Sky Talk

Gogo CEO on American Airlines contract: “We will fight for every plane”

Star-Telegram

Gogo CEO Michael Small emphatically told Wall Street investors that it will “fight for every plane” as American Airlines reconsiders its contract with the in-flight Internet service provider.

Small made several comments about American’s decision process on Gogo’s fourth quarter earnings call this morning.

“We’re competing for this piece of business. We’ll deliver a 2Ku upgrade proposal that gives American an option to get faster, cheaper, open-ended technology on board these aircraft,” Small said on the call.

Earlier this week, American dropped its lawsuit against Gogo after Gogo said it would submit a proposal to compete with another in-flight Internet technology company.

200 American Airlines aircraft use Gogo’s air-to-ground Internet service

The Fort Worth-based carrier sued Gogo earlier this month, saying that its contract with Gogo allowed it to renegotiate or terminate its agreement if another company offered a better service. Gogo had disputed that clause in the contract, but Friday agreed to the contract provision and said it would provide a competitive bid within 45 days.

Once American reviews Gogo’s proposal, if it does not beat out a competitor’s proposal, American can terminate Gogo’s contract with 60 days’ notice.

“American is absolutely right. Our first generation technology, which is still more than adequate for certain aircrafts is not cutting its day for some of their aircrafts,” Small said. “That’s why we’ve added a Ku satellite service to our portfolio and has spent the last few years developing our next generation 2Ku technology.”

About 200 American aircraft use Gogo’s air-to-ground technology to provide Wi-Fi during flight. In the lawsuit, American said ViaSat offers a faster service and is currently installed on United Airlines, JetBlue Airways and Virgin America planes.

Here are Small’s full comments on the earnings call Thursday morning.

“As you know, American wants to explore it’s provider options for upgrading 200 of the more than 900 Gogo good fleet in its - Gogo crypt aircraft in its fleet. The move isn’t surprising given the rapidly changing technology and pricing environment in our industry. We value our partnership with American. We’re competing for this piece of business. We’ll deliver a 2Ku upgrade proposal that gives American an option to get faster, cheaper, open-ended technology on board these aircraft. We hope that when they weigh the long range value of our service they’ll join the other carriers that have are already build our 2Ku backlog of more than 800 aircraft. And that’s really the place to start as we look ahead to 2016 and beyond....

“The recent action by American validates what I’ve been saying for quite some time, making the right connectivity decision matters to airlines a lot. What really matters to them is that they don’t make the wrong decisions. Our air-to-ground technology is still an engineering marvel that will keep improving. I’m extremely excited about our 4G ATG service for business aviation and the prospects for next-generation ATG, whether that’s through 14G or other spectrum. But American is absolutely right. Our first generation technology, which is still more than adequate for certain aircrafts is not cutting its day for some of their aircrafts. That’s why we’ve added a Ku satellite service to our portfolio and has spent the last few years developing our next generation 2Ku technology. But in my view, American’s decision holds an even stronger message. Simple - single technology solutions are not only passe, they are risky. Speed, adaptability, access to new technologies. These are the differentiators for the future and Gogo now possess them.

In response to a question from an analyst:

“Couple of things, on American, they’re a valued customer and our launch partner and we tend to do everything possible to retain a strong and lasting relationship with them. We also do that, recognizing that ultimately we’ll respect American’s decisions and they’re making them in their own interest and they won't always necessarily go our way, and supplier diversity is an interest that they must balance with others and we've never had all their planes from Day One. But we will fight for every plane. We are now very focused on providing AA a proposal for 200 aircraft. We’ve already described that length on this call why our proposal will provide AA the fastest and lowest cost solutions, now and in the future, based on 2Ku’s open architecture and the other advantages of working with Gogo. And so that's we can say about American.”

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