Business & GA, Commercial, Connectivity, Embedded Avionics

Gogo Continues Expansion Beyond North America, IFC in Third Quarter

By Woodrow Bellamy III  | November 11, 2014
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[Avionics Today 11-11-2014] In-flight Connectivity (IFC) service provider Gogo reported a record $104 million in 2014 third quarter revenue. According to Gogo CEO Michael Small, the company is currently focused on expanding its presence beyond North America, where it now serves more than 9,000 aircraft. The company's backlog has reached more than 1,000 aircraft requiring new connectivity installations. That includes nearly 750 U.S.-based aircraft and almost 250 aircraft for airlines and operators in other parts of the world. Since it first started offering IFC outside of the United States in 2012, the Itasca, Ill.-based service provider has won contracts for more than 50 percent of all of the aircraft that have been awarded for new installations by foreign carriers. 
 
 
Gogo's test aircraft will begin flight testing its GTO and 2ku service offerings next year. Photo: Gogo.
 
"There are more than 40,000 commercial and business aircraft operating globally today. That number is projected to top 70,000 in the next 20 years with the majority of the growth coming from outside of North America,” Small said during a conference call discussing the third quarter results. “Based on analogies and trends we see on the ground, it is inevitable that most — if not all —aircraft will get connected and we believe this industry could hit $30 billion in annual revenue within 20 years." 
 
New agreements outside of the United States announced during the third quarter include AeroMexico, Virgin Atlantic and Vietnam Airlines. Small attributes some of the company's international success to its assortment of different IFC offerings. 
 
Since first introducing its basic Air-to-Ground (ATG) network in 2008 on commercial aircraft, Gogo introduced a faster version with more capacity in 2012 called ATG-4. And earlier this year, the company introduced its satellite-based offerings, Ground-to-Orbit (GTO) and 2Ku. GTO is projected to offer much faster connection speeds than are currently available, an average of 60 Mbps or more for aircraft flying in North America, while 2Ku is projected to offer peak connection speeds of more than 70 Mbps. Both the GTO and 2ku offerings should satisfy airline and business jet passengers who are looking for IFC speeds that match what they're used to experiencing on the ground in their offices and at home. 
 
According to Small, Gogo will look to perform its first GTO test flight in the first quarter of 2015, with 2Ku expected to run on its first test flight shortly after. Additionally, Gogo plans to begin offering Ka-satellite connectivity on Inmarsat's Global Xpress (GX) service also in the first quarter of 2015.
 
"Our strategy of offering numerous technologies in our portfolio is working. Take a look at our recent wins: Virgin Atlantic and Aeromexico chose 2Ku, Vietnam chose GX, Air Canada chose ATG and ATG-4 and will trial 2Ku and GX, and United chose ATG-4 and will trial 2Ku on five of its premium service aircraft," said Small.
 
During the third quarter, Gogo also continued to expand its technology portfolio beyond its core IFC service offering. Delta Air Lines launched "Delta Studio," a custom wireless In-flight Entertainment (IFE) product that uses the Gogo Vision platform to deliver movies and other content directly to passengers' wireless devices. Gogo Vision is an alternative to traditional seat-back IFE systems, providing a Wi-Fi enabled aircraft server that streams television shows and movies directly to passengers' smart phones, tablets and laptops. 
 
Gogo also extended its free in-flight texting service to T-Mobile customers on commercial flights in the United States. When the in-flight texting partnership was originally launched in 2013 with T-Mobile, it was reserved for business aircraft. 
 
Gogo's Business Aviation division also partnered with Dassault in the third quarter to provide a factory-approved solution for Falcon jet operators looking to comply with emerging Future Air Navigation System (FANS) mandates.
 
"Gogo’s expansion into wireless content delivery and in-flight texting is the obvious next step toward a ‘smart’ connectivity service and is key to increase [Average Revenue Per Account] ARPA and remain competitive," Andrew DeGasperi, an analyst that follows Gogo for the Macquarie Securities Group, told Avionics Magazine. "Both provide high-margin ancillary revenue streams and enable airlines to relatively inexpensively differentiate their service offerings. For example, airlines can leverage the proliferation of personal electronic devices to deliver in-flight entertainment without the need for expensive seat-back systems."
 
In the third quarter, Gogo reached more than $100 million in quarterly revenue for the first time in the history of the company. According to DeGasperi, the next 12 months will be crucial to the company's continued domestic and international success.
 
"Only 5 to 10 percent of the international aircraft have some sort of connectivity in a market that will more than double over the next 20 years. We think Gogo and [Global Eagle Entertainment] GEE have the technology and knowhow to successfully tap this opportunity and see both companies as taking a significant share in the near future. The next 12 months will be key as several large airlines are finalizing decisions on their Wi-Fi solution," said DeGasperi. 

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