July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

The Federal Communications Commission released a new set of rules today aimed at making it easier for airline carriers to offer their passengers in-flight Internet access — and I don’t think I’m alone when saying it’s about freakin’ time.

Of course, the FCC isn’t solely to blame for all the rigid and ridiculous restrictions placed on Internet access during a flight. The agency jointly regulates in-air communications along with the much more stodgy Federal Aviation Administration, which forces passengers to turn off all electronics before and slightly after a plane takes off.

“These new rules will help airlines and broadband providers offer high-speed Internet to passengers,” FCC Chairman Julius Genachowski told Bloomberg in a statement. Genachowski said he’s been pushing the FAA to approve a revised set of rules regarding electronic usage during flights. For instance, one dire exception the FAA has yet to even acknowledge is being able to use devices like iPads and iPhones during take off if the passenger is using the “Airplane Mode” setting that blocks all Internet connectivity.

Previously, Airlines needed approval by the FCC to offer an in-flight Wi-Fi service, which was a long and slow process that permitted some airlines to offer stellar web services while others were woefully left out. Under the new rules, the FCC will offer airlines an opportunity to meet a set of standards that make sure the Internet service won’t interfere with the plane’s controls or communications while it’s in the air. These standards permit the passenger/consumer Internet access to work with an aircraft’s other communications systems to ensure problems don’t exist.

According to the FCC, the new access rules should lead to faster adoption and licensing of Internet services across all airlines and offer a path toward FAA approval of updated electronic usage regulation.

While I’m glad to hear that I’ll soon have more opportunities to pay $49.95 for unlimited blazing-fast Wi-Fi service on my 75-minute flight to the next airport, I won’t be fully satisfied until flight attendants stop acting like anti-gadget police during take off. Luckily, Sen. Claire McCaskill (D-Mo.) shares my frustration, and earlier this month threatened to introduce new legislation for in-flight electronic use if the FAA doesn’t act soon.

Airplane photo via Chalabala/Shutterstock

“We obviously don’t agree with that,” David Cush, the airline’s CEO told me in an interview. “Not only are we not in danger, we’re projecting a profit for the fourth quarter.”

The airline reported an operating profit for the third quarter with an operating margin of 4.3%. The airline also announced that it is scaling back its aircraft options with Airbus. On a cash basis, the airline had less cash at the end of 3Q than at the end of 2Q.

Like startups facing changes in the funding climate because of the broader markets, Virgin America has had to do its own pivot. I spoke with Cush about the latest results and the future of the company.

How Virgin is adapting its business plan is something other startups can learn from. Bay Area travelers may also find some comfort in his view of the prospects for the airline.

Oil

The biggest challenge the company has faced is oil prices. The original growth plan was built when oil was trading at $85 a barrel. Today, it’s trading at $130 a barrel. That’s a factor the airline has little control over. (Like most airlines, Virgin does hedge its fuel exposure, but that only gets you so far.) This affects the routes that all airlines can profitably fly. At today’s oil prices, it’s easier to justify business-oriented routes than leisure routes.

“There are only so many JFKs and only so many DFWs in the world,” Cush said, referring to popular business traveler airports in New York and Dallas. The additional aircraft Virgin had on order would have been used on lower yield routes favored by leisure travelers. “That’s what would have been left over.”

Rapid growth

The airline has grown rapidly in the last two years, increasing its capacity 73%, measured by available seat miles, while the industry grew at 0.4%. That rapid growth has dragged down margins because it takes time for a market to mature. Cush said that in its established markets, Virgin had operating margin of 8%, but the overall margin was 4.3%. As those new markets mature, he expects margins on those markets to reach those of the established markets.

Schedule cutbacks

Virgin has reduced its flight schedule for the first quarter of 2013. Cush said this is in line with a decrease in seasonal demand. In shuffling its schedule, Virgin tried to optimize for times business travelers favor. “There will be fewer total flights, but better timed flights in first quarter,” Cush said. Next to oil prices, capacity gluts have been the bane of the airline industry. Flights return to a fuller schedule in April.

New routes

Despite oil prices and growing pains, Cush is on the lookout for new markets that appeal to business travelers. Newark is one of those. “Absolutely, we remain interested,” Cush said.

In August, Virgin launched service to Washington National Airport. “The election has a pretty disruptive impact on flying overall and particularly flying into Washington,” Cush said. With the uncertainty about who was staying and who was going, travel was cut back. “That’s behind us and demand is very good. We expect that, after a little bit of time, it will be one of the best markets in our system.”

