Corporate jets are back in the air, and they’re more connected than ever. Gogo‘s Q2 results indicates a strong rebound in activity for its corporate jet market, finally following the charter and fractional ownership segments. Flight counts are climbing. And, more importantly for Gogo, so is data usage on board. That segment is showing an 81% increase in data per flight over Q2 ’19 levels.
Data usage on corporate jets is outpacing growth in the other markets. The overall data usage on the Gogo air-to-ground network was up 33% compared to 2021. Usage per flight hour increased 11% year-over-year. With corporate business jets representing 60% of Gogo’s active fleet, the company is especially bullish on potential for revenue growth. Excluding special items ARPU grew 4% YoY; the reactivation of corporate jets plays a large role in that boost.
Just three weeks ago Gogo announced it had passed the half-way point of its 150 tower planned initial deployment. This week the company is at 95 towers complete, with “clear line of sight to the equipment and resources required to finish the remaining 55 sites.”
A bit of that growth will have to wait, however, as Gogo finds itself impacted by chip supply issues. But not in the same way broader supply chain woes have affected myriad industries over the past couple years.
Full production volume of the 5G chips for its on-board modem will be delayed until mid 2023, owing to an issue discovered in “late stage testing” of the gear. Still, Gogo expects that many customers will provision their aircraft with the AVANCE system and the 5G antenna hardware. Once the chips are in full production those users will be able to upgrade the installed hardware and quickly activate the increased performance of the 5G system.
As CEO Oakleigh Thorne explains, “The chip is stuck in test mode and can’t be moved to operational mode… The way these chips are built, with multiple layers, test mode touches almost every layer. They have not been able to identify the exact source of the problem with the test mode.”
Thorne is hopeful a solution is developed before mid-2023, but the company is being conservative in its projections at this time.
In a somewhat surprising disclosure, Gogo also indicated that it only expects to ship 15 of the new 5G antenna systems this year. Given that the company previously expected to have the nationwide network online by the end of 2022, that is a very, very small number of aircraft to get fitted with the new gear.
That said, Gogo had not really opened up orders for the new gear until a few weeks ago (also, perhaps, a bit surprising given the planned network activation timing). Thorne says an additional 30 units are already slated to ship in 2023.
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Read more: Fed funds to boost Gogo’s network refresh
Gogo did not comment at all about the pending lawsuit from SmartSky which could derail the Gogo5G launch. Thorne did, however, offer an unsubstantiated view that the upstart is being less than honest about its claims of operating with nationwide coverage today:
We would agree they’re live in parts of the nation across the nation. They’re live in the Southeast, goes up a bit to Chicago; they’ve got some towers around Wichita… They’re live in Las Vegas, where they’ve tested and demonstrated several times. And they’re certainly live out in California, where they were getting ready for the JSX launch that they lost. But we don’t think they have nationwide coverage.
With respect to Satcom Direct, Thorne suggested (without any clear evidence) that the OneWeb partnership it announced at EBACE – after Gogo’s announcement – was “kind of rushed out,” with unclear implications. More significantly to the market, he also believes the antenna solution being developed by QEST is a heavier and less technically advanced offering, limiting it to larger aircraft and reducing the addressable market. Though he also believes there’s enough business for the two companies to share.
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