Gogo Looking To Sell Commercial Aviation Division; Workforce Cuts Set
Inflight entertainment provider Gogo has begun talks to sell its commercial aviation (CA) business, president and CEO Oakleigh Thorne revealed on an Aug. 10 earnings call.
Formal talks to sell the CA business are in progress with a service provider, a satellite operator or an avionics company, although none were named, Thorne said.
COVID-19’s negative effects on the industry—especially commercial aviation—have “accelerated consolidation discussions as industry players look to emerge from the crisis with the strongest portfolio of assets they can to capture future industry growth,” Thorne said.
The move comes after the company reported a 2020 second-quarter (Q2) consolidated net loss of $86 million, widened from a net loss of $84 million in Q2 2019. Consolidated revenue of $96.6 million declined by 55% from Q2 2019 because of the impact of COVID-19 on demand for both domestic and international air travel.
Gogo’s Commercial Aviation-North American division posted total revenue of $30 million, down 72% from Q2 2019. Service revenue decreased to $25.5 million, down 74% from Q2 2019, because of lower average revenue per aircraft caused by the pandemic on North American air travel and, to a lesser extent, to the “full impact of American Airlines switching to the airline-directed model and the deinstallation of Gogo equipment from certain American Airlines aircraft during 2018 and the first half of 2019.”
Revenue for Gogo’s Commercial Aviation-Rest of World division was $12 million, down 67% from Q2 2019.
The company’s Business Aviation business fared much better in the second quarter, reporting a 23% year-over-year (YOY) decline in revenue to $54.6 million, driven by a drop in both service and equipment revenue caused by COVID-19. Service revenue decreased to $44 million, down 20% YOY.
“While COVID-19 has significantly impaired global commercial aviation travel and our results for the second quarter, we are encouraged by the strong recovery in business aviation as well as the beginnings of a recovery in global commercial aviation, which has continued into August,” Thorne said. “Going forward, we are focused on maintaining the strength of our franchise and realizing the value of CA through a potential sale of the division.”
In response to COVID-19, the company on Aug. 14 plans to initiate a reduction in force of 143 full-time positions, predominately in the CA business, which follows a four-month furlough of over 50% of the workforce, or more than 600 employees; and ongoing compensation reductions for nearly all personnel not impacted by the furlough, including 30% for the CEO and board of directors and 25% for the executive leadership team.