Connectivity

Gogo Cites Airline Traffic Decline in COVID-19 Furlough Decision

Gogo is furloughing 60 percent of its active workforce, including employees pictured here, at its network operations center. Photo: Gogo

Gogo will furlough up to 60 percent of its workforce starting May 4, as the in-flight connectivity service provider enacts cost cutting measures in response to the impact that the decline in business and commercial airline traffic in March and April has had on its revenues.

All three of Gogo’s business segments – including business aviation, commercial aviation North America and commercial aviation rest of world – will see a combined 600 employees impacted by the furloughs. Oakleigh Thorne, president and CEO of Gogo, said in a press release that the decision was crucial for the long-term health of Gogo’s business.

"In March, we announced 16 levers that we can employ to dramatically lower our costs in order to ensure our long-term viability, and we believe we are implementing the appropriate measures to accomplish that goal,” Thorne said.

Passenger traffic on commercial airlines using Gogo's service has declined 95 percent this month compared to the same period a year ago, resulting in a projected 60 to 70 percent reduction in sales for the company during the month of April. On the business aviation side, Gogo also experienced a decrease in new plan activations due to the drop in business jet flights.

Other cost-cutting actions Gogo is also considering include "renegotiating terms with suppliers, delaying aircraft equipment installations, deferring purchases of capital equipment, reducing marketing and travel expenses and eliminating non-essential spend," according to Thorne.

The company has also applied for an $81 million grant and a $15 million U.S. government assistance loan under the recently enacted Coronavirus Aid, Relief, and Economic Security Act (CARES Act), a bill that provides a total of $2.2 trillion in economic stimulus aimed in emergency assistance and health care response for individuals, families, and businesses affected by the 2020 coronavirus pandemic.

A provision in the CARES Act also provides $61 billion in grants and loans as well as excise tax relief for the airline industry. Passenger and cargo carriers, part 145 repair stations, ticketing agents, and airline and airport contractors are eligible for assistance from CARES.

"We established best- and worst-case scenarios and action plans against the 16 levers based on market conditions against those scenarios," Thorne said. "Based on where the market is today, we believe these personnel actions are necessary, and if conditions worsen, we have additional levers to pull if needed."

Last month, during a quarterly earnings call for investors, Thorne discussed how he expects the overall aircraft connectivity service provider-to-airline relationship to change in the near future, with the demand for free service having the biggest long-term impact.

A representative for Gogo told Avionics International that the impact of COVID-19 will not delay their plans to launch a fifth generation in-flight connectivity network next year.

“Regarding Gogo 5G, our plans remain in place and 5G will continue to be a top priority for the company,” the representative said. Gogo revealed three partners — Cisco, Airspace, and First RF — for the development of its 5G network during the 2019 National Business Aviation Association annual conference in October.

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Some of the major international and regional carriers operating aircraft featuring Gogo’s air to ground or satellite-based 2Ku connectivity have announced their own plans to ground airplanes and furlough employees as well. Virgin Australia, for example, a 2Ku operator, according to an Apr. 21 report published by CNN, has entered into voluntary administration after temporarily laying off 80 percent of its workforce and stopping 95 percent of its flights over the last month.

Another airline featuring 2Ku, British Airways, is using a government-backed job retention scheme to pay more than 30,000 U.K.-based cabin crew and ground-based employees up to 80 percent of their base salary in April and May. The airline also reached an agreement for up to 4,000 pilots to take four weeks of unpaid leave between April and May. Air Canada, which features Gogo 2Ku and air to ground connectivity across its entire fleet, has suspended all flying to the United States until May 22.

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