From my early days in telecom to today, I’ve learned some simple truths. First and foremost, investments in the right network infrastructure ultimately pay off.
Remember early mobile on the ground? If you were lucky enough to have a car phone in the 80’s, you marveled at the fact that you could make a call in your car, on the go. You paid a dollar a minute and it dropped every other block, but the innovation was amazing. Heavy investments were made over time. More, cheaper bandwidth flooded the market. Nationwide coverage became available and unlocked everything that you see on the ground today.
I’ve been fortunate to have watched this play out on the ground and I’m equally privileged to be at the helm of the company that’s leading this for aviation. The only difference between the ground and the air is, believe it or not, we’re innovating at light speed compared to how things played out on the ground – going from car phone to smartphone in less than a decade. But, the general dynamics between mobile on the ground and the air are the same.
And just like the ground, Gogo’s investment in innovation, infrastructure and operations will pay off over time and the mobile Internet in the sky will advance aviation in ways we don’t even comprehend right now.
I can generally say that when people ask me about the future of in-flight connectivity, the questions fall into two buckets – technology and profitability. Passengers want to know when we are going to make the service like it is on the ground and investors want to know if and when anyone is going to make any money in this industry?
First, on technology. Gogo is where we are today because of our ability to out innovate the market. Our Air to Ground technology literally created the industry. It was and still is an engineering marvel.
That was then and this is now. Just like the original car phone on the ground, people were initially wowed by our Air to Ground technology and the notion that they could connect to the Internet on a plane, but passengers very shortly wanted more. They wanted to connect in the same way they do on the ground and stream movies anywhere a plane flew around the world.
We knew we needed a second act, but nothing in existence could deliver a ground like experience that could serve global aviation. So, we once again looked from within for innovation and created our own technology that could deliver on those goals with 2Ku. 2Ku delivers a ground like experience today including the ability to access streaming video services like Netflix anywhere a plane flies. Nobody can deliver on that promise today anywhere near as well as Gogo can. Maybe some can deliver regionally and everybody is talking about what they will have in the coming months and years. But, 2Ku is delivering on it today.
We’ve built massive momentum around 2Ku and now have a backlog of more than 1,200 aircraft. We not only have agreements to deploy 2Ku on some of our largest domestic airline partners, we’ve struck deals with some of the biggest airlines and largest commercial airline brands on four continents including China. Nobody has come close to us in terms of aircraft wins.
Let me set expectations, though. It’s not realistic to expect that Gogo will win every airline deal. There will be some fleet diversification, as is natural in the aviation industry. There are also competitors who have built good products that are operating regionally today. But, nobody has a next generation product built on an open architecture that is designed to keep airlines future ready and ahead of the curve.
The IFC industry and Gogo will be profitable because aircraft connectivity creates such enormous value for the aviation industry. With less than a quarter of the world’s commercial planes connected, and as of now only single digit passenger take rates across all Gogo equipped aircraft, I’d say this is just the top of the second inning when it comes to our potential for growth. With quantum leaps in capacity coming online, significantly declining costs of bandwidth, and increasing operational leverage from infrastructure investments – we and the industry are poised for a big takeoff. Add to that a wave of growth spurred on by the IoT of aviation, and you can see why we’re so excited about the future here at Gogo.
The hard part for Gogo is really done. We have a global satellite network in place and have our ATG network built in the U.S. We will invest where it makes sense to continue to bring more bandwidth at lower costs online and have proven that we know how to do that better than anyone in aviation. We’ve built a massive backlog of aircraft for 2Ku and are now focused on continuing to operationalize this technology and bringing these planes online.
Finally, I get asked a lot about what I believe will be the future competitive dynamics of this industry. While I obviously can’t predict that with certainty, I believe that scale is required to be successful in this business – and scale in my view is measured in thousands of planes. This means that the industry is likely to consolidate down to two, maybe three players, about half of today’s number. With more than 6,000 Gogo broadband connected planes already flying, 2Ku taking flight, and a large and growing book of new business – I like where we stand.