Inflight connectivity service provider Gogo is vowing it will fight to retain as many satcom-fitted aircraft as possible at Delta Air Lines, after admitting the US major plans to diversify its provider base and split the fleet between Gogo and an IFC competitor.

At stake are 575 predominately single-aisle, mainline jets at Delta that have been equipped with Gogo’s 2Ku IFC solution under a 2015 agreement between the two parties. A newly revised 2Ku IFC pact with Gogo effectively enables Delta to go in a different direction for IFC on these aircraft, on a fleet-by-fleet staggered schedule beginning in November of this year and running through July of 2022, if it so chooses.

During a William Blair-hosted Fireside Chat event last week, analyst Louie DiPalma asked Gogo CEO Oakleigh Thorne if Delta has notified Gogo of its plans to deinstall some aircraft, and whether investors should expect deinstalls to be in the hundreds. Thorne responded:

We don’t know how many planes will be deinstalled, because we have not been informed of any decision yet. We’re going to fight for our share of those 575 planes, but there will be another supplier. There is no doubt about that.

Thorne conceded that Gogo “will lose some planes but the amount of planes has not been communicated to us”.

No matter which way you slice it, the loss of tails is a blow to Gogo. But Thorne remains optimistic that Gogo can still grow its revenue at Delta even with a smaller plane count, as the carrier transitions to the airline-directed model, and pays outright for IFC service (versus receiving subsidized hardware and allowing Gogo to steer).

More broadly, the Gogo CEO reiterated that Delta’s plan to offer free Internet browsing to passengers “is good for us and the industry” as it will create demand for the same at other airlines.

Thorne finds Delta’s willingness to renegotiate terms amid the COVID-19 pandemic – at a time when airlines are cutting costs left and right – to be “remarkable”, as it demonstrates how important IFC has become to airlines and passengers.

As he has done in the past, Thorne stressed that Delta is simply doing what other majors will do (and have done) – trying to achieve maximum flexibility with a dual-source approach that effectively keeps vendors on their toes to remain competitive, striving to maximize the passenger experience. Industry observers predict that Viasat will win some of Delta’s business, though no announcement has been made. Viasat’s high-capacity Ka-band connectivity solution currently supports free Wi-Fi on JetBlue, as well as broadband IFC on American Airlines and on a portion of United Airlines’ fleet. The Carlsbad, California-based company has said it has undisclosed customers.

A bright spark for Gogo is that an onerous clause has been removed from the 2015 2Ku IFC agreement – that is, the ability for Delta to terminate the agreement if a materially improved IFC product becomes commercially available. Thorne called this the “shiny new product clause” and noted to DiPalma that it would have given Delta the ability to terminate in a mere 45 days. Such a termination would have resulted in years of litigation to resolve that question, he noted. The revised agreement removes this clause.

The Gogo CEO also seems to agree with Delta’s suggestion that there is presently not enough Ku-band satellite capacity for North America to support the high-capacity requirements of the carrier’s free Wi-Fi plan, saying: “I’m not sure any one supplier could supply all that capacity.” The newly amended arrangement buys Gogo time to enhance Ku capacity and to work on a Ka-band satellite-supported “2Ka” product, which might help Gogo hang onto tails.

Notably, Gogo has contracts with Delta for roughly 694 additional aircraft, consisting of twin-aisle jets that fly international routes (and carry the Astronics AeroSat traditional antenna) using Ku satellite capacity and a mix of older mainline aircraft and regional jets flying domestic routes utilizing the Gogo ATG network. The amended arrangement with Delta “doesn’t affect them”, said Thorne.

Photo at top credited to Jason Rabinowitz

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