of Strategy, within the company's
Airline Solutions division. In this capacity, Dave develops Aircell's B2B marketing
and sales strategies and directs the daily operations of Aircell's marketing, prod-
uct, and partnership marketing efforts with Aircell's partner airlines. Prior to join-
ing Aircell, Dave served as Director of External Relations, for the Air Transport
Association in Washington, DC, where he developed the Association's Smart
Skies campaign, a public and government affairs effort to modernize and reform
the nation's air traffic control system, and its 35-year-old funding mechanism. A
private pilot and lifelong aviation geek, Dave enjoys golf, skiing and rowing.
98
7.1.7 Frances Fiorilo, People and In-Flight Services SVP, Virgin America
Frances Fiorillo oversees Virgin America‟s most valuable assets. As head of

People and In-flight Services, she leads all aspects of the airline‟s organizational
development, human resources strategy and planning, compensation and bene-
fits programs, recruitment, learning, and performance management. She is also
responsible for all aspects of the development and day-to-day operations of
in-flight services.
Frances brings close to 30 years airline experience to the Virgin America team,
starting her career as a flight attendant with Canadian Pacific Airlines (later be-
came Canadian Airlines). She quickly rose through the ranks to become Direc-
tor, Onboard Service, then Vice President, In-flight Service and finally Vice
President, Human Resources, a position she held from 1997 to 2000.
When Canadian Airlines merged with Air Canada she remained to become an
integral member of the launch team for ZIP, Air Canada‟s low-fare start-up. As
Senior Vice President, Human Resources and Customer Service, Frances was
involved in the planning of commercial, operational, technological, service, hu-
man resource and brand strategies for the new airline‟s launch.
Frances joined Virgin America from the Provincial Health Services Authority in
British Columbia where she was Chief Human Resources Officer, responsible for
building a new human resources organization as well as organizational cultural
change, labor relations, employee wellness, learning and development.
At Virgin America, Frances‟ dual People and In-Flight Service roles has her de-
veloping a culture that respects and supports both the airline‟s employees and
guests.
Frances divides her time between two of the world‟s most beautiful cities, San
Francisco for work and Vancouver where her husband resides.
Frances graduated with a Bachelor‟s Degree in Psychology from the University of

British Columbia.
99
7.1.8 Giovanni Rivetti, CEO, New Content
At the age of 34, Giovanni Rivetti is one of the founders of New Content – pub-
lishing house and customized content producer on the market since 2007.
The enterpreneur has studied administration and advertisement at FAAP (Fun-

dação Armando Alvares Penteado - São Paulo - SP), and collected work expe-
rience from several large companies before taking charge of New Content, such
as: Gradiente Eletrônica, Unimark/Longo, Newcomm Bates and Synapsys.
Giovanni Rivetti and his partners Roberto Feres, Raphael Alcântara and Edoardo
Rivetti, are pioneers in the branded content segment in Brazil. Among their main
businesses there‟s the production of customized magazines, proprietary pro-
grams and media content integration projects for brands such as: Unilever, TAM,
Cyrela, Telefonica, Fnac, Mini Cooper (BMW), Expand, Accor and Studio/W.
7.1.9 Helio Rubens, Aircraft Interiors Design Manager, TAM Airlines
Helio Rubens has been working with Aircraft Interiors, including IFE systems,
since 1994. He became a Product Development Manager in 2001.
During this period, Helio was responsible for developing TAM‟s aircraft interiors,
including seats, galleys and IFE.
Helio is currently responsible for the “New Image Project”, which will determine
the pattern for TAM‟s Aircraft Interiors from 2012 onwards.
Helio graduated in Engineering in 1993. He also has a Certification in Business

Administration and post graduation in Interiors Design.
7.1.10 Hugo Janeba, Marketing VP, Vivo
Hugo Janeba, 44, is Vivo's Executive Marketing and Innovation Vice-President.

