Something seems off about this. Yes, Gogo CEO Michael Small probably had to go. But shouldn't the company have chosen a new CEO with a background in telecommunications?
Gogo, the inflight internet provider, replaced its CEO on Monday with the head of a family investment fund that owns roughly 30 percent of the company and is its largest shareholder.
After markets closed Monday, Gogo said Oakleigh Thorne, a member of the company’s board of directors and former chairman and CEO Chairman of eCollege.com, had taken over, effective immediately. Thorne leads Thorndale Farm LLC, a family office.
In a release, Gogo said CEO Michael Small, who had led it since 2010, had stepped down as part of a “mutual decision” with the board. Gogo, which had an IPO in 2011, has not had a profitable quarter as a public company, and last year its net loss was $172.0 million, up 38 percent from 2016. Revenue has generally been on an upward trajectory but Gogo has spent considerable sums on technology and on improving its market position outside its U.S. base.
The technology required to connect an airplane to the internet is more complicated than most passengers might expect, and over the years, Gogo has struggled to manage customer expectations. Its air-to-ground system, introduced on passenger aircraft in 2008 and until recently the platform that connected most U.S. airline flights, is reliable, but has far less bandwidth than passengers want. It also does not work over oceans, or outside North America.
Over the years, Gogo has also introduced a series of satellite-based solutions, including the newest, 2KU, which debuted in 2016, and is now available on hundreds of airplanes, with Delta the largest customer. Gogo is betting 2KU will help improve its fortunes, and while that’s certainly possible, Delta has recently complained that the new system, while fast, does not always meet customer expectations.
Last week, the publication Runway Girl Network reported that Gogo was facing reliability problems with 2KU, a platform that, when working properly, should support video streaming. Runway Girl Network obtained a Delta memo, in which an airline executive said the carrier was,”involving itself in multiple aspects of Gogo’s operations.”
— Eric (@GoldboxATL) March 5, 2018
A Gogo spokesman declined to comment, saying Small had addressed the issue on Gogo’s recent earnings call when he said, “We identified the root cause of all these issues and have fixed this for all of them that have either been deployed or in the process of being deployed.”
A Delta spokeswoman said the airline stood by the statement it gave to Runway Girl Network, which said, “Customers expect that when we say there’s Wi-Fi available onboard, it’s as reliable and available as what they’d experience on the ground. We have that expectation too – ensuring that in-flight Wi-Fi is reliable and stable is a top priority. While there have been some challenges, we are working with Gogo to implement a solution for impacted aircraft.”
More than 550 aircraft had 2KU at the end of last year, according to an investor presentation from February. And in some form or another, Gogo provides internet for more than 7,900 aircraft, though more than half of them are business aviation jets.
Under Small, Gogo not only invested in satellite coverage, but also began to expand beyond its North American base. It now provides connectivity for nine of the world’s top 20 airlines, including British Airways, Air France and Cathay Pacific. In its early days, it focused mainly on connecting U.S. airlines to ground-based cell towers.
Gogo has said its 2KU platform has major growth prospects. In its investor presentation, Gogo said it had orders to convert 590 more existing customer aircraft to 2KU, while adding 2KU to about 845 planes that do not currently have Gogo systems.
In addition to Delta, another major Gogo U.S. customer is American Airlines, the first carrier to offer onboard wi-fi in 2008. American remains a Gogo customer, but in 2016 it decided to split the business with ViaSat, another provider. In the investor presentation, Gogo said it expects it will de-install its technology from than 400 American jets this year and next.
With Gogo’s fortunes mixed, one telecommunications consultant asked on Twitter if the CEO change might be a precursor to the sale of the company.
“Looks to me like an attempt will be made to sell the company,” wrote Tim Farrar, of TMF Associates. “But who would be a buyer when Panasonic & Inmarsat have their own in-flight connectivity challenges? Satellite sector is not a good place to be a CEO right now.”
Photo credit: Michael Small is out as Gogo's CEO. His replacement is investor and board member Oakleigh Thorne. Gogo