Inflight connectivity provider Gogo announced plans to furlough approximately 600 employees representing 60% of the company’s workforce. The move comes as the company seeks to slash expenses in the face of a massive drop in revenue tied to its internet service on aircraft. The company also applied to the US Government for support under the CARES Act.
We established best- and worst-case scenarios and action plans against the 16 levers based on market conditions against those scenarios. 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.– Gogo CEO Oakleigh Thorne
Remaining staff will take pay cuts, starting at 30% for the CEO and members of the Board of Directors and reducing down the hierarchy. The duration of the furloughs will vary based on workload in the various departments.
The company applied for a grant of $81 million plus $150 million in loans under the CARES Act. If those are funded the company will “modify the personnel actions announced today to comply with the terms of that assistance.”
No planes, no revenue
Gogo disclosed a revenue hit of 60-70% for its Commercial Aviation segment, in line with the numbers forecast in our PaxEx Premium coverage last week. The drop in Business Aviation similarly impact’s Gogo’s revenue, with the company acknowledging the drop-offs highlighted in last week’s report, “[S]ince many business aircraft are flying less frequently, there has been an increase in requests for one-month account suspensions and a dramatic decrease in new plan activations for the month of April.”
With the US market showing signs of the service cuts extending through at least June the Q2 numbers for Gogo are unlikely to reverse soon.
Gogo reports $216 million cash on hand as of the close of business on April 20, 2020, including $22 million drawn under its revolving credit facility.
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