His 23-year experience comprehends the marketing departments of large-size
companies such as Colgate-Palmolive, Tambrands, Elma-Chips/PepsiCo. Since
1999, he works for Telesp Celular/Vivo marketing dept. Mr. Janeba has a degree
in design, with MBA in International Management by Toronto University, Macken-
100
zie University, and Business School São Paulo, as well as a major in Branding by
the Kellogg / Northwestern University.
7.1.11 John White, Editor, Avion Magazine
John N. White lays claim to a 30-year career in Delta Air Lines' Marketing Divi-
sion plus a few additional years as a Delta consultant. During that period, he
served as an art and creative Director, supervised many marketing campaigns
and projects and served as Delta‟s Director of Advertising. He became involved
in IFE when Delta added audio entertainment and, later, movies to its fleet in the
70s. White is a founding member of the WAEA (then the AEA) and has served as
VP, President, and Chairman of the Association. During his term, he initiated the
Association's newsletter and supervised its publication. In 1988, he became the
publisher of the newsletter and converted it to the magazine format publication
AVION that will soon publish its 20th anniversary issue.
John resides in Newnan, Georgia with his wife Martha who share three grown
children and five grandchildren. He wears both shoes and boots, tuxedos and bib
overalls comfortably, drives a farm tractor, and is an avid outdoorsman.
7.1.12 Jose Carrera, CEO, Access Inflight Media
Joe is one of the veterans of the IFE industry. He has been Access Inflight Me-
dia‟s owner for more than 10 years, being responsible for developing the IFE
lineup of major airlines, such as TAM.
He is also a respected private consultant for IFEC projects.
Before that, he was IMS sales representative for Latin America, DMX VP of Sales
and Air Canada‟s General Manager for Latin America and Country Manager for
Brazil.
Joe has an unusual music taste, which should not be surprising as he was born
and grew up in Angola, is a Canadian Citizen, lives in the United States and can
not help himself but cheer for Brazil‟s soccer team during the World Cup. The fact
that his son is Brazilian has nothing to do with it.
101
7.1.13 Jose Racowski, Business Units Manager, TAM Airlines
Jose Racowski joined TAM in 2007. He is currently Business Units Manager,

being in charge of Inflight Entertainment and Connectivity since August 2008.
From 2008 on, he has been the project leader of the OnAir project, which targets
the implementation of inflight connectivity for 2010. Besides that, he has contri-
buted to the growth of TAM Nas Nuvens, which is responsible for TAM branded
content (magazines, videos etc) and media sales.
Jose has background in project management, strategic planning and banking. He

graduated in Business Administration in 2004 at Fundação Getulio Vargas
(EAESP-FGV).
7.1.14 Libano Miranda Barroso, CEO, TAM Airlines
Líbano Miranda Barroso has been TAM‟s CEO since October 9, 2009. Alongside
this position he‟s also been the Finance, Management and IT Vice-president and
the Investors‟ Relations manager since 2004, when he joined the company.
Since 2009, he‟s also been the CEO and Investors‟ Relations Manager at Multip-
lus S/A, a company in charge of managing and operating TAM‟s frequent flyer
program and other programs to captivate commercial partners‟ customers. Líba-
no was responsible for Multiplus‟ IPO, which entered BM&FBOVESPA‟s New
Market on February 5, 2010.
A professional with a solid track record in finance, where he worked for 17 years,
he‟s worked at banks such as Nacional, Real and Safra, where he began at the
age of 15 and worked his way up to corporate manager. He‟s build his career
with a track record of working for large companies, such as Andrade Gutierrez
Concessões, as member of the Project Finance Team.
He‟s also worked at CCR (Companhia de Concessões Rodoviárias), as Financial

and Investors' Relations Manager. At this company he was also involved in large
financial operations, such as simple and structured debentures issuance, and
Project financing for the concessionaires Nova Dutra and AutoBAn, alongside
102
BNDES and the IFC; in addition, he was also involved in the strategic interna-
tional partner plan to attract Brisa – Autoestradas de Portugal. He was also re-
sponsible for CCR's IPO, the first company to enter the São Paulo's stockma-
kert's (Bovespa) New Market.
Graduated economist by the Economic Sciences‟ School at UFMG, Líbano also

holds an MBA in Finance by IBMEC and post-gradute degree in Corporate Law
by the Getúlio Vargas Foundation (FGV).
7.1.15 Linda Palmer, Senior Vice-President of Buena Vista Non-Theatrical,

