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Lure Of 'digEplayer' Grows As Airlines Zero In On Revenue Gains

6 December 2004
Airline Business Report

Handheld Units Could Nudge Out Embedded In-Flight Entertainment Systems

A small company that was hawking handheld entertainment devices at the beginning of the year is gaining critical mass by selling the units to airlines trying to improve customer service and boost revenues. The portable devices are called digEplayers, and some airlines in the United States and Europe view them as a cost-effective way to lure passengers away from low-fare carriers that offer satellite television at every seat, such as JetBlue Airways [JBLU] and Frontier Airlines [FRNT]. The handheld units are often provided free for first class passengers, while those in coach pay around $10.

The digEplayer is made and marketed by APS, based in Tacoma, Wash. Alaska Airlines [ALK] began offering the handheld units early this year on some routes, followed by Hawaiian Airlines. The airline industry is becoming increasingly interested in gauging customer responses. The latest carrier to offer the digEplayer is North American Airlines. It apparently has high hopes for the technology, which offers first-run movies, television shows, children's programming, music and video games, among other things. The airline began offering the digEplayer in mid-November on many flights from Oakland, Calif., to Hawaii.

The carrier's chief operating officer, Steve Harfst, said passengers are charged $10 per unit, although the systems can be split so that two people can use them without paying an additional fee. North American Airlines does not have a first class section, so everyone pays the same amount. The airline purchased the handheld devices and soon will evaluate initial data to gauge their popularity. "The initial reaction we received is very, very positive, so the expectation is that we will put the units on all flights from Oakland to Hawaii," Harfst said in an interview with Airline Business Report.

In November, North American Airlines got the green light from the Mexican government to fly between Oakland and Mexico City. It had already received permission from the U.S. government. Anticipating solid passenger demand for the digEplayers, it expects to offer them on flights to Mexico City, too. In addition, it is likely the carrier will offer the units on scheduled flights from New York to destinations such as Puerto Rico and the Dominican Republic, according to Harfst. He noted that the digEplayer is especially suited to these routes because passengers can select from various languages.

North American Airlines offers about 80 digEplayers on some flights between Oakland and Hawaii, less than half of the number of seats available. The airline knows the booking patterns and puts the units on the flights with the most passengers.

The digEplayer can hold up to 60 feature length movies. Each unit is about the same weight and size of a portable DVD player. Units contain a 40- gigabyte hard drive.

Bill Boyer, chairman and founder of APS, says airlines can save substantially on their fuel bills by using the digEplayer because the portable devices are not embedded in the aircraft. However, North American Airlines does not benefit from the fuel savings because its Boeing aircraft (757-200 ERs and 767-300 ERs) already have older versions of in-flight entertainment systems installed. The airline still uses this overhead technology but will likely switch to digEplayers exclusively in the future, according to Harfst.

He is not enamored of the overhead systems, saying the lines that run from every seat are not reliable and do not provide nearly as much content as the digEplayer. He also noted that embedded in-flight entertainment systems are substantially more expensive to install. He declined to say, however, how much the airline spent on the handheld units.

In late October, APS became a wholly owned subsidiary of Wencor, which is based in Springville, Utah. The acquisition allows Wencor to market the digEplayer and accelerate the development of new models built around the video- on-demand entertainment market, according to Brent Wood, Wencor's chief executive officer. Wencor is a company engaged in aircraft product and parts distribution.

Europe's low-cost carrier Ryanair [RYAAY] also has been smitten by the digEplayer. It introduced the devices on five aircraft this month and plans to gradually offer them on its entire 82-aircraft fleet over the winter, making in- flight entertainment available to all passengers by March 2005. Michael O'Leary, Ryanair's chief executive, said the carrier is the first low-fare airline in Europe to offer all customers the latest Hollywood movies and other features.

Aeroflot Russian International Airlines [AERZF.PK] will offer digEplayers to travelers throughout destinations in Europe. Aeroflot will initially make the units available on its new Airbus mid-range fleet and its Iiyushin 96 long-range fleet. The units will offer passengers 15 movies with multi-language tracks, including Russian, English and Japanese, as well as 20 sitcoms and up to 1,000 music tracks. Aeroflot will distribute the digEplayer in business and first class during phase one of their project. In the second phase, the airline will offer the units to coach service for a still-to-be determined rental charge.

Some airlines are testing handheld entertainment devices other than the digEplayer. American Airlines [AMR] may offer portable entertainment devices on its entire fleet. Instead of evaluating the digEplayer, it is testing a handheld unit called the Pea. The carrier is conducting initial market research on transcontinental and long-haul domestic flights. And United Airlines [UALAQ] recently completed a test of a DVD player made by Panasonic. Passengers flying on Ted, United's low-cost unit, paid $12 for the devices on flights between Denver and Fort Lauderdale, according to Jeff Green, a United spokesman. The handheld devices, which offered about 10 movies, were given free to first class and business travelers on United flights from Los Angeles and San Francisco to New York. Green said the test is being evaluated to gauge the popularity of the DVD players.

Steve Harfst, North American Airlines [phone]; Bill Boyer, APS, go through Dan Bean, [phone]; Brent Wood, Wencor, (801) 489- 2000; Billy Sanez, American Airlines, [phone]; Jeff Green, United Airlines, [phone].