Gogo, a Chicago-based inflight internet provider to business aircraft and airline passengers, plans to furlough about 60% of its workforce and reduce pay for most other employees as part of a plan to reduce costs due to the impact of the COVID-19 pandemic.
Furloughs, effective May 4, will affect more than 600 employees across all three of Gogo’s business segments. The time and duration will depend upon the workload of individual departments, the company said April 21.
Pay cuts include a 30% reduction for Gogo’s CEO and a 20% reduction for executives, with cuts to “feather down” from there, it said. Gogo’s board of directors will also have a 30% cut in compensation.
About 40% of Gogo’s revenue is from the business aviation segment, which has experienced a sharp decline in flight activity during the breakout of the novel coronavirus. With the drop in flight frequency, requests to Gogo for one-month account suspensions have increased while new plan activations for April have dramatically decreased, it says.
The remaining 60% of its revenue comes from its two commercial airline segments. With passenger traffic on commercial airlines using Gogo’s connectivity service down 95% in April compared to a year ago, the company is projecting a 60-70% decline in sales for the month.
“The health and safety of our employees and customers is our first and most important priority, but the long-term health of our business is also a critical focus area,” said Oakleigh Thorne, Gogo president and CEO. “In March, we announced 16 levers that we can employ to dramatically lower our costs in order to ensure our long-term viability, and we believe we are implementing the appropriate measures to accomplish that goal.”
Besides the personnel actions, Gogo’s 16 levers includes renegotiating terms with suppliers, delaying aircraft equipment installations, deferring purchases of capital equipment, reducing marketing and travel expenses, eliminating nonessential purchases and other actions.
“Based on where the market is today, we believe these personnel actions are necessary,” Thorne said. “And if conditions worsen, we have additional levers to pull if needed.”
Gogo has also applied for an $81 million grant and $150 million loan under the CARES Act. If it receives the government assistance, it will modify the personnel actions to comply with the terms of the assistance.
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