Disney
Linda Palmer is a long term veteran of Disney. She began her career with the
company at Disneyland as a tour guide. Following graduate school she moved
into Group Sales for Disneyland, and later took a position at the studio to work in
the Educational Film Division. Moving up the corporate ladder, Linda became a
member of the launch team for the Disney Channel. In 1987, she advanced to
the theatrical division to head up the non-theatrical film business unit.
In addition to her primary responsibilities as Senior Vice-President of Buena Vista

Non-Theatrical, Linda supervises the Imax and Giant Cinema's Educational Out-
reach Program and is a key member of Disney's special events team, working on
such projects as “Pocahontas in Central Park” and the World Premiere of “Pearl
Harbor” on the USS John C Stennis at Pearl Harbor. Linda has also served on
the WAEA Board of directors for 11 years, including two terms as treasurer.
7.1.16 Luiz Falco, CEO, Oi
Born on 13/08/1960 and graduated aviation engineer by ITA - Airforce Technolo-

gical Institute, the business executive also undertook further courses on Market-
ing and Finance at the Getúlio Vargas Foundation. Nominated surrogate member
of the Administrative Council on March 1, 2004 and TNL‟s Director-
Supeintendent on October 2, 2002. Since October 2001 he‟d been the TNL PCS
S.A.‟s (Oi) CEO. On April 29, 2005, he was nominated Telemar Norte Leste
S.A.‟s CEO. Falco also worked at TAM, where he occupied positions as Produc-
tion Manager, from 1986 to 1989, Technical Director, from 1989 to 1992, and
103
Commercial and Marketing Vice-President, from 1992 to 2001. The main areas
where he worked at TAM were: Maitenance, Production, Production Manage-
ment, Pilots (Flight groups), Bookings (Call Center), Mesh Operations, Pur-
chases, Supplies, Large Accounts (aircrafts and services), and left the company
while working in Sales/Marketing and Strategic Planning.
7.1.17 Marco Antonio Bologna, CEO, TAM Executive Aviation
Graduated form the Politechnical School at the University of São Paulo, Marco
has extensive experience working in banks, mainly, but not limited to, credit-
related areas.
During his time at Banco Itamarati he met Commander Rolim Amaro. After sev-
eral joint projects with TAM airlines, with the co-branded credit card, he was in-
vited to become the airline‟s CFO, later becoming its CEO.
After some time in the real estate market, he returned to aviation to lead TAM‟s
Exectuvie Aviation Segment in 2009, which he manages to date.
7.1.18 Michael Planey, Private Consultant
Bridging the gap between engineering and marketing in the inflight entertainment
and aircraft interiors industries, Michael Planey offers his clients more than 12
years of expertise in these rapidly evolving markets.
Michael began his career with a year as a Student Engineer working on crew
station design and emergency egress systems for the United States Air Force.
He was involved in the development of advanced electronic imagery and display
technology as well as human factors engineering programs examining pilot work-
load. That experience has carried through to his managerial roles in inflight en-
tertainment system implementations for American Airlines and US Airways.
Holding a bachelor of science degree in Aeronautical and Astronautical Engineer-

ing from Purdue University in West Lafayette, Indiana, Michael is fluent in the
technical details of product design and development. His positions at the airlines
afforded him the opportunity to develop substantial expertise in Aircraft Perfor-
104
mance Engineering, Operations, Revenue Management and Brand Management

as well as leading the implementation of premier inflight entertainment and com-
munications technologies. His deep understanding of the needs of airlines to
maintain cost-effectiveness while remaining competitive within the marketplace
means that Michael has been able to advise both airlines and vendors on the
next generation of inflight entertainment and communications products
7.1.19 Paul Margis, CEO, Panasonic Avionics Corporation
Paul attended California State University of Long Beach earning a degree in

