Gogo Inc., a provider of aircraft Internet and communications services, reported record quarterly revenue on Monday, rebuilding investor confidence after AT&T announced last month that it will join the in-flight Internet playing field.
Revenue was up 35 percent for the three months ending March 31, to $95.7 million, compared with the same period a year ago.
The company reported a net loss of 20 cents, per share, beating analysts’ expectations of a loss of between 24 and 26 cents per share.
“We have proven our leadership in bringing more bandwidth to any aircraft type no matter where it flies,” Gogo CEO Michael Small said during a morning conference call. “In addition Gogo has uniquely positioned itself as a full-service communications provider… to the global aviation industry."
Shares opened at $12.93 Monday morning, $1 higher than Friday’s close. Since AT&T announced its plans, shares had lost a little more than a third of their value through Friday.
AT&T plans to use its 4G LTE network in a deal with Honeywell, which will provide hardware to supply broadband service to business and commercial flights, the companies said. Honeywell said it estimates the service would provide the company $1 billion in revenue in the first decade.
In comments to analysts, Small predicted that AT&T will have a hard time entering the market.
“It is a long process to get into this business,” Small said on the call, noting the need for Federal Communications Commission and Federal Aviation Administration approval, as well as intellectual property issues to navigate.
The in-flight Internet industry is appealing for several reasons, Small said in an interview last week. Airline customers tend to be wealthier and willing to pay for connectivity, Small said.
“You also have an upscale demographic on planes, just because they have the ability to buy a ticket, and business travelers. People want access to that audience,” Small said. “They see it as a transformative new industry and (as) a tremendous branding opportunity in front of those captive, undistracted upscale travelers.”
He said he sees a day when nearly all passengers on a plane use Internet. Airline workers will be able to use the network to rebook connecting flights with passengers while they're in the air, identify safety issues and track marketing data in real-time.
"There's a sensational demand for connectivity on every face of the earth," Small said. "It's not surprising that it's the same demand in the air too."
Gogo uses a cellular network currently for 80 percent of its commercial airline clients, which include Delta Air Lines and American Airlines. When it launched its air-to-ground network in 2008, it provided bandwidth of 3 megabits per second for a plane.
The in-flight Internet company is in the process of upgrading its clients to 10 megabits per second. So far this year, 500 commercial aircraft have switched over and Small said 800 commercial planes should have the faster bandwidth speed by the end of the year.
Gogo is also working on satellite solutions for Wi-Fi that would accommodate international flights over large bodies of water. Once those systems are launched next year, Gogo will be able to provide 70 megabits per second for a plane.
“And then as new satellites get launched, we'll go over 100 megabits per second,” Small said in an interview last week.
Gogo provides broadband service to about 2,000 commercial jets, more than 70 percent of planes currently flying with in-flight Internet capabilities and about half of all planes in the air in the U.S. It has also installed equipment on more than 2,000 business jets in the U.S., of a total 20,000.
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