Late last week we were able to report that JetBlue would be updating its Airbus fleet to support the ViaSat-2 satellite with on board hardware upgrades. This week, as part of ViaSat’s quarterly earnings report, the company confirmed the initial report and more. Not only will JetBlue be upgrading those aircraft but it is also shifting the vendor relationship to make ViaSat the prime service partner for inflight connectivity. This pushes Thales out as the integrator for connectivity on JetBlue aircraft.
That shift will begin in 2018 as JetBlue upgrades its on-board hardware and expands the capacity and coverage area available to its aircraft and passengers. As expected, the full hardware upgrade is a long-term process, measured in months-to-years, not days-to-weeks. That creates potential challenges for the passenger experience if the portal cannot be tightly managed to deliver a consistent product across the fleet. Fortunately JetBlue holds a slight advantage here in giving away its Fly-Fi product to passengers for free. A consistent payment process seems to be one of the largest stumbling blocks for such split vendor implementations.
The shift to being primary on the implementation offers many benefits to ViaSat, including more direct control of the revenue the connectivity solution generates. The provider expects per byte pricing to decline in the coming years – as does the rest of the industry – but still hopes to realize higher revenue per aircraft. That comes in the form of increased consumption on board. As ViaSat COO/President Rick Baldridge explained during the call:
So this kind of moves us into the prime position and helps us do other things with JetBlue network. And the overall goal for us that we’ve been working on is to try to get actually more passengers engaged and for them to do more things on the airplane. So we’re motivated for the actual cost to come down on a [per Mbps] basis but to expand the amount of services. So we think we’ll see some ARPU growth out of it, but the real goal is to get them more engaged with their subscribers and be able to be more creative and more nimble.
JetBlue echoed the expectation of lower costs for connectivity. In the deal announcement Mariya Stoyanova, JetBlue’s director of product development states, “This new deal with ViaSat gives us the ability to tap into a robust communications satellite network, at far better economics, enabling us to build-out plans for a fully connected gate-to-gate experience.”
The strained Thales/ViaSat relationship is no secret, though most in the industry avoid talking about it openly. This shift by JetBlue and ViaSat to remove Thales from the connectivity implementation is the first concrete move to address the schism. As for whether United Airlines goes down the same path, ViaSat is quietly optimistic. CEO Mark Dankberg implies that such a move is in the airline’s best interest, but it remains to be seen what path is chosen there, “[W]e’re in a situation with both JetBlue and United where they had kind of a mixed contracting agreement because of the history of live TV, and JetBlue resolved that in a way that we think was good for them and good for us. And to the extent that that needs to get resolved on others, I think we’re going to do the best we can to get a good outcome there as well.”
Thales is pursuing its own Ka-band network announced months ago, with promises of a committed customer but no announcement to date. In a crowded market that has spent years now talking about consolidation and the economies of scale necessary to deliver profitable connectivity services to the airline industry this loss of 235 aircraft from the portfolio can’t be good news. Though it also should not be surprising news.
Thales will still be on the JetBlue fleet, with the LiveTV4/AVANT platform rolling out on the A320s as part of the cabin retrofit program. And that system can still integrate with the connectivity kit; similar mixed implementations are flying on several airlines.