China lifts ban on mobiles on planes presenting e-commerce opportunities

China's authorities are lifting restrictions on the use of mobile phones on planes, which could see wider in-flight connectivity that is currently only available in developed markets. Legislation is being drafted to amend regulations limiting the use of electronic devices on board and the changes should come into effect either at the end of this year or the start of 2017. The move comes after revised safety standards were implemented three years ago in Europe and the US and if approved would present e-commerce opportunities for Chinese airlines in the world's second-largest​ air-travel market.

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Millions of flyers in China may soon see their wish come true: authorities are considering lifting restrictions on the use of mobile phones on planes, paving the way for wider in-flight connectivity that is now available only in developed markets.

Legislation to amend regulations that limit the use of electronic devices on board is being drafted and the norms will be relaxed by the end of this year or early 2017, Zhu Tao, director of the air transportation division at the Civil Aviation Administration of China, said.

The changes follow revised safety standards issued about three years ago by regulators in the US and Europe.

The amendment, if approved, will enable passengers to surf the internet, use applications such as WeChat, and shop online at cruising altitudes with smartphones.

For the 50 odd Chinese airlines fighting for a slice of the world’s No. 2 air-travel market, it provides e-commerce opportunities as they tap the purchasing power of the nation’s newly rich while they are airborne.

The global market for in-flight e-commerce is set to reach $1.7 billion by 2020 from $1.4 billion in 2015, according to Frost & Sullivan. China Eastern Airlines and Spring Airlines are already preparing for it.

Big Positive

“From a business perspective, we definitely hope that there’ll be a breakthrough in the policy review,” said Zhang Chi, a deputy director at China Eastern, the nation’s second largest by passengers. “While I let passengers browse the internet for free, I can at the same time profit from advertisement and on-board shopping. There will be a big positive return.”

Under Chinese civil aviation regulations, airlines at present order mobile phones to be turned off for safety reasons. However, many allow the use of other electronic devices, such as tablets, that do not interfere with flight radio signals.

Such rules are changing across the world, partly because of advancements in technology and users preference for the convenience of smartphones. As of June, 656 million users in China, or 92.5 per cent of all internet users, use mobile phones to browse the web, according to a report published by the China Internet Network Information Center in July.

Though many Chinese carriers provide in-flight Wi-Fi service for a limited number of flyers on some of their planes, it isn’t widely available yet.

A report by Routehappy, a company that tracks airline amenities, shows that 78 per cent of airlines in the US provide some sort of connectivity. That compares with 23 per cent in China, according to a local aviation statistic company VariFlight.

Almost three quarters of US airline “seat miles,” an industry measure of capacity, now have Wi-Fi, according to the “Global State of Inflight Wi-Fi” report from Routehappy, with American Airlines, Delta and United leading with relatively decent Wi-Fi in most of their fleets.

Use of smartphones in China has grown rapidly (Bloomberg)

China Eastern allows the first 50 passengers in every flight to register on a first-come-first-served basis to use its internet service for free, which otherwise would cost 258 yuan (£30), according to its website.

China Southern Airlines, Asia’s largest carrier by passengers, allows 10 passengers in economy class to register 24 hours before departure for free service on its 10 Airbus A330 jets, according to media relation officer Sean Cui.

Urgent Need

Air China, the flag carrier, plans to provide full coverage, according to its website, which didn’t elaborate.

The service has become a deciding factor for Chinese passengers. A survey conducted by Inmarsat during the first quarter showed 90 per cent of Chinese passengers prefer an airline that offers internet connectivity on-board, the most for the Asia-Pacific region. It also showed 65 per cent of Chinese flyers are willing to pay for the service.

“In-flight Wi-Fi has become one of the most urgent needs of passengers,” wrote Neil Wang, president of Frost & Sullivan in Greater China, in an e-mail. “Multiple business models are expected to emerge where service fee paid by passengers won’t be the only source of profit for airlines that provide in-flight Wi-Fi service.”

The main reason carriers are looking to provide wider connectivity is not profit, but a good way to lure passengers, said Will Horton, an analyst at CAPA Centre for Aviation in Hong Kong. E-commerce advertisements haven’t proven to be quite lucrative yet, he said.

“Profit doesn’t have to be the objective, it can be about differentiation,” Horton said.

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Offsetting Costs

Some of China’s carriers are already preparing for the change.

China Eastern, which is spending about $300,000 to fit each plane with Wi-Fi, is able to offset some of that cost using revenue from passengers picking the carrier over rivals because of the service, Zhang said. It has 40 planes with Wi-Fi and 70 more will have the facility by 2018, he said.

Shanghai-based Spring Airlines, the nation’s top budget carrier, is planning to install Wi-Fi on two of its 60 aircraft by the end of the year after investing 200 million yuan in an e-commerce platform. While passengers will have free access, vendors who wish to sell their ware on the platform will have to pay, Spring said.

“Passengers’ time on an aircraft is exclusive to the airline,” said Spring’s public relations manager Mao Yi, adding guests connecting to the airline’s in-flight facility will have to pass through its digital platform. “It is the entrance.”

Bloomberg