As with most earnings calls Gogo‘s latest ran through myriad statistics and reporting metrics. But, unlike most service providers, CEO Oakleigh Thorne chose to celebrate a massive drop in network consumption over the past 4 years. And for good reason.
Airplanes on the Gogo Air-to-Ground network consumed just one third of the total data compared to 2017. That’s great news for the company as it refocuses on the business aviation market and delivers high performance to a record number of aircraft online, with the average revenue per month reaching record levels.
The business aviation market has clearly shifted out of recovery mode and into growth mode.– Gogo CEO Oakleigh Thorne
The drop in consumption is attributable to the company shedding commercial aircraft from the ATG network. In 2017 more than 1,500 mainline planes, seating 100+ passengers, operated on the ATG network. Today that number is just 200. Those aircraft consumed a disproportionate share of bandwidth. With them no longer on the network the company can deliver a massively better performant solution to the business aviation aircraft it now focuses on.
Those customers now appear wiling to pay more for the improved services.
The business jets operating on the Gogo air-to-ground network consumed 52% more data in Q2 2021, compared to 2019. This includes a 26% boost in megabytes per hour and a 20% increase in flight hours per day.
As that consumption increases, aircraft owners and operators are paying higher monthly fees. Gogo added four new streaming plans in the quarter and customers seem keen to get on board, particularly charter fleet operators. CEO Oakleigh Thorne says the company saw a direct $193/plane/month increase with the new streaming plans online.
Gogo 5G remains on track
Gogo also reports that deployment and activation of its upgraded Gogo 5G air-to-ground network remains on track for launch in the back half of 2022. The company is experiencing some challenges related to chips for the on-board hardware, but it now believes those are properly accounted for in the timeline.
Thorne also highlighted the continued growth of AVANCE L5 installations as a stepping stone to the 5G network. AVANCE hardware sales continue to accelerate, now roughly a third of total ATG systems online, up from a quarter of the total three months ago. With a churn rate of 0.5%/month, Thorne says “These units will drive high margin, very sticky revenue for years to come.” And the company anticipates growing sales numbers into the coming year.
More than just being confident in the timing to deliver its upgraded offering, however, Thorne took multiple opportunities during the call to offer his sales pitch as to why the Gogo 5G network will out-perform the SmartSky network. And he did not mince words.
Among the choice comments:
- MROs stopped taking SmartSky seriously a long time ago because they missed so many dates.
- Dealers do not like the antenna, they nickname it the canoe because it is so big. There are benefits of the bigger antenna because you get more power. We have very large ground towers instead. That’s driven by what the market has told us about antennae.
- They boast a lot of partnerships, but when we talk to those same people we don’t see a lot of substance there.
Obviously these comments come with bias. And SmartSky has shown some real progress in finally getting its network online this year. But it also has spent more than $300 million, compared to Gogo’s estimated $100 million, to get the next gen network to this point. Recovering that investment will be a challenge.
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