[Avionics Today 08-11-2014] Gogo CEO Michael Small sees the company's business moving well beyond a focus on passenger connectivity in the commercial and business aviation sectors in the near future. During a second quarter conference call, Smalls said the company’s new non Internet-connectivity based products are an example of the growing connected aircraft business model.
Japan Airlines (JAL) launched its first Gogo-equipped flights in the second quarter of 2014. Photo: Gogo.
"I still believe there is substantial increase by multiples of the average revenue per aircraft that will be a function of engaging every passenger over time, the crew, and all the aircraft components, navigation systems, the brakes, on and on. We cannot just think about this business as Internet sessions to passengers," said Small, responding to a question about the newly launched Delta Vision service, which uses an onboard aircraft server to stream content directly to each passenger's Personal Electronic Device (PED).
The service does not use Internet connectivity, which has analysts curious as to how Gogo would leverage a service that is the opposite of its main connectivity-based product line. According to the company, this is a new concept that Gogo is using to essentially entice more passengers to use its paid in-flight Wi-Fi services. Delta Studio is the first service using this model across more than 800 aircraft, using Gogo's ACPU-2 airborne server which features is supported by a Layer 2/3 gigabit Ethernet switch, avionics discretes and onboard Wi-Fi radio.
"It marks a shift in how Gogo delivers its product. This is Gogo's first B-to-B version of its IFE platform which allows Delta and others to build customized experiences for its passengers," said Small. “Anything that engages the passengers at the portal will lead to increased take rates across the board. You could argue the opposite that new services cannibalize the existing service, but I think we have a lot of leverage to control that should it happen. I think the odds are totally in our favor that stimulating engagement is going to be good for everything."
Small said Gogo's current focus is on moving beyond its status a year ago as a business-to-consumer (B-to-C) company that was only based in North America, to a business-to-business (B-to-B) company with more international penetration. During the second quarter Gogo took some steps toward that goal, by launching its services on its first commercial flights outside of North America with Japan Airlines (JAL) and Delta International. Gogo also received regulatory approval to start providing Ku-band satellite connectivity service for aircraft flying over the eastern and western regions of Russia.
Another example of Gogo's focus on innovation and moving beyond "passenger Internet sessions," as Small noted, is the expansion of its services for business aviation. Gogo Cloud — a wireless content delivery network — is now installed at 10 Fixed Based Operations (FBOs) throughout North America. The service was first launched in 2013, and allows Gogo Vision customers to automatically receive the latest content updates when they arrive at a Gogo Cloud facility, such as an FBO or General Aviation (GA) airport. Gogo Cloud uses Aircell's UCS 5000 system to automatically connect to the aircraft Wi-Fi signal and facilitate a complete content update without any manual intervention from the flight crew. Smalls wants to expand Gogo Cloud to "provide a nationwide content delivery network for business aviation."
Gogo is also focusing on making all of its business aviation terminals Future Air Navigation Systems (FANS) compliant by the end of 2014.
"FANS ready solutions apply to the business aviation market and part of our operational apps package for commercial aircraft. Gogo is now well positioned to take advantage of what we believe will be an increase in the demand for NextGen safety services in the global aviation industry," said Small. “FANS over Iridium is a great example of how Gogo leverages its engineering talent across business and commercial aviation. We developed FANS over Iridium for business aviation, and we’ll be doing that for commercial as well.”
Regarding connectivity itself, Gogo is still focusing heavily on improving in-flight connection speeds. The company purchased a Boeing 737-500, which it will use to start flight testing its 2KU and Ground to Orbit (GTO) IFC solutions in early 2015. Both 2KU and GTO are expected to eventually be capable of delivering in-flight connection speeds greater than 100 megabits per second (Mbps), an enormous increase from the ATG-4 service that Gogo rolled out last year, which provides a 9.8 Mbps connection speed.
Overall, Gogo had a strong performance during the second quarter with $99.5 million in revenue, a 25 percent year over year increase.