Electrical Engineering and completed UCLA‟s Executive Program in Manage-
ment. Paul worked for Hughes Aircraft for several years, Photonic Automation
and then Chips and Technologies (C&T) before joining Matsushita Avionics in
1992 as Director, Advanced Systems Development.
Paul has served the Company as its General Manager, Advanced Systems Engi-
neering, and as Vice President, Development Engineering.
As Vice President, Paul led the development of Panasonic‟s audio and video on
demand systems and the revolutionary X-series product line.
In July 2000, Paul was named Senior Vice President and Chief Technology Of-
ficer. On April 1, 2005 Paul became President of Panasonic Avionics Corpora-
tion.
On July 1, 2007 Mr. Margis was named Chief Executive Officer of Panasonic
Avionics Corporation
7.1.20 Ricardo Guimaraes, CEO, Thymus Branding
Ricardo Guimarães is renonwed as one of the prioneers in the concept of brand-

ing as a management approach for companies in very volatile markets.
He‟s supported two of the most important branding cases in Brazil: Natura, case
study at London Business School, and Banco Real, case study at Harvard Busi-
ness School; framed by the renowned professor Rosabeth Moss Kanter. Among
105
his clients there are companies like: TAM, Vivo, Toyota, Fleury, Organizações
Globo, CPFL, Afroreggae, Grupo Martins, Grupo ALGAR, Rossi, among others.
Ricardo Guimarães is Thymus Branding‟s CEO, president of the Decison-making

Body of the Akatu Institute for Consumption Awareness, member of FNQ‟s (Na-
tional Quality Foundation) Trustee Council, member of the Advisory Board of the
ARES-Institute for Responsible Agribusinesses and Member of the Editorial
Board of “Página 22” Magazine, from the Sustainability Study Center of the
School of Administration of the Getúlio Vargas Foundation, and member of the
Administrative Board of the São Paulo Dance Company.
A national and international lecturer; Ricardo regularly collaborates with the gen-
eral and specialized press.
He‟s also a co-writer to the books: “Integrated Intangible Asset Management” and
“Value-based Leadership”
7.1.21 Walter Longo, Business Development VP, Young & Rubicam
Business Adminstrator with an MBA from the University of Califórnia, he is cur-

rently the strategics and innovation mentor of the Newcomm Group – a Commu-
nications Holding owned by the WPP Group, which includes companies such as
Young&Rubicam, Wunderman, Energy, among others. He‟s also been the re-
gional director for Latin America at the Young&Rubicam group, and Brazil‟s CEO
at Wunderman Worldwide, TVA, MTV and the Newcomm Bates Group. He was
also partner and co-founder of the first Advertainment Agency in Latin America,
Synapsys Marketing and Media.
Due to his contribution to the Telecom segment, Longo was chosen CEO and
Chief of the Advisory Board at ABTA – Brazilian Paid TV Association, besides
being the founder and CEO at Abraforte – Brazilain Association of Telecom Sup-
pliers.
He‟s been elected 4 times the Best Business Executive of the year by the Caboré
Prize in the following catagories: Planning and Services and Communication Me-
dia Professional.
106
He was also awarded the Direct Marketing Personality title by Abemd, one of the
leading bodies in the segment.
Walter Longo is a member of several boards in Telecom companies, partner in

