After taking nearly a year to unwind the complexity of its financials following a string of acquisitions Global Eagle is finally ready to move forward on executing its plan. To that end the content, connectivity, and data analytics company announced the promotion of Jeff Leddy from CEO to Chairman of the Board and of Joshua Marks from EVP Connectivity to CEO. These new roles take effect on 1 April 2018. Ed Shapiro, the current Chairman of the Board, will continue to serve as the Lead Independent Director.
The company concurrently announced a cash infusion from private equity firm Searchlight Capital Partners. Searchlight will invest $150 million in Global Eagle, helping to strengthen the balance sheet. The cost of the cash is relatively high, similar to Gogo‘s debt taken on last year, but it loosens potential funding for growth into new customers and products. Global Eagle will net $142M from the transaction after management fees and use the bulk to pay off the $78M outstanding on its revolving credit line. The remaining $64M (plus the full $85M of the credit line) will be available to the company.
The abrupt departure of former CEO Dave Davis last February and the delayed filing of multiple quarterly earnings statements left a cloud of uncertainty hanging over the company. These latest moves are poised to push that uncertainty away. With significant cash in hand and the former head of the connectivity segment now leading the company day-to-day it is not hard to anticipate a significant push into that very competitive segment. Global Eagle continues to invest in Ku-band satellite capacity in targeted regions and the company is also pushing into the Ka-band market.
Last autumn’s APEX EXPO featured flying demonstrations of the new kit. And the company announced the signing of an MOU with a major airline, expected to be larger than the Norwegian installation in scale. Assuming that Global Eagle helps finance the hardware installations on those new aircraft the cash on hand will be very useful.
Read More: Global Eagle’s Ka connectivity takes flight
It is worth noting that Global Eagle’s approach to the inflight wifi connectivity market is different from pretty much every other service provider in the space. Notably, Global Eagle claims to not really care so much about twin-aisle aircraft serving long-haul routes. During the recent earnings call Marks explained that position:
We’re not trying to chase every plane in the world. We want to be the provider of choice for short-haul single aisle aircraft that are operating dense, operation inside of a specific region. We take capacity from different operators and different orbits and different networks. We bring them together to provide a scalable user experience over that that specific area. The key there is achieving regional density, right, that’s the key to getting efficient utilization out of your network and being able to drive significant margin growth from the operational connectivity services. So, as I look forward whether it’s North America, Western Europe or Asia-Pac, our focus is on building additional aircraft counts within those areas and being disciplined about what we go after.
There are many reasons this approach makes sense. Focusing on only a couple aircraft types keeps STC development costs down. Focusing on specific geographies rather than global coverage allows for better economics of scale when buying transponder capacity. And Global Eagle takes that a step further with its strategic acquisition of inclined orbit payloads such as the newly named Eagle-1 it picked up last year. Lower costs to service customers can led to higher margins. But it also means that larger airlines seeking sole suppliers for their IFC platforms are likely looking elsewhere. Fortunately for Global Eagle it appears the days of single source connectivity solutions for airlines are quickly ending. As the offerings evolve many carriers are splitting their fleet.