Virgin also has “every intention” of bringing its service to Hawaii, Cush said. Hawaii is such a popular destination among San Francisco area residents that I call Maui the Outer Outer Sunset.

But the delays in its aircraft orders will push that back a couple of years. The aircraft scheduled for delivery in 2015 and 2016 would enable that service. In the meantime, Virgin recently launched a partnership with Hawaiian Airlines that allows frequent fliers to redeem Virgin points for travel to Hawaii, Tahiti, Asia, and other destinations on Hawaiian’s network. The partnership was in the works before the delay in Virgin’s service. “It makes it more important now that we’ve deferred [Hawaii service] for a while,” Cush said. The point-based redemption rates are actually quite attractive, though nowhere near as attractive as the (since closed) loophole in Icelandair’s program that allowed me to fly first class to Maui on Alaska Airlines for about $350.

Elite levels and customer loyalty

Earlier this year, Virgin launched elite tiers of its frequent flier program to entice business travelers to be more loyal to the airline. Among the benefits are bonus miles, priority security screening, preferred seating and priority boarding. “They are working out great,” Cush said. Virgin measures the success of its elite programs based on the degree to which elite fliers use the benefits they are entitled to and how much they spend. Spend is based on both the amount they pay the airline for tickets and how much those customers spend on the airline’s co-branded credit cards.

Elite members are using the new benefits “quite a bit” and “there has been a significant increase in spending since we put the program out there,” Cush said.

The airline is now matching elite status from American and United, its two largest competitors. Cush said the limitation was to keep the administrative process as simple as possible. Besides, I don’t think Virgin’s route network is very attractive to the bulk of Delta fliers; Virgin doesn’t fly to the key Delta hubs of Atlanta, Detroit and Minneapolis.

Security

TSA hassles are the bane of business travelers who fly often enough to know what a joke our current “security” model is. The TSA has been moving toward a risk-based model that would allow frequent travelers to bypass many elements of the screening process. With recent changes to the TSA’s rules, Virgin is now eligible to participate in the TSA’s Pre Check program. Cush said the airline is working to modify its systems to enable its fliers to participate and hopes to have it available shortly after the holidays.

Mobile

For an airline based in Silicon Valley that is known for in-flight Wi-Fi fleetwide, power at every seat, modern airplane cabins, and its great Linux-based entertainment system,Virgin’s lack of mobile apps sticks out like a minority on “Startups: Silicon Valley.” I told Cush that they were far behind their competitors. Heck, even Amtrak has a mobile app.

“Yes we are, and we recognize that,” Cush said. The airline launched a mobile version of its Web site about a month ago. He guesses that iPhone and Android apps will launch in 2013.

Although I will make bold predictions about the future of Internet companies, I stay away from making long-term predictions about airlines. The biggest factor that affects an airline’s existence is oil prices. And airline CEOs have as much control over that as their pilots have over the weather.

But if I use up my Virgin miles in the next year, it’s going to be because I really want to go to Tahiti, not because I’m worried they’ll become worthless.

Rocky Agrawal is an analyst focused on the intersection of local, social and mobile. He is a principal analyst at reDesign mobile. Previously, he launched local and mobile products for Microsoft and AOL. He blogs at http://blog.agrawals.org; and tweets at @rakeshlobster.

[Top image credit: chalabala/Shutterstock]

July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

In-flight WiFi can bog down with lots of bored travelers sharing it. But JetBlue announced today in a company email that its in-flight WiFi will be fast enough early next year to stream movies and TV shows to each airline passenger.

JetBlue said in a memo obtained by The Verge that it will launch high-speed wireless networking on its planes in the first quarter of 2013. Right now, JetBlue uses ViaSat for its WiFi networking. The airline says it will provide free in-flight connectivity until at least 30 planes have been equipped with the high-speed satellite-based WiFi. After a trial period, the service will remain free for email and browsing. But you’ll pay if you want to stream Netflix shows or other movies (like Dark Shadows, pictured above) during the flights. JetBlue expects to deploy the first satellites in a partnership with LiveTV and ViaSat.

The memo said that JetBlue considers free in-flight connectivity to be a competitive advantage over other airlines, particularly those that offer slow service. Only a small percentage of current passengers are satisfied with in-flight WiFi today, the memo said, based on a survey by FlightView. JetBlue promises the ability to load 10 web pages in 1 minute and 18 seconds, compared to 8 minutes and 42 seconds for a rival. JetBlue launched a Ka-band satellite in October with the latest technology.

JetBlue first offered BetaBlue connectivity in 2007, but JetBlue acknowledged that it wasn’t easy to endure in terms of service quality.

