ViaSat Inc. will provide satellite-powered Wi-Fi on 100 new American Airlines planes — cracking market leader Gogo Inc.’s stronghold on American’s in-flight connectivity business.
The deal announced Friday sets the stage for Carlsbad, Calif.-based ViaSat and Chicago-based Gogo to compete for a larger piece of American’s in-flight Wi-Fi.
The world’s largest airline is moving to convert a significant portion of its fleet to faster satellite-powered Wi-Fi instead of the ground-based technology it uses today.
American chose ViaSat to outfit 100 new Boeing 737 MAX aircraft that are expected to be delivered in September 2017.
Meanwhile, American will use Gogo’s new 2Ku satellite service, launched last year, on 134 Airbus Group planes, American Airlines spokesman Casey Norton said.
Gogo has been the supplier of in-flight Wi-Fi for the bulk of American’s 1,100-aircraft domestic fleet using its ground-based system. It serves up about 10 megabits per second of bandwidth for passengers to share. That can lead to clunky Web browsing if too many passengers hook up at once.
Using satellites, ViaSat delivers 12 megabits per second to each seat on the plane. It has powered free Netflix streaming for Virgin America during a promotion and free Amazon Prime video streaming for JetBlue under a sponsorship arrangement. United Airlines is also a customer. Nearly 500 commercial aircraft now use ViaSat-powered Wi-Fi.
“In some sense, Wi-Fi on airplanes has been about just viewing email. It never has been about the whole Internet,” ViaSat Chief Executive Mark Dankberg said. “Having the whole Internet on an airplane — all the media and possibilities that brings — I think is a big change.”
In a Friday filing with U.S. securities regulators, Gogo said that of the 1,100 American planes with its Wi-Fi systems, 550 are subject to a contract option that allows American to drop Gogo’s ground-based technology at any time.
“We currently expect that the option will be exercised by American with respect to a significant portion, or potentially all, of such approximately 550 aircraft from time to time over the next several years,” Gogo said in the filing.
About 150 of those planes are slated to be retired, Norton said. The rest will be converted to satellite-based Wi-Fi. The company hasn’t chosen a supplier yet.
Having high-speed Wi-Fi “is part of a customer’s decision process now,” Norton said. “Customers chose flights based on whether they have Wi-Fi.”
Gogo’s shares tumbled 16% Friday to close at $9.29. ViaSat’s stock rose 4.5% to $73.08.