In a matter of months, passengers on American Airlines and Virgin America should be able to surf the Internet from the sky, thanks to new technology from an Itasca company.
AirCell LLC has dramatically expanded its Chicago-area operations, hiring 125 workers, opening a small manufacturing operation and securing private-equity financing for its air-to-ground wireless broadband system, set for installation in the first airplanes by December, said Jack Blumenstein, president and chief executive.
"We're ramping up," he said.
The company's expansion plans stem largely from an exclusive broadband frequency license it received from the Federal Communications Commission in June 2006, which will allow its in-air Wi-Fi system on commercial airliners.
Virgin America plans to equip planes with an in-flight entertainment system linked to AirCell's Wi-Fi service, while American expects travelers to bring onboard their own laptops and personal digital assistants, Blumenstein said.
The new partnerships could be the big break 15-year-old AirCell has been waiting for, but whether it can make the most of the opportunity depends largely on how well it has planned for the growth, experts said.
"Many small companies have failed because of an inability to scale their own operations to the needs of the big company, that then will drop them like a hot potato if they can't keep pace," said Andrew Sherman, senior partner at Dickstein Shapiro LLC, a Washington, D.C., law firm.
Managing growth well requires hiring qualified people who can adapt as the company changes to meet the new demand, adding necessary infrastructure to support the growth and securing enough capital to sustain the business while new sales are coming in, said Raman Chadha, executive director of DePaul University's Coleman Entrepreneurship Center.
AirCell, which bid $31 million for the FCC's air-to-ground spectrum license, has received an undisclosed private-equity investment from New York-based Ripplewood Holdings, which is helping to fund the company's expansion, Blumenstein said.
It also has been recruiting top talent. AirCell chose the Chicago area for its expansion because of the workforce available here, Blumenstein said. In addition, its board of directors includes Robert Crandall, former boss of American Airlines parent AMR Corp., and Ron LeMay, former president and chief operating officer of Sprint Corp.
People with ties to large corporations can provide valuable insight into how those companies operate, Sherman said.
"The whole idea is making sure there's someone on the team who knows how to manage the relationship with the customer," he said.
Still, it also is important for fast-growing businesses to look for people with an entrepreneurial mind-set who can adapt readily to change, Chadha said.
"You're hiring more on potential because you may need for them to grow in more senior positions," he said.
Fast-growing businesses also will want to look for people who don't mind a hectic work environment. Some people thrive at a business growing at a fast pace, and some people don't, he said.
\ Consolidation spurs growth
Businesses don't have to win an exclusive contract to face the management challenges of accelerated growth. At Geckotech, a provider of hosted voice-over-Internet-protocol telecommunication systems for small and midsize businesses, consolidation in the telecommunications industry has resulted in new customers for the Chicago-based company.
"There is a lot of uncertainty in the market," with rumors circulating that a national provider is preparing to exit the Chicago arena, said Josh Robbins, managing partner at Geckotech. "We are steadily converting their customers to our service one by one."
In addition, Geckotech has picked up some of Mpower Communications Corp.'s 5,000 Chicago-area customers since that company's merger in May with McLeodUSA.
"The vast majority of Mpower's customer base did transfer over to McLeodUSA," said Daniel Smith, spokesman at Cedar Rapids, Iowa-based McLeod. Still, he said, "in any merger, some customers will seek new alternatives."
Geckotech has been preparing for rapid expansion for the past year or so, when Robbins began stepping back from day-to-day operations to focus on strategy and new business opportunities. The company has boosted its workforce by 50 percent in the past six months and plans to keep hiring, he said. A year from now it plans to employ about 35 employees, up from 12 today.
"We'll be tripling our business in the next 12 months," to about $12 million in annual sales, he said.
To ensure excellent service for its customers, Robbins came up with a visual information system for employees using six large plasma TVs. By glancing at the screens, workers instantly know where each customer order is in the installation process. If a customer order is late, it is displayed in red.
"If it's green, it's good," he said. "We make every effort to keep it green so we are serving our customers in a timely manner."
Robbins first created the system on paper, then moved it to a Web-based system displayed on the plasma TVs.
Meanwhile AirCell, which previously specialized in airborne telecommunications for business aviation out of its Denver office, has been working on the new air-to-ground Wi-Fi system for commercial jets about four years, Blumenstein said.
Chicago-based Boeing Co. tried its hand at an on-flight Internet service a few years ago using satellite technology but failed because the price was too high, experts said.
"They gave up and wrote it off," said Craig Jenks, president of Airline/Aircraft Projects, a New York-based airline consulting firm.
By using cellular technology instead of satellite, AirCell plans to keep the cost of its Wi-Fi access to about $10 per flight, Blumenstein said. But at that price it will likely take years to pay off the cost of the FCC bid and other development costs, experts said.
\ Lining up to join in
If the concept flies the way AirCell predicts, other airlines will be queuing up to get in on the action, experts said.
"From a consumer standpoint, the time has come for broadband access on airplanes," Jenks said.
AirCell has, in effect, created two new business arms to handle the opportunity. One resembles a wireless company but with cellular stations on the ground that point up at the air. The other will create the onboard equipment that satisfies security and aviation requirements.
The challenge has been "putting the pieces together," Blumenstein said. The company had the technology but needed the government approval. Then it needed to qualify as a vendor for various airlines, Blumenstein said.
AirCell hopes to expand to Canada, Mexico and the Caribbean shortly after the domestic launch, he said. If the company is as successful as it hopes to be, the niche business likely would become a takeover candidate, said John Pincavage, president of Pincavage & Associates, a Westport, Conn.-based financial adviser to airlines.
"If it looks to be a real business, someone else will own it, and these guys walk away rich," he said.
