Wi-Fi in the sky is a rare bright spot in an industry that engenders ever lower customer expectations. Five years after Gogo launched its in-flight Wi-Fi service, most passengers still don’t pay for Internet in the sky, but there’s every reason to believe they’re beginning to see the value of staying connected en route. As Gogo disclosed in an updated IPO filing last week, its sales and installations have been growing, and it is inching toward profitability.
Gogo’s in-flight Wi-Fi service was installed on 1,565 planes at the end of June and available to about 65.5 million passengers in the June quarter. Both of those stats have grown around one-third in the past year.
That growth has allowed Gogo’s revenue and number of wi-fi sessions to increase, even as the percentage of passengers who pay for service (known as take rate) and the amount of money people spend on service have remained flattish.
Some 5.3% of potential Gogo passengers connected during the June quarter. That’s up significantly from 4% take rate a year ago, but down a bit from 5.6% in the March quarter and 5.5% in the December quarter.
Take rates vary by airline and flight, of course, and air travel is a seasonal business. In April, Virgin America’s CEO boasted Gogo usage rates in the low- to mid-20s, including generally passing 50% on its San Francisco-to-Boston route. But not every airline is Virgin America, and not every flight is so full of techies.
Still, Gogo’s filing suggests that the company powered about 3.5 million Wi-Fi sessions in the June quarter, up about 75% from last year and up more than 10% from the March quarter.
That’s pretty solid growth, and faster than Gogo’s overall sales, which grew 51% year-over-year during the June quarter. Operating loss fell to $4.9 million in the June quarter from $7.1 million a year ago. And a $135 million credit line, announced in late June, will keep things moving.
The filing notes that Gogo has contracts to install the service on another 415 aircraft, mostly before the end of next year. That could provide roughly 25% more capacity. Take rate will almost certainly increase as more people bring aboard iPads and smartphones and as they become accustomed to paying for in-flight connectivity. And Gogo just started its international expansion efforts this year. (It also generates almost half its revenue from the “business aviation” market, serving private planes.)
But Gogo faces hurdles, too. Network capacity, for example: It’s already frequently slow to connect, and Gogo warns that it must upgrade many planes to new technology to meet capacity demands. Satellite-based competitors could win deals, too. And then there’s the overall instability of the airline industry: American Airlines, whose customers generated 23% of Gogo’s commercial-aviation revenue in the first half of the year, filed for bankruptcy and may shed planes or lose control to another airline.
Still, for many passengers, Wi-Fi has become a crucial part of flying. It looks like Gogo has plenty of runway left for growth.
