Doubtful On Discounting, Gogo Does Distribution Deals - Business Travel News

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Doubtful On Discounting, Gogo Does Distribution Deals

March 07, 2012 - 04:35 PM ET

By Jay Campbell

New York - Having tested corporate discount programs since 2010, inflight Wi-Fi provider Gogo Inc. is open to but skeptical of volume-based discounting, said vice president of airline partnerships Dave Bijur. Nevertheless, the company is lining up other partnerships, following initial work with BCD Travel and GetThere, to facilitate the purchase of inflight Internet access in the booking path—which itself comes with a discount.

"It's a dicey situation. I'm hesitant to put too large of a discount out there beforehand, but I'm aware there's no point in buying it before the flight if it will cost the same," Bijur said Monday during a Global Business Travel Association conference here. "So anytime we have a pre-purchase situation, we discount. If that will result in a lot of volume, we're very interested in that discussion. As a general rule, we get folks who ask for a corporate discount, and we talk about volume and they promise volume, and we see like five sessions, so it wasn't worth it. If you do have travelers who are going to use it, or if you know they already are, then it does make sense and we'd be delighted to talk about that."

Gogo launched in August 2008 and now counts 1,500 aircraft in the domestic U.S. fleet among its install base. Alaska Airlines, Delta Air Lines and Virgin America have added Gogo service to their entire U.S. fleets.

Gogo is working toward additional industry partnerships. "Different players in the space are at different levels technologically," said Bijur. "When the traveler is making a booking, we need to be able to be fed the information about aircraft type. For example, American Airlines [Boeing] 767-200s are equipped with Gogo, but 767-300s are not. And not all tools or travel management company products are in a position to do that data exchange with us, so technology has something to do with it. We're working on other partnerships that I would say cover 80 percent of the market."

BCD Travel offers clients 24-hour Gogo sessions for $11, a $1.95 savings. For an annual pass valid on all Gogo-equipped flights, BCD Travel charges $395 ($375 through the end of this month). That compares favorably with Gogo's retail monthly rate of $34.95 ($419 annually) for a pass on just one airline. BCD estimates that an annual pass would be worthwhile for travelers flying 36 or more segments a year.

Gogo in December filed initial paperwork with the U.S. Securities and Exchange Commission for a public stock offering. The documentation showed that Gogo, which is not profitable, provided 15 million Internet sessions from its inception through Sept. 30, 2011. Tech writer Dan Frommer determined that volume represented about 4 percent usage relative to the total number of passengers exposed to the service.

Gogo's SEC filing referenced an Egencia study that found 48 percent of business travelers "were willing to pay for in-flight Wi-Fi over other amenities such as extra leg room and avoiding the middle seat," but a survey released last summer from Egencia and the GBTA Foundation found that only 35 percent of travel buyers worked for companies whose policies allowed for reimbursement of inflight Wi-Fi. Two Business Travel News surveys—one conducted in May and June 2011 and the other a year earlier—turned up almost identical results, with 36 percent of 260 buyers and 34 percent of 230 buyers, respectively, saying their companies reimburse the expense.

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