Strategic sale opens opportunities

Sergio Aguirre, President, Gogo Business Aviation, talks to Anthony Harrington about the company’s sale of its commercial airlines division and its experience through the pandemic

AH: Sergio, how has Gogo fared through the pandemic? Has it changed the way you operate?

SA: I would say that we have definitely had to learn how to work and operate in a COVID environment, but we have accomplished that very well, and all our employees are safe and well. From an operational standpoint, we had to make some adjustments, and we had to do that fairly quickly, but I’m pleased to state we have not missed a single delivery on new equipment or on any repairs during the pandemic. Our people really rose to that challenge.

Additionally, we have been able to continue our quarterly cross-functional and development planning sessions every quarter, where we outline our development and ‘go-to-market’ objectives. These meetings define what we expect to achieve and to be successful it has to be very collaborative across most of our functional business units. These are big events for us, and we have now done three of them virtually. I continue to be amazed at how well our people have adapted to this virtual approach, maintaining a high degree of productivity and innovation as before, and in many instances even more so.

A couple of examples of how that played out include our recent release of new AVANCE software and the launch of Gogo Vision 360 which is an enhanced version of our industry-leading inflight entertainment system, Gogo Vision. We now offer a 3D moving map and unlimited streaming of the latest Hollywood releases and TV programming. Both of those were developed and taken from concept to market release during the pandemic.

AH: How has the year gone from a sales standpoint?

SA: Clearly, 2020 has been an unusual and difficult year, but we are very pleased that we ended 2020 with more air-to-ground (ATG) subscribers then we started the year with. To end the year with a greater number of customers during a pandemic year shows the resilience of Gogo and the importance of inflight connectivity.

AH: You had a huge announcement this year with the sale of your commercial airline business. What was the thinking behind that, and what does it mean for Gogo Business Aviation going forward?

SA: In August, we announced the sale of the commercial airline side of the business to Intelsat, and closed that deal on December 1. It was the right thing to do for the business, customers, and employees. The commercial airline division is now a part of a vertically integrated business that will allow it to better compete and serve its airline partners more effectively. The remaining Gogo team will be laser-focused on the business aviation customers and market.

With the commercial division now part of Intelsat, the company has the ability to really extend its position in that market, and all our former employees continue to have great career opportunities with Intelsat. The whole division will be a great value-added asset to Intelsat.

For us here in business aviation, it is a fantastic win. It puts us in a much stronger financial position and we now have an exclusive focus on services to business aviation. Our investments and innovation will all be targeted to business aviation.

Part of the transaction involved the sale of Gogo’s Ku-band satellite services to Intelsat. But it’s important to note that we retain the ATG network and all the related technology. There is a long-term service agreement between the two companies which means that we will have Intelsat as a customer, and they will continue to support us with their Ku-band network for our satellite-based customers.

So, this whole transaction has been very well thought through. Intelsat gets a channel to sell a lot of Ku capacity. All our former commercial airline staff move across to Intelsat, and it is a great win for us here at business aviation. We get to be solely focused on business aviation and the unique requirements of our customers and our channel distribution. This really is one of those rarest of deals that make for a win-win-win for all parties.

AH: Back to the pandemic. What has happened when customers stopped flying or dramatically reduced their flight hours? Did their subscriptions to Gogo cease?

SA: We have taken a very flexible approach with customers, and that is coming back to us now in terms of customer loyalty. This is a relationship business, based on developing long-term relationships with customers. We recognised that these were very hard months and we chose to be as accommodating and flexible as possible with our customers. It was simply the right thing to do.

What we are finding now is that customers are flying again and they are reactivating their accounts, usually with a plan that is at least equal to and is often greater than, the plan they had before. So, we are finding that the dollar values that business jet customers are generating for us today are very similar to what they were prior to the pandemic.

The message we are giving customers is that we will all get through this together. That message has become cliché in many ways, but for us it’s very real and we are committed to doing what we can to help our customers get through this. We have seen impact on hardware sales, and installations at the OEMs, and in the aftermarket. Most flight departments are still flying less than they were before, but that is slowly changing.

With the charter fleets, we’re seeing they are basically back to normal flight activity, but passengers on those flights are using more data than they were before. Increased data use is a trend we’re seeing across the board.

We’re also seeing that more people who can afford to fly private are now flying private, many of them for the first time. We’re seeing this trend both in charter and fractional fleets. We are hopeful that this is a positive trend that will continue to drive business aviation through 2021 and beyond.

Another effect of the virus is that with so many international flight restrictions, many of the larger aircraft that would have used satellite broadband communications in the past, are spending a lot more of their flight hours over the continental USA, so they are able to benefit from the improved user experience at a more affordable cost. Satellite connectivity has greater latency and the data cost is much more expensive than with ATG, so that is a key differentiator for us.

Read the full article here: issuu.com/bizavmedia/docs/bam016_winter_2020-2021/16?fr=sMzVmNTI3NzQ1NDc