several digital media companies, article writer to several publications, besides
being the author of books “Tudo o que você queria saber sobre propaganda e
ninguém teve paciência de explicar” (All you’ve always wanted to know about
advertisement and no one’s had the patience to explain) (Atlas publishing house)
and “O Marketing na Era do Nexo” (Marketing in the age of Nexo) (Best Seller
publishing house). One of its most celebrated lectures is called “Inovação na
Comunicação” (“Innovation in Communication”), which discusses the impact of
the technological revolution on consumer relationships.
107
8. Bibliography
Credit Suisse Equity Research (2001): Global Airlines Sector Review. October
2001, London, England.
Datamonitor (2009): Global Airlines Industry Profile. December 2009, New York,
United States.
Deschamps, Jean-Philippe (2008): Innovation leaders. West Sussex, England.
Deutsche Bank Securities Inc. (2002): Airlines 101 An Introduction to the U.S.
Airline Industry. August 2002, New York, United States.
Esmerk (2009): Europe: Lufthansa CEO forecast continued consolidation in air-

line sector. From: Esmerk, December 11, 2009.
Gates, Roger; McDaniel, Carl. (2001): Marketing research. United States
Gillen, D. (2006): Airline Business Models and Networks: Regulation, Competition

and Evolution in Aviation Markets. From: Review of Network Economics.
Volume 5, Issue 4.
Gladwell, Malcolm (2008): Outliers. United States.
IATA (2010): Industry Financial Forecast. March 2010.
IATA (2010): IATA Economic Briefing Airline Fuel and Labour Cost Share. Feb-
ruary 2010.
Kemmetmueler, Andrew (2010): IMDC - The Perfect Storm. January 2010, United
Kingdom.
Kotler, Philip (2000): Marketing Administration. Prentice Hall, Inc, United States.
Li, Charlene; Bernoff, Josh (2008): Groundswell, United States.
Manila Bulletin (2010): Two big US airlines open to consolidation. From: Manila
Bulletin March 2, 2010.
Mcluhan, Marshall; Lapham, Lewis H. (1994): Understanding Media: the exten-

sions of man. The MIT Press, Massachusetts.
MKT Gestion Magazine & HSM Group (2008): Nov/Dec 2008, Argentina.
Morgan Stanley (2009): The Mobile Internet Report. December 15 2009, New
York, United States
108
Mugnaini, Andrea (2009): O McLuhan que nos perdoe. Disponível em:

(http://ccsp.com.br/ultimas/noticia.php?id=35429) Acessado em
15/03/2009.
Mugnaini, Sergio (2009): Luddities@communicationIndustry – MBA Thesis. Ber-

lin School, 2009.
O'Fee, J. (2009): Eight simple rules for flying in my country. From: Kamloops Dai-
ly News (British Columbia), September 21, 2009 Monday, pp. 47.
Silvester, Simon (2009): Mobile Mania. London, England.
Spagat, Carlos Andre. Private aviation collection.
Standard & Poors (2009): Industry Surveys Airlines. June 18 2009, New York,
United States.
Standard & Poors (2009): Industry Surveys Airlines. December 31 2009, New
York, United States.
Tapscott, Don. (2009): Grown up digital – How the net generation is changing
your world. United States.
The intelligence group (2010): Connecting with consumers through trend.- Mod-
ule 5 / Class 3 of Berlin School of Creative Leadership – UCLA.
The Royal Bank of Scotland (2009): Airlines How to survive, how to thrive. June 8
2009, London, United Kingdom.
Trevizan, Rodrigo (2010): Market Intelligence Manager for TAM Airlines. Onboard
habits research. March 2010, São Paulo, Brazil.
109
9. Internet Sources
N.N.: http://en.wikipedia.org/wiki/EU-US_Open_Skies_Agreement [as of

16.03.2010].
N.N.: http://www.guardian.co.uk/business/2009/nov/13/implications-iberia-ba-
merger [as of 16.03.2010].
N.N.:http://online.wsj.com/article/SB100014240527487047894045746363512840
60282.html.
N.N.: http://www.joc.com/air-expedited/avianca-taca-merge.
N.N.: http://www.avianca.com/NR/rdonlyres/F50029BF-BF6D-4D9C-B3E1-
E9F6FB9C0950/0/091007PressConferenceINGLES.pdf
N.N.: http://www.onair.aero
110
10. Addendum
The Passengers‟ Onboard Habits quantitative research is presented on the fol-

lowing pages.
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Connectivity Solutions
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Master’s Thesis