OneTwoTrip is an online airline ticket booking site where users can search for flights, see offers, look at ratings, and select the flight that is right for them. It is like a Russian version of sites like Kayak, Orbitz, or Expedia.

OneTwoTrip launched in 2011 and with this funding plans to add additional services like hotel booking and car rentals. Phenomen Ventures is a Russian venture capital firm that focuses its investments on high technology and Internet startups.

It stands to reason that when I travel for work, I either breathe a sigh of relief or roll my eyes in frustration when I see the itinerary for work trips showing which airports and airlines I’ll be in and on.

If you do require constant Internet access, it helps to know what the best options are in terms of airlines and connecting airport locations. West Coast business folks who are traveling to the other side of the country would do well to pick a Virgin America flight and connect through Cleveland, Raleigh-Durham or Charlotte (with free WiFi that gets 14Mbps download speeds) if possible. However, I tend to grab the least-connected flight paths. I live in Nashville, Tenn. and connect through Dallas-Fort Worth when traveling to the West Coast. If my flight is through Southwest or United Airlines, there’s a pretty good chance I won’t have reliable Internet until I reach my destination.

For more information about the most connected airports and airlines in the U.S., check out the useful infographic below. (Click image to enlarge.)

[Infographic via OnlineMBA News]

But lately, Twitter has been full of gripes about the once highly touted airline:

Used to love @virginamerica but they’ve become undependable and horrible at communicating with passengers. I’ll take on-time over hip.

@VirginAmerica Why would you go live with an online reservation system that doesn’t work? yfrog.com/h45hgzknj

So what happened?

The airline recently switched over to a new reservation system from Sabre, the industry-standard travel reservations network that started in the 1960s. The transition has caused significant issues with the airline’s Web site. Some passengers are having issues changing and canceling flights, making seat selections and viewing their frequent flier accounts. Airport check-in kiosks are also having issues. This has also led to dramatically increased call hold times.

Veteran blogger Anil Dash tweeted, “I’ve been fascinated by the botched Sabre migration. Worst since Hershey’s moved to SAP & had no candy for Halloween” in 2002.

Virgin spokeswoman Abby Lunardini said, “It’s a once in a lifetime cutover for an airline. If you look at the past history of cutovers [to new reservations systems], they never are easy for airlines. Every airline has tended to see issues for weeks, if not months afterward.” She said that airport operations have gone smoothly relative to other cutovers, but the Web side has experienced more issues than they anticipated.

The change was necessary because the rapid growth of the airline.

A reservation system change is one of the more complex technology challenges because airlines are 24×7 operations. “It’s a knife-edge cutover because you have live operations,” Lunardini said. “You have to move everything over to the new system at once.” She said the airline initially increased its call center staff by 30 percent (and later another 45 percent) and thinned its flight schedule in preparation for the switch.

The timing of the upgrade, right before the start of the holiday season, raised some questions on Twitter. Lunardini said Sabre provided two options for the switch: October, 2011 or June, 2012.

“We really felt it was a priority from a Web stability viewpoint but also from the business viewpoint to not wait until June of 2012 to make the switch, which would also be in the middle of the summer travel season,” Lunardini said.

The airline added extra airport staff over the busy Thanksgiving holiday weekend, and Lunardini said that the Thanksgiving weekend wasn’t actually that bad, given the holiday, with a high proportion of flights on time.

Passengers who booked their travel before October 27 are more likely to experience issues than passengers who made their travel plans after the switch to Sabre. For passengers whose travel isn’t imminent, Lunardini suggests trying their request at a later time if it doesn’t work initially. She said that many changes can be made at the airport. The airline is waiving change and cancellation fees for passengers who experience trouble.

Members of the airline’s frequent flier program who traveled during the period received an email apology from the airline’s CEO and 5,000 bonus points, worth the equivalent of a free short-haul flight.

Because consumers have been using social media to complain about the airline, Virgin America has also been using those channels to respond. Virgin has staffed its social media team around the clock.

“We are really the first airline that has gone through this type of business change in the era of social media,” Lunardini said.

The asynchronous nature of social media is also helpful because people don’t have to wait on hold before getting a response. She estimated that the airline has sent about 10,000 Twitter direct messages to travelers since the cutover.

Lunardini said that a major deployment that went in on Friday should fix many of the issues that customers are experiencing. She hopes that any remaining issues will be fixed with another deployment schedules for Dec. 8.

Once the bugs are worked out, the Sabre system will allow Virgin to offer new capabilities such as codesharing with V Australia and Virgin Atlantic, an elite program for very frequent fliers and mobile tools.

