For more than two years Gogo teased the idea of splitting the company between its Commercial (airline) and Business (private) Aviation segments. The rumblings ebb and flow, but by mid-July the tone of the conversation was undeniable. Now the company confirmed the news. Gogo has retained outside advisors to assist with the formal process to “evaluate our strategic options” for the business.
CEO Oakleigh Thorne described “extensive discussions with multiple parties” and an “optimistic” feeling that a deal may happen.
The BA division generates better margins and comes with more consistent costs than commercial. It also has more aircraft online and rebounded more quickly from the March industry collapse. Gogo offered up some details on how bad the numbers are on a monthly basis.
Thorne also pointed out that ~75% of the CA-ROW flights today come from domestic service in Japan (JAL), Brazil (GOL) and Australia (Virgin Australia).
With the recovery timeline for CA now stretching years just to get back to where it was in 2019 (and that’s based on traffic estimates from Gogo hitting 50% by the end of 2020 and 70% by the end of 2021) the decision to split still makes sense. That segment needs help and a new owner can likely better invest in its future while the BA segment focuses more on terrestrial growth.
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Gogo 5G, 2Ka spending shifts
Gogo also indicated that spending on the next-gen ATG network and 2Ka option for its existing 2Ku customers will be “shifted around” though the timelines won’t at least for now.
On the Gogo 5G front, the change mostly comes from delaying larger CapEx investments for network rollout, mostly money that doesn’t need to be spent until mid-2021 anyways. Roughly half of the $100mm budget for the project would start to flow at that point as the company installs and activates towers with the new hardware.
While Thorne did not provide much in the way of detail on the 2Ka project it is reasonable to assume it is a low priority pending the outcome of the CA sale discussions.
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