Gogo: Internet and Connectivity for Business Aviation

Section 1: Business Overview

Gogo is the market leader in internet and connectivity to business aircrafts in North America. Gogo’s service is delivered from its network of 260 air-to-ground (ATG) cell towers and third party satellites, reaching approximately 10,000 customers at an ARPU of ~$3,000.

Gogo generate 80% of revenue from monthly subscriptions to its connectivity platform and 20% from hardware sales. The revenue run rate for this year is projected at $400 million.

At the end of 2023, Gogo had 457 employees. None are part of a labor union.

Section 2: Background and History

Founded as Aircell in 1991.

Gogo initially entered the in-flight connectivity market with a focus on commercial airlines but shifted solely to the business aviation sector in 2020. Founded with the goal of using analog cellular technology for air connectivity, Gogo evolved through multiple technologies, including digital networks and satellite-based systems, to become a major player in providing in-flight Wi-Fi primarily for private and business aircraft.

Gogo shifted exclusively to business aviation in 2020 after selling its Commercial division to Intelsat for $400 million. This repositioning allows them to focus on higher-margin, less competitive markets.

Section 3: Technology / Products

• ATG Network: The legacy Biz ATG operates on 3G and 4G networks with speeds of 1-2 Mbps. An upcoming upgrade to a 5G system (launching mid-2025) promises speeds up to 80 Mbps.

• Satellite (Gogo Galileo): Launching in Q4-2024, Gogo Galileo will provide narrow-band global broadband via a Low Earth Orbit (LEO) satellite network, delivering speeds of up to 50 Mbps.

• Software Platform (AVANCE): Acts as an operating system, allowing customers to toggle between ATG and satellite networks for optimal connectivity.

Section 4: Business Model / Strategy

Gogo follows an infrastructure-based model. Once equipment is installed on an aircraft, customers pay recurring monthly service fees. This setup generates long-term, stable revenue, as equipment typically remains on aircraft for over 20 years. Hardware is sold through a dealer network or directly to OEMs, with customer retention maintained through high switching costs and durable equipment.

Section 5: Revenue / Geography Segment

• Service Revenue: Represents 80% of total revenue, comprising monthly subscriptions and usage fees.

• Equipment Revenue: Accounts for 20% of revenue, derived from ATG, narrowband satellite, and LEO products. Gogo’s multi-band capabilities allow customers to combine ATG and satellite networks, catering to both domestic and international business aviation markets.

  
  

Section 6: Acquisitions

Gogo acquired Satcom Direct for approximately $640 million in cash, equity, and earnouts, financing it with cash on hand and $275 million in September 2024. This acquisition bolsters Gogo's position in the business aviation market, offering satellite-based connectivity and hardware solutions.

Section 7: Market Size / Opportunity / Customers

Gogo estimates the addressable market for business aviation connectivity to be approximately 24,000 planes in the U.S. and an additional 14,000 international aircraft. They project a growth runway of 10 to 15 years as the business aviation market increasingly adopts in-flight Wi-Fi connectivity.

Market forecasts by industry bodies, such as the National Business Aviation Association (NBAA) and General Aviation Manufacturers Association (GAMA), suggest that nearly all business aircraft will have connectivity within a decade, highlighting a strong market opportunity for Gogo.

Customers include private aircraft owners, fleet operators such as Flexjet, NetJets, and Wheels Up, and OEMs such as Embraer.

Section 8: Competition

Gogo’s primary competitors are satellite providers, including ViaSat and SmartSky. SmartSky relies on unlicensed spectrum, making it vulnerable to interference, especially over populated areas. In contrast, Gogo has licensed spectrum, which minimizes interference and improves reliability.

SmartSky announced bankruptcy in November 2024 leaving Gogo as the undisputed market leader.

Traditional satellite providers such as ViaSat and OneWeb, as well as emerging players like Starlink, bring new technology such as low-earth orbit (LEO) satellites. Gogo is addressing this by partnering with OneWeb for international expansion and by deploying its own 5G network domestically.

Section 9: People / Ownership / Board

Oakleigh Thorne, Gogo’s CEO since 2017, owns 23% of the company. GTCR, a Chicago-based PE firm with $12 billion AUM, owns 20%. Together, insiders hold over 50% ownership.

Gogo has a staggered board.

Management compensation (from 2023) is based on

• Total revenue ($455.2 million)

• Adjusted EBITDA ($161.5 million)

• Shipment of AVANCE platform (1400 units)

• Commercial launch of Gogo 5G ATG Network

• Progress towards the launch of Gogo Galileo

Section 10: Finances / Valuation / Projections

• 2024: Revenue is projected at $400 million with an EBITDA of $100 million (35% margin). Gross margins on service revenue at 77%.

• 2025: Projected revenue of $500 million with an EBITDA of $150 million (~40% margin).

• Valuation: Market cap of $1 billion, net debt (2.9x) of $415 million, giving an EV/EBITDA multiple of 11x. The business could be valued at 15x EBITDA for a target EV of $2.3 to $3.4 billion.

Gogo’s fundraising strategy has involved external financing for new product developments, such as its 5G network rollout.

Section 11: Competitive Advantage

Gogo’s main competitive advantage lies in its licensed spectrum, which reduces the risk of interference. This advantage makes Gogo’s network more reliable compared to competitors that rely solely on unlicensed spectrum.

High switching costs act as a barrier for customers to leave, as the removal of installed Gogo equipment and replacement by competitors would be expensive and technically challenging. Additionally, Gogo’s infrastructure model allows it to scale without significant incremental costs, driving high margins and cash flow stability as the market grows.

Section 12: Challenges / Risks / What Can Go Wrong?

Gogo faces a risk from Starlink's new inflight connectivity product, but the threat is limited. Starlink's product is not specifically designed for aviation. Additionally, Gogo's main competitor, SmartSky, shut down last week, leaving its customers without service, which could benefit Gogo. However, Gogo has faced challenges like product delays since 2022, microchip redesigns, and the bankruptcy of a key supplier.

Section 13: Appendix:

(Sources: Gogo IR, SmartSky Bankruptcy)