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JetBlue's In-Flight Internet Initiative

Just how much can you offer for a $100 fare? For JetBlue (Nasdaq: JBLU  ) , the answer still may not include a roomy seat; but come 2007, it may include Internet access. On Friday, the airline agreed to pay (link opens a PDF file) the FCC $7 million for the right to use airwaves for in-flight services; along with JetBlue, other winners of the bid included AirCell, which provides in-flight voice and data services.

Color me unsurprised; the FCC auction has been widely discussed, after all. Here's what hasn't: Adding onboard Web connectivity, if done correctly, could provide another way for JetBlue to raise its average take per customer. Doing so has never been more important for the airline than it is now.

In April, the carrier announced its second straight quarterly loss, which prompted CEO David Neeleman to announce a broad restructuring plan that includes delaying aircraft deliveries, focusing on shorter-haul flights, and other cost-cutting measures. Modest fare increases are also expected to be a part of the plan, which Neeleman says could produce roughly $70 million in gains.

All of that sounds great. History, however, says that cutting costs alone is no panacea. Just consider the number of carriers that have been in bankruptcy more than once, including U.S. Airways (NYSE: LCC  ) and Continental Airlines (NYSE: CAL  ) . No wonder the airline business is so cutthroat.

Low-price leadership is fleeting, and brand loyalty is difficult to maintain -- unless, of course, there's something unique about the product. That's where the Web clicks in for JetBlue. Establishing an onboard Internet service could make flights more enjoyable, which, in turn, would make it a luxury worth paying for.

Consider, too, that JetBlue's Live TV subsidiary bought the license from the FCC. That means the airline could theoretically license spectrum and technology to competitors seeking a similar service for a fee. Either way, JetBlue, already in a dogfight, has a lot more ammo today than it did just a week ago.

JetBlue is a Motley Fool Stock Advisor selection. Ask for us anall-access passand you'll get a backstage look at all of the stocks that are helping David and Tom Gardner beat the S&P 500 by more than 30% each as of this writing. It'sfree for 30 days.

Fool contributorTim Beyersthinks Web access would make JetBlue's cramped flying quarters a whole lot more bearable. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. You can find out which stocks he owns by checking Tim's Foolprofile. The Motley Fool has an ironcladdisclosure policy.

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