Rolling out the newest Gogo 5G Air-to-Ground (ATG) network will take a bit longer than anticipated. The company now expects its nation-wide deployment to go live in 2022 rather than later this year. While the delay is slightly disappointing the overall message from Gogo’s 2020 earning call is far more positive.
The refocused business aviation connectivity company now sees a significant untapped market for its products and a compelling timeline to realize profits from that potential over the next five years.
When we look at our addressable market and project 5 years there’s…just a lot of room in the market to grow.– Gogo CEO Oakleigh Thorne
A strong BizAv recovery boosts Gogo
With its operations wholly focused on the BizAv market now Gogo sees promising numbers in the industry rebound. While long-haul business traffic is not expected to recover to 2019 levels for years yet the Gogo fleet continues to see growth, with more aircraft online at the end of 2020 than at the end of 2019. The company closed the year with 5,778 planes online, including 567 activations in Q4. More than 1,700 of those are on the AVANCE L3 or L5 platform, positioning them strongly for upgrades into the 5G offering when it becomes available.
Looking specifically at the recovery pace of the BizAv market, CEO Oakleigh Thorne rattled off a series of optimistic numbers during the earnings call. Among the business aviation operators Gogo tracks in North America the company saw the final two weeks of December at 100% of the 2019 operations, with the full month at 85%. By February 2021 the charter and fractional jets segment surpassed 100% of the 2020 numbers.
Corporate flight customers are not rebounding quite as quickly. The segment is only at about 75% compared to 2020. But Thornes expects that side to come back as vaccinations roll out more broadly.
Moreover, consumers are using more data while on board. The company reports a 20% increase per flight on average, with the charter/fractional segment at 30% today.
Challenges – and advantages – on the Gogo 5G rollout
Delaying the rollout of the 5G network by a year is not great news for the company, of course. Thorne cited a specific chip from one of the components needing to be rebuilt as the reason for the delay. And while the global semiconductor fab industry is taking a hit right now he is confident that the company will get its towers online next year.
Perhaps more interesting, however, was the obvious, if not explicitly stated, marketing pitch Thorne made. He spent a good portion of the prepared remarks, as well as part of the Q&A, highlighting the advantages he sees in the Gogo 5G solution compared to the also delayed SmartSky ATG offering.
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