{"id":603,"date":"2015-09-13T22:15:40","date_gmt":"2015-09-14T02:15:40","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-digit\/submission\/gogo-air-winning-through-partnerships-and-contracts\/"},"modified":"2015-09-13T22:15:40","modified_gmt":"2015-09-14T02:15:40","slug":"gogo-air-winning-through-partnerships-and-contracts","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-digit\/submission\/gogo-air-winning-through-partnerships-and-contracts\/","title":{"rendered":"Gogo Air: Winning through partnerships and contracts"},"content":{"rendered":"<p style=\"line-height: 18.0pt\"><span style=\"font-family: 'Georgia','serif';color: #333333\">Gogo Air is a provider of inflight communications including internet, text messaging, and other related services. Gogo currently partners with 11\u00a0major commercial airlines and\u00a0the satellite provider Inmarsat to serve 80% of the airline market. Gogo has a preference for long-term contracts, typically 10 years, tying airlines into their service for a significant duration.\u00a0The long-term contracts have been a major driver of increased market share over the past several years. <\/span><\/p>\n<p style=\"line-height: 18.0pt;text-align: start\"><span style=\"font-family: 'Georgia','serif';color: #333333\">Gogo is excellent at applying the most\u00a0relevant and economical technology to each flight they serve. International flights are best served by Inmarsat\u2019s satellite technology and a majority of domestic flights are best served by Gogo\u2019s wireless offerings. <\/span><\/p>\n<p style=\"line-height: 18.0pt\"><span style=\"font-family: 'Georgia','serif';color: #333333\">Two months ago I probably would have written that Gogo is a digital loser as one of the most shorted stocks on the market and provider of weak service and reliant upon long-term contracts. But, with the recent FAA approval to install new hardware that will allow for 20x the bandwith offered previously, Gogo will not only continue to control a majority of the market, but will have a strong chance of contract renewal and positive customer reviews. Recent surveys have shown that frequent fliers have felt Gogo is both too expensive and too slow. With the 2KU hardware (offering the 20x current bandwith), major airlines are increasing the number of aircrafts that carry Gogo and partner hardware, which is a positive sign for revenue growth for Gogo.<\/span><\/p>\n<p style=\"line-height: 18.0pt\"><span style=\"font-family: 'Georgia','serif';color: #333333\">Many investors cite massive capital expenditures on new equipment as unsustainable and a negative sign for Gogo, especially when examining the free cash flow generated by the business over the last 6 years. The free cash flow problem combined with the end of long-term contracts over the next few years drove many investors to short Gogo stock. However, with recent FAA approval of 2KU on flights, not only will revenue increase through new customers and expanded offerings to existing customers, but the likelihood of contract renewal for another 10 years increases significantly. <\/span><\/p>\n<p style=\"line-height: 18.0pt\"><span style=\"font-family: 'Georgia','serif';color: #333333\">One of the major ways Gogo\u2019s competition aims to compete is on price. Competing on service tends to be a better method than price in an industry with ever higher expectations for quality. It\u2019s an industry that requires significant capital expenditures for the deployment of new\/faster technology and sacrificing margin or cutting expenses on R&amp;D aren\u2019t realistic options. <\/span><\/p>\n<p style=\"line-height: 18.0pt\"><span style=\"font-family: 'Georgia','serif';color: #333333\">Overall, Gogo has maintained technology offerings ahead of competitors and in line with expectations of most customers. Long-term contracts have prevented significant volatility expected in businesses with such high capital expenditures as new technologies are released. Critically, they aren\u2019t tied to a single technological offering and understand the rise of satellite internet for airlines, evident in the partnership with Inmarsat. Gogo is a digital winner because of the relentless pursuit of market share, protected through long-term contracts and advanced technology.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Gogo Air, a provider of wireless in-flight internet, partners with several companies to serve 80% of the country&#8217;s airline market<\/p>\n","protected":false},"author":105,"featured_media":604,"comment_status":"open","ping_status":"closed","template":"","categories":[],"class_list":["post-603","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-digit\/assignment\/digital-winners-and-losers\/","yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Gogo Air: Winning through partnerships and contracts - Digital Innovation and Transformation<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-digit\/submission\/gogo-air-winning-through-partnerships-and-contracts\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Gogo Air: Winning through partnerships and contracts - 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