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Gogo Inc., like other in-flight Wi-Fi providers, faces capacity constraints — too many passengers trying to get online with too-little bandwidth — so it has a coping solution: raise rates to discourage usage.
Gogo CEO Michael Small said today that’s why the company’s average revenue per passenger session rose more than $1 in the fourth quarter of 2014.
Considering the fact that some Gogo customers, such as Delta, offer some Wi-Fi entertainment products that are free, it is certain that many paying airline passengers saw their rates rise a lot more than a buck a session when using Gogo-provided Wi-Fi.
Speaking during the company’s fourth quarter earnings call with financial analysts, Small said Gogo is managing take rates by raising pricing onboard the aircraft.
New Business Models
A day before Gogo published its fourth quarter results, Delta announced it will be installing Gogo’s new satellite-based Wi-Fi, 2Ku, on 250 mainline domestic planes and on international aircraft as they are rolled into the Delta fleet.
As airlines such as Delta transition from Gogo’s air-to ground system to its new satellite technology, 2Ku, Small said “it brings more bandwidth to the sky for the benefit of the airlines and for us.”
But if Gogo is raising prices for passengers to get online to cope with capacity issues, new business models are emerging, Small said, pointing to the Delta Studio, for example.
With Delta Studio, First Class and Economy Comfort passengers get free access to premium entertainment content on their personal electronic devices while Economy passengers get some free content but have to pay for premium services.
Under the Delta Studio model, Delta pays Gogo for the Wi-Fi services for passengers instead of passengers at the back of the plane having to whip out their own credit cards for payments, Small said.
JetBlue’s Fly-Fi service, through partners ViaSat and LiveTV, likewise offers a free product but it does so through advertising sponsorships.
“Internet in the sky will be like Internet on the ground,” Small said, adding that it should be “open.”
Gogo currently has an exclusive texting service offered through T-Mobile and the exclusivity will soon be expiring.
Asked how important such a service is over the long term, Small said texting will be one of only hundreds of applications on tap for the future.
But he said texting is an economical alternative for passengers particularly while Gogo’s Wi-Fi prices are so high.
For the fourth quarter, Gogo saw its net loss widen to $24.1 million, up from $22.1 million a year earlier, while revenue increased 18 percent to $109.2 million.
Gogo states that it supports Wi-Fi on 9,000 aircraft, or 20 percent of the world’s planes, and has the largest number of connected aircraft in the world.”