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JetBlue indeed has plans to begin charging bag fees in 2015, but the airline has crafted a business model at odds with those of its competitors and will keep its basic, satellite-based Wi-Fi free for the foreseeable future.
At least that’s the plan as articulated by Marty St. George, JetBlue’s senior vice president, commercial, at the airline’s investor day yesterday.
The key part of the Fly-Fi business model, executed with partners ViaSat and LiveTV, is that JetBlue claims a usage rate of 43% of passengers on average, and they skew younger, and more tech-savvy and affluent than passengers on rival airlines, St. George said.
Instead of an airline merely being a “vessel” for Gogo’s and Row44’s Wi-Fi, JetBlue controls what it claims is its superior Fly-Fi experience and has signed up brand partners as sponsors, including Verizon, Time and the Wall Street Journal, to foot the bill and keep the basic Fly-Fi service free, St. George said.
JetBlue pegs Gogo’s service at 3-8 megabits per second, Row 44’s at 1-5 Mbps and Fly-Fi at a significantly more robust 12-20 Mbps per customer.
Business model covers costs for 2015
“We have covered more than 100% of our bandwidth costs for 2015 and we do have significant upside beyond that,” St. George said.
Verizon is offering JetBlue passengers free streaming services on board through the end of the year “at the price of a very hefty sponsorship fee,” St. George said.
St. George said the airline routinely finds more than 100 devices connected per flight on those Airbus aircraft equipped with Fly-Fi and recently saw 150 devices logged in on a flight.
Sponsors want to target the captive audience,” St. George said.
JetBlue’s free Simply Surf product offers broadband Internet access and passengers can stream video for 10-12 minutes before they are cut off, St. George said. The Fly-Fi Plus service, for streaming movies and large downloads, costs $9 per hour.
Different from competitors
“Because of that high penetration we can pursue a very different monetization strategy,” St. George said.
In addition to sponsorships from brands, JetBlue has lined up a digital advertising partner for the portal and on interstitial pages, and will earn commissions from an ecommerce partner for items sold through the portal, St. George said.
St. George disparaged the Wi-Fi services of competitors that use Gogo and Row44 Wi-Fi, saying their take rates are 6% to 7%, respectively, and that if 15 to 30 passengers starting using their Wi-Fi “it absolutely grounds to a halt.”
“We are not forcing our customers to pay us $20 to $30 to receive a fair to middling service,” St. George said. “Our customers are actually going to pay us nothing for a fantastic broadband experience.”
Gogo spokesperson Steve Nolan says sometimes competitors make unfair comparisons between their latest technologies and the original Gogo Wi-Fi launched in 2008.
“In terms of in-flight Internet performance, we’re confident our latest technologies — GTO and 2Ku — will be the best-performing solutions in the market,” Nolan says.
“On take rate, take rates can be misleading especially when you’re comparing free to paid,” Nolan says. “It also varies by route. There are many transcontinental routes where we see more than 50 percent of an aircraft pay for Wi-Fi.”
The rollout of JetBlue’s Fly-Fi, though, hasn’t entirely met the projected timetable.
The service is live in 90 planes, St. George said, and implementation is expected to be complete in all of JetBlue Airbus aircraft by the middle of 2015.
Earlier this year, JetBlue forecast that the Airbus rollout would have been finished by the end of 2014.
After JetBlue completes placing Fly-Fi on all of its Airbus fleet, then it will begin tackling its E190 aircraft, St. George said.