Gogo’s 2Ku plan: More, faster and maybe cheaper, too

With the hardware installed on 10 planes today Gogo’s 2Ku connectivity solution is far from ubiquitous. But the company and its airline customers expect to see that change quickly in the next 16 months. Heading into last week’s 2Q earnings release, we knew that Gogo had finally activated the system on its first Delta aircraft, a 737-800. That was a significant step forward but not the most significant news of the week with respect to the service. More material is the fact that 2Ku will be coming to airlines faster than previously expected and, perhaps, even cheaper for travelers.

Faster deployment

The 2016 target for Gogo is still to have approximately 75 aircraft fitted with the 2Ku hardware; the bulk of these will be Aeromexico and Delta planes. And the first GOL aircraft has already been fitted with 2Ku.

However, the 2Ku install pace is expected to increase significantly in 2017 and 2018 versus previous plans. The new estimates would see 350-450 total aircraft installed in 2017, and equipage of the remaining currently awarded aircraft finished in 2018. The company specifically cited its $525mm bond issue from earlier this summer as facilitating the financing of the increased install pace. And getting more aircraft onto 2Ku should increase revenue, too, helping to pay off that financing and otherwise benefit the company’s bottom line.

kontron newestFaster service

Gogo CEO Michael Small suggested that the 2Ku service will pass the firm’s 100 Mbps-to-the-plane goal in 2017, as new satellite capacity agreements come on line. This increase will be tempered by the growing number of aircraft using the service and potential contention on the satellites in certain geographies but the overall expectation is that airlines and passengers should see spectacular performance going forward.

It is worth noting that Small also suggested that surpassing 100 Mbps is not such a big deal, despite prior marketing hype surrounding its new modem technology, in partnership with Gilat, exceeding 200 Mbps in current lab testing and targeting a capability of 400 Mbps in 2017. Reports that at least one airline requested such high speeds in an RFP were dismissed by Small, saying, “We hit the bogie that is going to matter; [that] issue is off the table as far as I am concerned.”

(Maybe) cheaper rates

Some eighteen months ago when discussing the 2Ku platform Small famously guarded his words when talking about end-user pricing for the solution, saying, “What happens per session or per passenger, we’ll have to see.” This time around it appears that what we’ll see might be good news for passengers.

Speaking to the future trend in pricing Small noted that with 2Ku “we can now analyze what it means to take down prices rather than what it means to increase prices” while still providing an acceptable level of performance for passengers. He stopped short of making a formal prediction on cutting end-user pricing but noted that when the capacity is available cheap or free really does work:

We just saw in Japan Airlines, they introduced that 15 minute free session to their passengers on all the planes. That’s been extraordinarily successful and we’ve seen pretty dramatic increase in take rates as a result of that. So the passengers are happy. The airline is happier and we are happier, that was a win, win, win.

2 Comments

  1. Claude B.

    The use should be free, air compagnies will same millions in non installing tv screen anymore.

    • Seth Miller

      Yes and no.

      More and more passengers are seeing their personal devices as a second screen, not a replacement of in-seat IFE. Especially on long-haul flights.