In-flight WiFi provider Gogo‘s price increase last September saw revenues rise but failed to tip the company into profitability, despite hopes to milk more from corporate accounts as general use remains stagnant. Only 6-percent of flyers on planes that are Gogo-enabled actually took advantage of the connectivity in Q1, Gogo admitted to Bloomberg Businessweek, and while traditional economics might suggest trimming pricing to drive demand, technical limitations effectively blocked that strategy.
Gogo’s problem is that, while it would like greater adoption of in-flight WiFi, it has to balance the number of users against the capacity of the current systems. In fact, Gogo’s infrastructure simply couldn’t handle everybody on a flight trying to get online simultaneously; there are already complaints that the system is sluggish and unsatisfying to use.
In reaction, Gogo opted to instead increase prices, justifying the decision with the logic that those most likely to use in-flight WiFi would be billing the service to their employer. 2012 revenues did in fact rise as a result, up to $233.5m versus 2011’s revenues of $160.2m.
Now, though, relying on its own revenues isn’t sufficient to support Gogo’s plans for growth. The company floated its IPO on Friday, raising $187m in the process.
That cash will be spent in part on upgrading flights to the so-called ATG-4 standard, which will see download speeds on select Delta Airlines, US Airways, and Virgin America flights as much as triple, hitting peaks of as great as 9.8Mbps. Meanwhile, Delta will also use Gogo Vision, the on-demand streaming service, to offer pay-per-view movies and other content on its domestic fleet.