Gogo(US:GOGO)2019-02-21 19:21In-Flight Connectivity Services - Gogo provides in-flight connectivity services on approximately 3,100 commercial aircraft and 5,200 business aircraft as of December 31, 2018[7]. - The 2Ku system, capable of delivering peak speeds of 100 Mbps, has been installed on over 1,000 aircraft, with an additional 1,000 in backlog[7]. - As of December 31, 2018, the Commercial Aviation North America segment had 2,551 aircraft online, with 670 equipped with the 2Ku system[11]. - The Commercial Aviation Rest of World segment had 589 aircraft online, with 337 equipped with the 2Ku system[12]. - The Business Aviation segment had 5,224 aircraft online with Gogo Biz, including 442 equipped with the AVANCE L5 technology platform[14]. - Gogo Vision was available on 2,200 aircraft, while Gogo TV was available on over 700 aircraft as of December 31, 2018[20]. - As of December 31, 2018, Gogo provided connectivity services on 3,140 commercial aircraft and had approximately 5,200 business aircraft online with broadband connectivity, increasing by more than 500 in 2018[25][26]. - Gogo expects nearly all commercial aircraft and a rapidly increasing percentage of business aircraft to be broadband connected over the next decade, with a global fleet of approximately 22,500 commercial and 30,700 business aircraft[25]. Revenue and Financial Performance - Revenue from Delta Air Lines accounted for approximately 23% of Gogo's consolidated revenue for the year ended December 31, 2018, while American Airlines accounted for about 22%[34][35]. - Gogo service generated approximately 49%, 64%, and 64% of consolidated revenue for the years ended December 31, 2018, 2017, and 2016, respectively[162]. - The average revenue per aircraft equivalent (ARPA) is expected to grow through increased passenger connectivity take rates and the adoption of additional services, including entertainment and connectivity-based applications[27]. - The company anticipates margin improvement through benefits of scale as the number of aircraft online increases and through the execution of its Integrated Business Plan (IBP) designed to reduce costs and improve operational performance[29]. - The company expects an increasing portion of its service revenue to be billed directly to airline partners, which may affect cash flow dynamics[199]. Technology and Innovation - Gogo has over 200 U.S. and international patents, primarily related to network technology, demonstrating its commitment to innovation[22]. - The company is exploring the development of a fully electronic phased array antenna and the use of low earth orbit satellite capacity[22]. - Gogo's technology roadmap includes plans for continued rapid improvement in bandwidth speeds and performance metrics of in-flight systems[9]. - Gogo has patented technologies in the U.S. and other countries, with U.S. patents expiring between February 2019 and December 2037, and foreign patents expiring between August 2020 and June 2035[75]. - The company must invest significantly in technology to keep pace with evolving market demands and regulatory requirements[143]. Competition and Market Position - Gogo's key competitors include Global Eagle Entertainment, Inmarsat, and Panasonic Avionics, but the company maintains competitive advantages through its exclusive focus on in-flight connectivity and entertainment[38]. - The company competes in the business aviation market against major players like Honeywell Aerospace and Collins Aerospace, with new entrants such as Global Eagle Entertainment and Panasonic Avionics expected to increase competition[39]. - Increased competition from satellite-based broadband providers may pressure the company's market position and pricing strategies[101]. - The airline industry is highly competitive and sensitive to economic conditions, which could adversely affect the company's business if consumer demand for air travel declines[93]. Regulatory Compliance and Legal Matters - The company is subject to FCC regulations, including data roaming rules that require negotiation of roaming arrangements with compatible providers[53]. - The company has implemented privacy measures in compliance with the California Consumer Privacy Act (CCPA), which took effect on January 1, 2020, granting consumers new privacy rights[66]. - The company is actively involved in ensuring compliance with various federal and state consumer privacy and data security requirements, including FTC regulations[64]. - The company is currently involved in multiple litigation cases, which could result in significant costs and adversely impact its financial condition[200]. Operational Challenges - Gogo is experiencing network capacity constraints in the United States, particularly on high-demand flights, and expects capacity demands to increase internationally[89]. - The company has encountered supply chain issues that have delayed equipment delivery and installation, impacting operational efficiency[170]. - The company faces risks related to the successful deployment of 2Ku technology and the development of next-generation ATG technology, which could impact capacity management[90]. - The company relies on third-party suppliers for satellite capacity, and any termination or non-renewal of agreements could lead to service interruptions and increased costs[95]. Future Growth and Strategic Plans - The future growth of the CA business relies on the adoption of Gogo Vision, Gogo TV, and other services, which depend on partnerships with airlines and content providers[117]. - The company plans to alleviate capacity constraints by continuing the installation of 2Ku technology on U.S. aircraft, upgrading existing ATG systems, purchasing satellite capacity, and using bandwidth management tools[90]. - The company may need to rely on new service offerings to continue domestic revenue growth as it approaches maximum penetration rates for existing services[106]. - The demand for in-flight broadband Internet access services may develop more slowly than expected, affecting future revenue growth[164]. Financial Condition and Debt - The company has total consolidated indebtedness of approximately $1.1 billion as of December 31, 2018, including $690 million in senior secured notes due 2022 and $162 million in convertible senior notes due 2020[204]. - The company may require additional financing to execute its business plan, including technology roadmap and international expansion, which may not be secured on acceptable terms[169]. - Adverse economic conditions could lead to a decrease in business travel, significantly affecting service revenue, which has historically been important for the company[173]. - The company may incur additional debt in the future, which could limit its ability to obtain financing and pursue business opportunities[204].