Gogo Doesn’t Have Profits Yet, But Says It Has Momentum

In more than three years as a public company, Gogo has not reported a profitable quarter, and while that did not change Thursday, the company is betting it is finally on the right track.

While quarterly revenues rose 22 percent, Gogo said Friday it lost $40.2 million from April through June, with its international commericial airline division responsible for much of the loss. But Gogo has long argue that selling its services outside of the United States is a key component of its business, and in the second quarter it signed up a major new customer, International Airlines Group, parent of British Airways, Iberia, and Aer Lingus.

Gogo will need to continue to win new global customers if it wants to finally turn a profit, while also keeping its main U.S. customers, Delta Air Lines and American Airlines, happy. But with its new satellite-based platform called 2KU finally operational, Gogo suspects it now has the right technology to sell worldwide.

Here are some notes from Gogo’s Thursday earnings call.

New WiFi is finally flying — but only on 10 planes

For two years, Gogo has bragged that its next-generation satellite WiFi called 2KU would revolutionize its business. But rollouts take time, and the product, while relies on two low-profile, high efficiency Ku-band satellite antennas, just started flying on Delta Air Lines, Aeromexico and Virgin Atlantic.

That’s the good news. The bad? It is now available on fewer than a dozen planes, so your chances of using it it are about as good as winning the lottery. By year-end, Gogo said the technology will be on 75-100 planes. Next year, it expects to install 2KU on 350-450 aircraft.

U.S. travelers will be most likely to find 2KU on Delta, which has committed to adding it on more than 600 aircraft. American also will install it on 134 Airbus A319s and A320s. 

2KU is “exceeding expectations”

Public companies set expectations partly so they can beat them and delight shareholders, so there isn’t that much significance to Gogo CEO Michael Small’s assertion that 2KU  is performing better than expected. But it’s better than the alternative.

On Aeromexico, Gogo said the 2KU system is supporting NetFlix even though the airline’s system is free on a trial basis, which means more passengers than usual are connecting.

Gogo has promised airlines 2KU would deliver peak speeds of 70 megabits per second to the plane, making it about eight times faster than the company’s typical U.S. domestic system, which rely on a network of ground-based cell towers. Gogo said Thursday it expects 2KU speeds to exceed 100 mbps next year.

Gogo is hopeful that guarantee will help it win more airline customers, despite fierce competition from ViaSat, Global Eagle Entertainment and others.

“What gives us confidence is how well 2KU is working and how badly airlines want it on their planes,” Small said.

Wifi coming to China flights

It doesn’t affect many travelers, but today’s Gogo systems lack coverage over China, so service cuts out on any route crossing the country. This is mainly an issue for Delta Air Lines passengers.

Gogo said Thursday that it should solve this problem by December, giving Delta customers complete coverage on Asia flights.

Thinking about more than satellites

Gogo’s satellite coverage is receiving heavy attention, but most of the company’s U.S. equipped planes – the ones travelers love to complain about – connect to the Internet through cell towers. Historically, this has produced slow speeds, but Gogo has long said the sluggish connections can be improved.

Until recently, Gogo had said it hoped to bid on new spectrum called 14G that would markedly improve connections for its ATG – or air-to-ground – services. But Gogo said Thursday that it no longer sees 14G as a viable option.

“That’s taking too long and it’s not a compelling alternative to us given how well 2KU is doing,” Small said.

Small said the company is evaluating other technology to improve ATG systems and should make an announcement about its plans by year-end.