We’re just a couple weeks into the formal transition process of the Gogo Commercial Aviation division into the Intelsat operation, but the teams involved have never been more optimistic about the future of in-flight connectivity and the value they can deliver to airlines and passengers. In a wide-ranging conversation about the future of the company CEO Stephen Spengler and Commercial Aviation President John Wade offered up their views on what the first year will bring, as well as the longer term outlook for the industry.
We’re gonna do everything possible to maintain Gogo CA’s leadership in the marketplace, not just from a market share standpoint but also in terms of its innovation, in what it brings to the customer experience. We’re committed to this business for the long haul. We think it’s going to be a strong sector.
– Intelsat CEO Stephen Spengler
A different business model
Not much is going to change in the near future for the Gogo CA division, but both executives see a very real potential for the business model used in the IFC market to shift relatively soon. The vast majority of user sessions are end-user paid today. Wade expects that to change, especially with the push by larger carriers such as Delta Air Lines to deliver free service to passengers. Wade expects “a migration away from the legacy model of [Gogo] acting as a retailer, more towards either a freemium model, or a third party paid model. Because Wi Fi isn’t free, there’s a cost to deliver it.”
Which direction it goes from here is not quite as certain as the fact that it must change for the industry to see the take rates necessary for financial success. Freemium, to Wade, looks more like high-value customers receiving the best bandwidth on the plane as part of their airfare while others perhaps receive a lower tier of service with the opportunity to buy up. The challenge here, for airlines and providers alike, is figuring out the right price point and service level to make that a compelling transaction. Is the desire to stream videos enough to get a passenger to cough up the cash? And what’s the correct price point? It is far less likely that a traveler will pay $20 for the option versus two or three dollars.
Want more? The full interview transcript is available now for PaxEx Premium subscribers.
More compelling, however, is the opportunity to bundle the in-flight connectivity service on to a cell phone bill. Wade explains, “As Wi Fi becomes an expectation and, importantly, very high quality Wi Fi becomes an expectation, the one place where the telco can’t deliver service to you today is on aircraft. I think a number will be interested in doing so. I wouldn’t be surprised if we see telcos getting more actively involved.”
The ability to implement that sort of roaming to the access points in the sky is already baked in to the platform, with Wade noting that the company has already tested it with providers. It is just a matter of settling on the correct commercial terms. And under the Intelsat umbrella the economics should improve significantly towards making that viable.
Minimal change
It will be some time for the economics to shift enough for the business model to completely transition. And in the interim the goal seems to be not making too many other changes to the operation. The first year has one key focus according to Wade: “Do no harm.”
The company is ecstatic with the reliability of the 2Ku satellite network today, with November 2020 the best performance on record. Given that success and the increased focus of customers on being connected in the sky, Intelsat does not want to do anything to risk that, especially as aircraft are coming out of storage and returning to service.
Beyond that, Wade expects to see aircraft installations resume in the new year. Airlines are starting to get a better picture of the finances and, despite the pandemic-induced pains, appear willing to make the capital investments. It won’t be at pre-COVID pacing for retrofits, but Wade believes it will “start to gnaw down the backlog in a meaningful way.”
We’re still very enthused about the merger and very, very positive about what we can can do together.
– Intelsat CEO Stephen Spengler
Both Spengler and Wade are optimistic about the opportunity to start more tightly integrating the employee groups from the two companies. Opportunities for that interaction are limited so far, but the two sides are largely complimentary, not overlapping (arguably owing to staffing level changes completed prior to the merger). But the interactions thus far show serious promise. Spengler observes that “people on both sides of the organization are really excited and are already connecting to share ideas and perspectives.” Ultimate he expects that to pay off “real benefit in terms of learning, sharing expertise, and being able to say okay how do we how do we do it better?”
Delivering on the IFC promise
There are many other factors that play into the company’s optimism for the product and the industry. New satellite constellations, owner economics, and more. But in the end it all comes down to can the networks keep up with the ever growing demand for bandwidth. To Wade that answer came easy, “I am more confident on that than I have ever been.”
Learn more about the future plans for Intelsat and Gogo CA in the full interview transcript, available now for PaxEx Premium subscribers.
A favor to ask while you're here...
Did you enjoy the content? Or learn something useful? Or generally just think this is the type of story you'd like to see more of? Consider supporting the site through a donation (any amount helps). It helps keep me independent and avoiding the credit card schlock.
Leave a Reply