When the in-flight connectivity world spills over into legal wrangling that’s when I start to think things have maybe gone just a bit crazy. But that’s what happened this week, thanks to American Airlines and Gogo. The former has filed a petition in Tarrant County, Texas (AA’s home base) seeking relief over a dispute around specific contract terms covering 200ish AA 737s fitted with Gogo’s air-to-ground solution. And reading the filing is rather entertaining from my limited understanding of contract law.
Essentially there is an “out” in the contract by which AA can seek to terminate the contract if a better technology comes along.
In short, if American reasonably determines that Gogo’s new proposal is the same or better as the competitor’s offering, the Agreement would be amended on agreed upon terms. If American reasonably determines that Gogo’s proposal is not as favorable, American may elect to terminate the agreement.
Alas, AA claims that it has determined such – citing the ViaSat solution installed on JetBlue, some United Airlines and some Virgin America planes – and informed Gogo of the finding but that “Gogo refuses to acknowledge or accept American’s notice letter under the Agreement.” And so there is a legal filing, essentially forcing Gogo’s hand on this front.
There are some flaws in the filing, at least related to the facts surrounding what the ViaSat solution delivers. Most notable is the continued overstatement of the bandwidth available:
[T]hese new satellite-based services offer 12 Mbps per device…
Yes, but not really. At least not all at once. ViaSat has acknowledged that and is not delivering 100+ Mbit to planes, at least not yet. On the plus side, with some hardware upgrades to the on-board kit that might be possible in 2017 once ViaSat-2 is in the sky. Either way, the capacity to the aircraft is higher with ViaSat’s solution and it is providing full streaming to nearly 200 aircraft flying over the USA today, with room to grow according to executives.
Read the filing: http://media.wandr.me/AA-Gogo-lawsuit.pdf
It is also worth noting that AA calls out the pricing plans as one of its complaints and a differentiator of the service. Panasonic, ViaSat and Row44/Global Eagle typically engage as bandwidth wholesale vendors rather than retail providers, the space Gogo sits in. But Gogo is diversifying on that front lately. It is willing to provide wholesale contracts and has done so – United is currently on that model for some planes as I understand it. Alas, there is not a ton of clarity into how that pricing works but it is possible.
But here’s what I REALLY do not understand: If AA sends the letter to Gogo then Gogo gets to counter with an offer. That will obviously be the 2Ku platform because it has the best bandwidth and economics of anything Gogo is selling right now. In fact, it is exactly what Gogo has said it will offer in a statement filed early this morning after news of the suit became public. So why not just do all of that behind closed doors? Why get the attorneys involved? The news would break eventually if AA choses ViaSat even after the 2Ku counter-offer. So why let this frenzy happen now instead of later, given the potential that AA could pick 2Ku rather than ViaSat.
My gut feeling is that ViaSat wins this deal for a variety of reasons but, overall, some things about the timing and the publicity surrounding it have me all sorts of confused.
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Bryce G says
I’m bummed for selfish reasons. T-Mobile gives me free in-flight texting on all Gogo-equipped flights. I travel a lot and LOVE that feature on any flight 3.5hrs or longer. I would sorely miss that if it went away.
The good news (I think) is that I’d imagine that if ViaSat were selected, it wouldn’t exactly be an overnight transition…
Seth Miller says
Yeah…that’s a pretty selfish reason. 🙂
I’ll take faster, cheaper connections over that edge use case every single time.
Does AA’s timing having anything to do with Viasat having a firm launch window (Q1 2017) for Viasat-2, announced a week or two ago? Are they doing this in public to help Viasat’s public profile with investors (VSAT +12% today)? Does this help them attract new investment? Improve their bond rating?
Seth Miller says
Securing a new customer – especially for 200 more aircraft – would undoubtedly be a huge win for ViaSat. But I don’t think AA is in it to boost ViaSat so much as for itself. The firm launch date (which is still just a window, not a specific date, but a might tighter window than the SpaceX uncertainty allowed for) was announced after the initial notification sent from AA to Gogo so I do not believe that was in play unless VSAT gave hints on that front in advance of the public announcement.