Gogo Looks to Delta Pressure For Help With Its Airbus Problem

As Gogo transitions from air-to-ground technology to its satellite-based solutions, things seem to be going fine with Boeing but Airbus “is a little tougher to work with.”

That’s the view of Gogo CFO Norman Smagley, who addressed the subject at the Piper Jaffray Technology, Media and Telecommunications Conference in New York City March 11.

The issue revolves around “line-fitting,” meaning having manufacturers such as Boeing and Airbus pre-install Gogo in-flight Wi-Fi connectivity in new aircraft as they roll off assembly lines.

While Boeing is line-fitting aircraft for Gogo’s satellite offerings, Gogo is counting on Delta Air Lines to put some heavy pressure on Airbus to do likewise.

Delta and Gogo recently announced that Gogo would be upgrading Delta planes flying long-haul domestic, Latin America and Caribbean routes from air-to-ground-based wi-fi to Gogo’s 2KU satellite system.

Smagley said “one of the other great things about the Delta announcement” is that the upgrade not only involves more than 250 North American-based aircraft but also covers another 50 international aircraft, “a chunk of which is Airbus.”

“And they (Delta) will be bringing us to Airbus and demanding line-fit,” Smagley said. “So that will get us over the hump with Airbus, which will also be very helpful.”

Pricing Evolution

In other matters, as Gogo builds up its capacity, pricing changes should be coming both in the short and long term.

Smagley envisions a day when Gogo generates $1 million of revenue per year per aircraft. While managing revenue and margin, Gogo will offer pricing to enhance the take rate rather than inhibit it, he said.

Gogo sometimes increases pricing when demand exceeds capacity, but pricing will likely come down as Gogo can handle more capacity.

In fact, Smagley compared the evolution of in-flight Wi-Fi with what he said is the way that telecom companies reduced wireless pricing when they upgraded from 3G to 4G etc.

Said Smagley: “We can imagine a similar dynamic in the air.”