Manoela Amaro Mugnaini

Manoela Amaro Mugnaini

Master of Business Administration

1. Supervising Tutor: Doug Guthrie

Editing Time From: 01/08/2009

Sao Paulo, 23.03.2010 Manoela Amaro Mugnaini

Ill .1: Air traffic from space

We speak of globalization as a reflection of an increasingly more connected

List of Tables ................................................................................................. XIV

3. Understanding the IFE Industry .................................................................. 22

3.2.1 Hardware and Cost Challenges .................................................... 23

4. The History of IFE ........................................................................................ 31

5.2.5 Wired to wireless communication ................................................... 69

7. Backup data ................................................................................................. 96

8. Bibliography ............................................................................................... 108

10. Addendum ................................................................................................ 111

Ill. 1 Air traffic from space………………………………………….. V

Ill. 2 Overall industry situation…………………………………….. 3

Ill. 3 Airline industry (USD billion)…………………………………. 6

Ill. 4 Point-to-Point – Hub and Spoke…………………………….. 8

Ill. 5 Passenger traffic per cabin class…………………………… 9

Ill. 6 Operating margins…………………………………………….. 12

Ill. 7 Average pre-tax profit margin (1978-2008)………………… 13

Ill. 8 Share of airline operating costs……………………………... 17

Ill. 9 24-month (after merger) stock price performance………… 21

Ill. 10 Destinations served from London´s Heatrow airport……… 25

Ill. 11 Services and payment flows between Airlines and Con-

Ill. 12 IFE vs IFEC – Number of projected retrofit installations

Ill. 13 IFE vs IFEC – Number of projected total installations 2008

Ill. 14 IFE and IFEC – Total number of aircraft installations fore-

Ill. 15 Early television set receiving pictures on a wastern Air

Ill. 16 American Airways flight attendant selecting a radio station 34

Ill. 17 Movie Screen on PanAm´s Stratolines, 1940…………….. 35

Ill. 18 Inflight MotionPictures, pioneer of exhibition systems for

Ill. 19 TWA, Strato Cinema…………………………………………. 37

Ill. 20 By Love Possessed, the first regular inflight movie offered

Ill. 21 John Wayne reaches up to the sky on this overhead video

Ill. 22 Japan Airlines B 747 showing the overhead display sys-

Ill. 23 Airshow map display over Japan…………………………… 47

Ill. 24 Bill Boyer holds his dig Eplayer 5500………………………. 50

Ill. 25 Evolution of portables, left to right, top to bottom…………. 51

Ill. 26 A landscape of failures has not curtailed enthusiasm for

Ill. 27 jetBlue Airbus with the Live TV satellite randome located

Ill. 28 American Airlines and AT&T promote their inflight phone

Ill. 29 Delta Airlines and jetBlue promote their connectivity solu-

Ill. 30 Emirates A380 First Class suite…………………………….. 57

Ill. 31 Society´s evolution…………………………………………… 61

Ill. 32 iPhone + Android Mobile Internet Usage much higher than

Ill. 33 Smartphone covergency 1………………………………….. 69

Ill. 34 Smartphone covergency 2………………………………….. 69

Ill. 35 Mobile phone usage………………………………………….. 70

Ill. 36 Mobile phone usage………………………………………….. 71

Ill. 37 Video tramp evidency………………………………………… 74

Ill. 38 Antenna installed on the aircraft…………………………….. 76

Ill. 39 Aircell´s coverage……………………………………………... 76

Ill. 40 Top Web Sites………………………………………………… 77

Ill. 41 Gogo´s welcome Home Page………………………………. 78

Ill. 42 Virgin Seat Back Cards………………………………………. 78