March 25, 2008 – THE mercurial handheld IFE market is currently in one of its bull moods, with some of the minor players making long-awaited commercial breakthroughs, others promising new product announcements soon, and, most recently, leadership of the pack being contested for the first time in years.

“We believe we’re now the clear leader in this space,” says Harry Gray, sales and marketing VP for California-based IMS. “If you put together the number, size and quality of the airlines we serve, our customer retention record, the number of units we have in service, our follow-on sales to existing customers and the positive trend in our sales, we’re Number 1.”

The announced IMS customer list comprises American Airlines, Northwest Airlines, US Airways, Eos, Air India, Royal Jordanian, LOT Polish, Jet Airways, Varig, TAM, Oasis Hong Kong, Sonair, and Transaero of Russia. Gray also confirms that rumours of a deal with United Airlines are correct, while the company has agreements in place or pending with several other carriers.

Transaero is one of IMS’s most recent customers, having started flying its handhelds earlier this month. Post-Soviet Russia’s first private airline, Transaero plans to deploy the 7in-screen, 80Gb players on a total of 28 Boeing 737s, 747s and 767s.

“Our current customer total exceeds 20,” says Gray. “Our main competitor has had deals with a total of around 30 carriers over the years. But while the number of airlines using our portables doubled last year, it would appear that our competitor actually saw a decrease in the number of carriers served, to the point where we believe our customer tallies are now very similar.”

Gray also emphasises the quality of the IMS customer base, including as it does four US majors, established premium-only operator Eos, and the flag carriers of India, Jordan and Poland. “Eos and the majors use our players to serve premium passengers,” he points out. “Some have integrated our players into the seatback or arm, and all offer very robust content sets.” American, US Airways, Royal Jordanian, Eos and LOT all placed further orders in 2007 and early this year.

Privately held IMS shows the customary reticence about talking dollars. “But we recorded double-digit revenue growth last year and we expect that to continue in the future. If we get most of the things we’re chasing right now, we could double our annual average of 5,000 units shipped,” says Gray. “Our profits also grew, allowing us to continue developing new products, enhancing existing ones, and broadening into other markets.”  

The company’s shipments record will certainly benefit from the contract with United, one of the largest carriers in the world. IMS has just started delivering its PAV-704 player to the Chicago-based airline for use in business class on its Boeing 757s. The players feature a 7in touchscreen, 10hr battery, 80Gb hard drive and a United-branded graphical user interface. IMS also provides content management services and a ground content loading and battery charging infrastructure. The players replace Panasonic DVD players and are used in handheld mode only; there is no in-seat provision.

As for new markets, IMS took a huge stride last year in the form of a contract from car-hire giant Hertz. “Our players are now being offered at more than 40 airport locations across the USA, and Hertz with partner Nickleodeon are looking at further expansion,” says Gray. “We are in discussions with other potential non-aviation customers – we have been selected as one of two finalists by a non-US train operator, and we’re looking at other opportunities outside aviation.”

IMS’ current handheld hardware offering comprises the PAV-704 and very similar PAV-705, manufactured by French consumer electronics supplier Archos. Products no longer in production but still supported are the original 8.4in-screen Fujitsu-based PEA, the 10.6in Fujitsu-PED, and the PAV-700. “All the products we are delivering today are part of the Archos product line,” says Gray. “They provide the right thing for us in terms of functions, features and price. We continue to scan what’s available – we went to the Consumer Electronics Show in Las Vegas earlier this year - but right now Archos is still the best.”

Also exercising the minds of the IMS engineers are new concepts for the in-seat accommodation of the company’s players alongside passengers’ own devices – this work will be featured at Aircraft Interiors in just over a week’s time – and connectivity. Gray believes that broadband connectivity is still in its infancy. “We’re talking with various airlines about broadband, and not just in relation to the portable players,” he says. “We will enable WiFi and associated support services as demand dictates.”

If connectivity is still undercooked, so too is the handheld IFE market itself, Gray believes. “The adoption rate has been low – in terms of seats served if not in the number of airlines - but it is growing. That trend can only be accelerated by the emergence of a variety of applications to go alongside handheld IFE services as an additional cabin amenity.” These applications include service recovery, rentals, and the provision of IFE for aircraft on short-term lease.

“The airlines have for a long time been under pressure from their passengers to have a reliable IFE system on the aircraft,” observes Gray. “Now portables allow them to go on offering a service if the primary IFE system fails. Better still, if the airline knows beforehand that IFE will not be available in a particular seat or zone, it can pre-empt the problem and maintain goodwill by going to the affected passengers immediately they board, apologising and issuing them with handhelds.”

At least one of IMS’ customer airlines has placed multiple repeat orders for service recovery purposes, Gray says, and the company is talking to another half dozen about this application.

While Gray sees rentals as a genuine opportunity, it’s far from easy money. “Making a return from rentals requires a number of things to come together,” he says. “The right content set must be offered to the right passenger demographic on the right flight duration by a fully engaged cabin crew. We have just signed an airline that plans to offer the players for rent – we will work with them as they seek to generate revenue.”

Airlines that lease to provide short-term gap-filling capacity pending the arrival of a new aircraft can face a dilemma – whether to offer a lower level of service in the leased aircraft or spend heavily to duplicate the IFE in the owned fleet. “In fact it’s usually completely uneconomic to put in a $3-6 million embedded system into aircraft on short-term lease,” says Gray. “On the other hand, a portable solution could be implemented very quickly and at reasonable cost and would not take each aircraft out of revenue service for a month at a time for installation work.”

In general, Gray maintains, handheld inflight entertainment must have a growing role to play at a time of global financial insecurity, and when IFE is spreading down through the air transport industry from its traditional niche among the top-level carriers.

“Against a background of rising fuel costs, the credit squeeze and the weakening dollar, handheld offers a more flexible and cost-effective way of putting IFE into the aircraft,” he says. “At the same time, many more airlines – low-fare operators, even regional carriers - feel the need for IFE, whether or not they have the dollar and manpower resources. That’s where the inherently lower cost of handheld can help.”

Gray is convinced that handheld has now established itself as an accepted part of the cabin service armoury. “The fact that the likes of American, Northwest and US Airways are building portables into the cabin shows that this solution is not ephemeral but an ongoing part of IFE,” he insists. “What’s more, handhelds have now been around for long enough to prove that passengers like them, and that they tend to be much easier to keep serviceable than embedded systems.”

While Gray paints a sunny picture of the future of handheld IFE, some observers can see a cloud on the horizon in the form of the explosion in availability of ever more sophisticated personal entertainment devices. Could they one day render obsolete not only the handheld players and their associated services but also the high-level embedded systems?

“We need to cater for improvements in consumer technology,” he concedes. “The concepts for in-seat docking of passenger devices that we will show in Hamburg are designed to that very thing. But there’s even more to it than that – we still think we can do a better job than the individual traveller of lining up compelling content, while in my view the leading carriers will never give up on seeking to do everything for their customers. We have to keep a close eye on the evolution of personal entertainment devices, of course, but I don’t see them as a significant threat to the existing IFE market in the short term.”