“We are hoping that when we get on the other side of these last errors that guests will still enjoy the experience with us and stay with us,” Lunardini said.

In the meantime, frustrated passengers continue to use social media to vent. To its credit, Virgin America is leaving negative comments up on its Facebook page, where it could easily remove them.

“Arrrgffhggh. – based in silicon valley – high tech airline that can not get it’s website working for weeks – wrong. Hold time on phone over 47 minutes !!,” wrote commenter Winston Vaughan.

Rocky Agrawal is an analyst focused on the intersection of local, social and mobile. He is a principal analyst at reDesign mobile. Previously, he launched local and mobile products for Microsoft and AOL. He blogs at http://blog.agrawals.org and tweets at @rakeshlobster.

Top photo credit: Artur Bergman/Flickr

The only thing worse than no in-flight Wi-Fi is crummy in-flight Wi-Fi. Gogo aims to fix that problem with its new ATG-4 service, which will deliver wireless speeds around four times as fast as its current service, and which will debut on Virgin America’s fleet in the first half of 2012, the company announced earlier this week.

And in other Gogo news, the company plans to expand its Gogo Vision in-flight video rental service on all American Airlines planes with Gogo services in 2012.

Gogo debuted its in-flight Wi-Fi service on Virgin America back in 2008, so it makes sense for the airline to get first dibs on the company’s new tech. The ATG-4 service will “improve aircraft WiFi capacity to the plane by approximately four times the current performance through the addition of directional antenna, dual-modem and EV-DO Rev. B technologies,” the company said in a press release today.

Like most Web addicts, I’ve welcomed the addition of in-flight Wi-Fi. But the technology can be frustrating when, like most public Wi-Fi networks, it slows to a crawl thanks to users hogging bandwidth. I’m hoping the ATG-4 technology puts an end to that.

Gogo Vision, which launched last month on 15 American Airline aircraft, offers passengers access to a streaming library of over 200 movies and TV shows. Videos are stored on the planes, so the service doesn’t rely on access to the Web. The company announced that it’s also extending its introductory pricing for Vision of $.99 per TV show and $3.99 per movie through October 15. Additionally, customers will receive a free Gogo Wi-Fi session to use on future flights.

Via Engadget; Photo via Albert Domasin

July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

United Airlines on Tuesday announced it has purchased 11,000 Apple iPads to and will be giving one to all United and Continental pilots.

The airline wants to replace massive paper flight manuals in the cockpit with a more versatile digital solution. The first iPads started being deployed this month, and all pilots will be using iPads by the end of the year.

“The paperless flight deck represents the next generation of flying,” said Captain Fred Abbott, United’s senior vice president of flight operations, in a statement. “The introduction of iPads ensures our pilots have essential and real-time information at their fingertips at all times throughout the flight.”

Not only will the iPad make it easier to reference flight information, but also the company says the new tools will save 16 million sheets of paper and 326,000 gallons of jet fuel per year. The company writes:

Each iPad, which weighs less than 1.5 pounds, will replace approximately 38 pounds of paper operating manuals, navigation charts, reference handbooks, flight checklists, logbooks and weather information in a pilot’s flight bag. A conventional flight bag full of paper materials contains an average of 12,000 sheets of paper per pilot. The green benefits of moving to EFBs are two-fold–it significantly reduces paper use and printing, and, in turn, reduces fuel consumption.

United isn’t the first airline to bring tablets onto its airplanes. In June, American Airlines bought 6,000 Samsung Galaxy Tab 10.1 devices to offer as amenities in premium-level cabins of some transcontinental and international flights.

July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

American Airlines on Monday announced it would start offering the Samsung Galaxy Tab 10.1 as an in-flight entertainment device on select flights. It plans to deploy 6,000 Samsung tablets in premium-level cabins of some transcontinental and international flights.

This will be the first time a North American airline has offered a branded tablet for in-flight entertainment. It’s also a sign that tablet PCs are increasingly becoming the go-to entertainment device for the luxury class.

“We are working hard to revitalize our fleet and invest wisely in new products and services to modernize and enhance the travel experience,” said Virasb Vahidi, American’s Chief Commercial Officer, in a statement. “Working with Samsung to outfit our premium cabins with the innovative Galaxy Tab will give our premium customers a modern and innovative in-flight entertainment experience.”

The Galaxy Tab 10.1 is a larger and more powerful version of the original Galaxy Tab. Samsung is touting the device as the “world’s thinnest tablet” at just 8.6 millimeters. The Wi-Fi only tablet has a 10.1-inch screen, Android 3.1 preloaded, and an Nvidia Tegra 2 dual-core processor.