Global Eagle is primed to emerge from its cloud of financial uncertainty this month according to company executives. After more than half a year of uncertainty and delayed SEC filings the entertainment and connectivity provider held an investor briefing on Thursday reaffirming plans to complete its internal audit and file the long-delayed annual report by the end of the month. GEE also provided an update on the expected earnings numbers; they are not great at all – revenue is up but costs increased even more.
— Seth Miller (@WandrMe) September 14, 2017
The company believes the time is now to turnaround those shortcomings and executives spent most of the call detailing how that would happen.
Global Eagle is not shy about acquiring older satellites as they reach the end of their use for terrestrial applications. These “inclined orbit” birds are typically available at a significant discount compared to newer, more stable satellites but for mobility applications (i.e. planes that are already moving at 500mph anyways) the inclined orbit is not a problem at all. In January the company announced the acquisition and branding of “Eagle-1,” formerly SES’s AMC-1 Ku-band satellite. This week Eagle-2 joined the party.
Eagle-2 is a rebranding of Telesat’s Telestar 12, a Ku-band satellite launched in 1999. It delivers coverage to the Americas and Hawaii today but GEE indicated it will be repositioned to further add capacity over North America, specifically to meet the ever-growing demand of Southwest Airlines. The company declined to comment on the cost for acquiring the payload but EVP Connectivity Josh Marks stated that the company’s Ku-band costs have dropped by two thirds since 2014 and are expected to continue in that direction. He described the shift as “especially attractive, even for inclined orbit” suggesting that the Eagle-2 bird costs are likely less even than Eagle-1 from earlier this year.
Marks also notes that “Per megabit, the cost of data has converged across satellite platforms and is now converging across bands.” He also notes that the real cost savings is per megahertz, not just per megabit. Improvements in modem and antenna technologies allow the company to extract even more megabits from each megahertz so the two-thirds cost drop translates to even greater savings.
The convergence across bands comment is particularly intriguing as it implies Ku-band capacity is nearing Ka-band’s historically cheaper rates. The Ka-band satellites still generally have more total spectrum available so it is easier to provision large amounts of capacity to a service profile, but Marks says the cost advantage may be waning.
Ka-band Koverage Koming
Many vendors talk about being technology agnostic. Global Eagle may be one of the first to step up to that challenge in a real way. Even as the company sees Ku-band costs dropping it is set to deliver a Ka-band option across North America. Details on the offering remain scarce but Marks confirmed that the service will operate on the Jupiter 1 & Jupiter 2 Ka-band satellites. These are also known as EchoStar 17/19 and are part of the constellation Thales is using to deliver its new FlytLive connectivity solution, also announced earlier this year. Thales has SES-17 launching at the end of the decade with even more Ka-band capacity and potentially in position to win the connectivity contract from Spirit Airlines, but that remains unclear at this time.
Sharing capacity on the Hughes/Jupiter/EchoStar satellites is not a problem, per se, but it does raise questions of total capacity for supporting a full airline fleet. Then again, most of the larger fleets in North America are already accounted for so this may prove to be more of a niche play.
The Southwest Airlines contract is massive for Global Eagle and it is under pressure from Panasonic Avionics; the first Southwest 737MAX is now flying with the PAC kit and many more are expected to carry that hardware in the coming months. The public portion of that contract is a parallel installation, where some new planes will take the PAC hardware and some will take the GEE system.
— Seth Miller (@WandrMe) September 14, 2017
Since that was announced PAC has hinted, intimated and outright claimed that it would be displacing some of the existing Southwest installs, potentially to the tune of “hundreds” of aircraft. Neither Southwest nor Global Eagle will confirm such claims and that scene played out again on the call. When asked specifically about such a displacement Marks commented, “We have no knowledge of any retrofits that will happen.” Obviously that doesn’t mean the replacements are impossible, but the timing is unclear at best.
Finally, GEE’s content services business remains a massive part of the company and continues to grow. EVP Media Wale Adepoju detailed a new product, “Time Flies,” that will see the company install its systems on the largest fleet of tour coaches in the United States, for example. This is another vertical, facilitated by the inflight seatback content business strength, that helps drive revenue and reduce costs for GEE overall.
As with many of the product updates delivered during the call more details are expected at the upcoming APEX EXPO conference later this month.
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