A Captive Wi-Fi Audience Pays Off
Photograph by Getty Images
Our need to remain constantly connected everywhere is definitely paying off for inflight Internet provider Gogo. The company reported its first quarterly earnings since going public in June, and it shows that not only are more domestic flyers signing up for its pokey airborne connections, but that they’re also paying more for the privilege.
Gogo (GOGO) now connects 1,982 American Airlines, United (UAL), Delta (DAL), Air Canada (AC/A:CN), US Airways (LCC), Alaska Air (ALK), AirTran, and Virgin America planes in North America, and each plane brought in an average of $25,600 in the second quarter, up 22 percent from the same period a year ago. That’s a pretty hefty increase for a single year, but that’s not the half of it. Its overall revenue from commercial aviation increased an impressive 53 percent, to $49.8 million, in the second quarter.
It’s connecting not only more planes, but more flights with more passengers. The company estimated that in the second quarter, 77.1 million butts were in the seats of Gogo-linked flights. Not only did Gogo succeed in luring more of those passengers onto its network (5.9 percent vs. 5.3 percent a year earlier), but it also extracted more money from each passenger who did connect: $10.38 per session, a full $1.35 more than it did a year ago.
Gogo still isn’t profitable—in fact, its losses increased fivefold, to $72.6 million—but its revenue is increasing at a fantastic clip and shows few signs of slowing down. After all, Gogo has what amounts to a monopoly in the aircraft that it does serve, and our desire to check e-mail and surf the Web at 10,000 feet shows no sign of abating.
The irony is that the more successful Gogo becomes, the worse off its customers will be. Gogo is feeding all these flights with what is essentially a CDMA 3G network pointed at the sky, and as with all cellular networks, users must share their capacity. So just as a bunch of simultaneous smartphone users will congest and even take down a cell on the ground, the more Internet surfers there are on a flight, the slower the speeds will be for everyone.
Gogo is trying to keep up with that capacity demand by upgrading its networks, but so far only 312 of its planes can tap into the new system’s higher speeds. And even when its entire fleet is upgraded, we’re still talking about just a souped-up 3G network.
It doesn’t seem to matter to the flying public, though. We’re more than willing to shell out $20 a flight for slower than dial-up speeds. I do it every time I get on plane for San Francisco. So does Om Malik and pretty much everyone on the GigaOM staff. We’re holding out hope, though, that a new generation of air-to-ground systems—currently being debated at the FCC and developed by Qualcomm (QCOM)—will supply the same level of broadband quality that we’re used to on the ground up in the skies.
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