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Gogo plans significant cost cuts as it seeks to shore up its financial position. Facing a financing crunch the company’s “Gogo 2020” business plan unveiled this week will see hundreds of millions of dollars cut from cost side of the balance sheet even as the company attempts to boost revenue through increased performance and passenger take rate on its 2Ku network. In the announcement of the program CEO Oakleigh Thorne suggests “Gogo 2020 represents a new era for Gogo with a significantly reduced cost structure, much lower capital expenditures, and a streamlined and standardized approach to meeting the needs of our customers with improved quality and service.”
Cutting head count is an easy way to address cost challenges and Gogo 2020 includes such cuts. The company will also trim some of its programs seen as inefficient use of capital. And, with any luck, some airline customers will pay more for the product, shoring up the books in advance of the impending debt call. Thorne admits that the subsidy model is Gogo’s fault, “The subsidy model has led to our entire industry suffering substantive losses. And it was started by us.” Fixing that problem will be painful for everyone involved.
Cutting Costs, Cutting Programs
Headcount is being reduced by ~5% immediately in the Commercial Aviation segment, with 55 employees laid off this week. Future significant cuts to staffing are also expected, largely through reducing contractor headcount and by a 50% cut in backfilling positions opened through attrition. Layoffs are a short-term approach to the savings and also don’t nearly address the major costs the company must trim to meet its targets.
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