A few interesting year-end numbers from Gogo


Gogo released their year-end numbers this week and with them their annual 10-K SEC filing. While I find most of the content of those filings pretty boring I also usually seem to find one or two nuggets of interesting news in there. This time around that interesting bit comes in the form of some details on how Gogo is paying out to its airline partners in their revenue sharing scheme. Gogo paid out $33.4 million in 2013, the most ever to its partners. That makes sense given that revenue also peaked in 2013, with more equipped planes, more sessions, more sessions/opportunity and more revenue per session. But the percentage paid back to the airlines is growing, too.

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Dollar amounts in thousands; revenue is Service Revenue numbers from 2013 10-K filing

While this payout may come in the form of forgiveness on installation costs, it is still a growing portion of the total revenue realized and Gogo acknowledges that in their filing. They actually expect that it will continue to grow. That’s probably a good thing as it means they’re making more money elsewhere along the way, but I do find it an interesting share model.

Gogo is also going to be increasingly reliant on growth of the take rate and revenue per session as the North American market for commercial installations slows. There simply aren’t all that many more planes around in North America which don’t already have a contract in place or hardware already installed. You can see the growth slowing in the Aircraft Online line-item of the filing. And even with airline load factors continuing to increase the Gross Passenger Opportunity growth rate is also slowing.

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Also of note, Delta is responsible for 26% of the gross revenue in the commercial aviation market while American Airlines made up 15% of the income.

And, finally, there are multiple references in the 10-K to provisions in the various contracts with airline partners which require Gogo to make updates to the hardware involved – at Gogo’s expense – if another carrier gets a system on board which is materially better than the one for that customer. So if Gogo comes out with a new technology and deploys it with one carrier they might be obligated to upgrade existing installations for other carriers. Makes sense, I suppose, though that could end up being a rather significant cost of doing business.

Oh, and the business aviation market is still a much better profit center than commercial aviation is. Which is to say there actually was profit there; the commercial aviation market still hasn’t reached the top side of the ledger.

Not the most interesting collection of data, but a couple fun bits in there.

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Seth Miller

I'm Seth, also known as the Wandering Aramean. I was bit by the travel bug 30 years ago and there's no sign of a cure. I fly ~200,000 miles annually; these are my stories. You can connect with me on Twitter, Facebook, LinkedIn and .

3 Comments

    1. I am long in Allegiant (I bought in March 2010) but no other stocks one would consider tied to the industry.

      And, while I am VERY much not a financial advisor, I would be suspect of buying Gogo right now. I have concerns about their growth potential and ability to continue delivering a solid product as take rates increase. GTO will help but that requires airlines to make the investment, something not all will do in all cases. And it is just a part of what they need.

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