Virgin America believes it can command a premium for quality wifi


Virgin America made a splash in the aviation connectivity market recently when it announced a shift to a ViaSat-operated satellite solution for its next 10 Airbus narrowbody deliveries in the coming 12 months. Expanding on that plan in an earnings call, company CEO David Cush was bullish on the potential the new ViaSat system offers. Not only is he confident that passengers will be satisfied with the performance of the system but he also believes they will pay a premium to have access to it.

Cush pushed the thought that Virgin America is focused on offering “the most robust system that has been FAA-approved” with the introduction of Ka-only connectivity initially.

Later, in 2016, the airline will roll out the as-yet-uncertified hybrid Ka/Ku system, a first of its kind solution that will enable Virgin America to leverage higher speeds while in Ka range and have Ku as a backup for broader coverage. But the deal is more than just about providing connectivity; it is about performance and offering a complete solution to passengers as Cush summarized later in the call. “Wifi is still not ubiquitous. Business travelers want to know that it is there and know that it works,” he said.

As the “at home in the air” connectivity is deployed Cush expects Virgin America will also realize a benefit in terms of revenue. “Our strong gut feel is [in] migrating to a satellite-based system that the bandwidth capabilities we will have will once again push [us] back to a premium revenue position while the other guys are still flying around with ATG and ATG-4. Our expectation is that as we roll out this program we will once again be able to command a premium because of the quality of the service,” he said.

Regarding pricing for the ViaSat solution, Virgin America has not yet announced anything official. Company CFO Peter Hunt noted, “We think with a product this good, people will pay for it. We’re not in the business of giving things away for free that people are willing to pay for. Our gut feel is that there is a way to monetize that.” In contrast, Virgin America rival JetBlue – also a ViaSat Ka service customer – offers passengers a free wifi tier (which supports streaming video); the carrier has said it will also continue to offer a paid tier to support passengers’ VPN usage.

The ViaSat solution will only be on 10 of Virgin America’s 63 planes; the rest of the airline’s fleet will continue to carry the Gogo ATG-4 solution, which does not always offer sufficient capacity, especially on longer flights, Cush noted. “Even with ATG-4 we know that our network gets overwhelmed on certain high business routes such as Boston and New York.”

Cush also indicated that the new Android-based RED IFE retrofit will eventually be tied in to the wifi system. RGN previously learned that this includes pushing live TV content over the data connection while the plane is in Ka coverage (i.e. CONUS). The lower capacity in the off-shore Ku regions precludes streaming the live TV content over those links, at least for now.

As for the future of the Virgin America planes currently carrying the ATG-4 kit, that remains unclear at this time. Gogo’s 2Ku product is a potential upgrade option. Viability for that will depend on delivery timing, costs and current contract expiry dates, among other things. The backlog for 2Ku installs is not trivial so getting delivery slots could be a challenge should Virgin America want to go down that path.