Gogo’s losses have continued with the announcement of a net loss of US$84.8 million driven largely by the impact COVID-19, for First Quarter 2020.
Its business segments enjoyed mixed financial fortunes.
According to Oakleigh Thorne, Gogo’s President and CEO, “We saw significant impact on our business aviation flights with April average flights per day down 78% versus prior year and a decrease of 90% from prior year at the low point on April 12th.
“Because of the dramatic reduction in flights, many aircraft owners, parked their aircraft in the mid March-April timeframe. And approximately 30% of our 5,700 ATG accounts took some action to reduce their spending with Gogo, including 940 account suspensions and more than 750 service plan downgrades.”
Total revenue for business aviation increased to $70.9 million, up 1% from Q1 2019, driven by 8% service revenue growth offset by a decline in equipment revenue.
Service revenue increased to $57.7 million, up 8% from Q1 2019, driven by a 7% increase in ATG units online and a more than 2% increase in average monthly service revenue per ATG unit online.
Equipment revenue decreased to $13.2 million, down 24% from Q1 2019, due to lower ATG and satellite unit shipments.
In April, Gogo’s commercial aviation segment’s flight counts were down 73% versus prior year. Because there were very few passengers on those planes, session counts were down 91% and sales were down 66%. “The reason sales are not down as much as sessions because we have subscription plans and monthly revenue guarantees from some airlines,” Thorne said.
In North America, total revenue for commercial aviation decreased to $80.1 million, down 17% from Q1 2019, while for the rest of the world (RoW) revenue increased to $33.4 million, up 1% from Q1 2019.
Service revenues in both markets decreased, but was felt more sharply in North America with the full impact of American Airlines switching to the airline-directed model, the deinstallation of Gogo equipment from certain American Airlines aircraft during 2018 and the first half of 2019, and the recognition of product development-related revenue from one of our airline partners in the first quarter of 2019.
Equipment revenues in both markets also increased due primarily to more installations under the airline-directed model.
Across both markets, aircraft online increased to 3,313 as of 31 March 2020, due to an increase in 2Ku and ATG aircraft partially offset by the previously planned removal of older mainline ATG aircraft from airlines’ operating fleets.
“We started the year well ahead of plan, but Commercial Aviation demand fell sharply in March due to COVID-19 and has deteriorated further in Q2,” said Thorne. “There has also been a slowdown in new activations and an increase in account suspensions in our Business Aviation segment, which we expect will negatively impact BA revenue in Q2.”
“The Gogo team responded quickly to COVID-19 with actions to reduce costs, maintain our strong global franchise and ensure our long-term financial viability,” Thorne said. “I think we are well positioned to get through this crisis and am extremely proud of the efforts and sacrifices of our Gogo team in these difficult times.”
In a Q1 2020 earnings conference call, Thorne stated that “Only now in May do we see some green shoots with a big increase in BA [Business aviation] flights per day, and encouraging increases in CA [Commercial aviation] passenger traffic and daily sales.”
“In BA the green shoots are more pronounced, with average daily flights last week up more than 200% from the low point in mid-April and up a little more than 60% over the April average. We’re also starting to see suspended accounts reactivated with 218 reactivations as of last Friday or 23% reactivation rates. We see these reactivations really accelerating and accelerated a lot late last week, and we expect that to continue.”
Looking ahead, Thorne confirmed that Gogo was in talks with its satellite partners to reduce costs as it reduced capacity to satisfy demand
“Generally, they’ve been very cooperative as they value our future business once the pandemic has passed,” said Thorne who added that the company was close to completing documentation on terms with more than half of its satellite partners and are very close to reaching terms with most of the rest. “We’ll obviously favour partners in the future who help us today,” he pointedly said.
In addition, Gogo is delaying installations for the rest of the year as well as delaying purchases, which has required extensive negotiations with suppliers where it had pre-existing orders.
