NEW YORK (TheStreet) --Delta Air Lines (DAL - Get Report) and Gogo (GOGO - Get Report) inked a deal Wednesday that will bring higher-speed Internet capability to passengers on hundreds of domestic and international flights starting in 2016.
The agreement has Gogo upgrading more than 250 Delta aircraft with its satellite-based 2Ku Internet Wi-Fi connectivity technology. The companies cited several benefits that will be derived by using 2Ku, including faster data transfer rates (in the 70 megabits per second range) and being able to continue service when the flight goes over water. Currently, Gogo uses ground-based cell towers to deliver its signal with a typical data speed in the 4MBps to 9MBps range.
"2Ku is the first globally available solution," Gogo CEO Michael Small said in an interview. "The additional bandwidth will let us increase the number of customers using the service and a per plane increase in revenue."
There are now 2,000 commercial airliners using Gogo's older equipment. The number of people who pay for Internet access varies between 7% and 50% per flight, with higher numbers more likely to be reached on flights traversing routes favored by businesspeople, Small said.
The new 2Ku service will be installed on a wide variety of aircraft that ply Delta's long-haul domestic, Latin American and Caribbean routes. The upgrade is expected to be completed in 2016, but Delta reported it has completed installation of Ku-band satellite Wi-Fi on more than one-third of its international fleet and expects to have 85% completed by the end of 2015. The remaining equipment will be installed by Gogo.
The 2Ku system uses two Ku antennas, one for downloads and one for uploads, allowing them to handle more more bandwidth, according to the company. It's possible that when new satellites, known as High Throughput Satellites, come online in the next few years, the data rate could increase to 100MBps.
Delta said its fleet of Wi-Fi-equipped planes offers more than 3,500 Internet connected flights daily.
Although in-flight Internet capability is only a few years old, fliers, particularly those traveling on business, have quickly come to expect it, said Bob Mann, president of R.W. Mann, an airline industry analysis and consulting firm.
Despite the strong demand for it, what passengers can do with these services is still limited.
Once a device is connected to any in-flight Wi-Fi system, its capabilities are limited by the amount of bandwidth each customer receives. The 70MBps of data is what is sent to the aircraft, which is then shared amongst everyone who has signed up for the service. This provides each one enough to handle simple productivity tasks, check email, surf social media and read the news, but Gogo and other services do not currently support streaming on Netflix, HBO Go or YouTube.
Gogo has its own streaming service , Gogo Entertainment On Demand, but the company doesn't heavily promote it.
Gogo has not yet set the fee for fliers, but currently, and depending upon the route, costs average $12, the company said.
"How Delta/GoGo 2Ku plays against United's (UAL) and JetBlue's JBLU K-band services and price points is yet to be discovered," Mann said.
Gogo's 2Ku will also have enough bandwidth to allow the airline to utilize some for its own use.
"Our agreement to work together to develop applications and services that connect their aircraft and crew to the Internet at all times will help build a more efficient airline over time," added Small.
Gogo does not expect any incremental revenue from the airlines for supplying this service.