Leaps of faith

Recent financials seem to disprove the adage that leap years are harbingers of bad luck, according to Alexander Preston 

We’re just days away from celebrating a leap year as February gets an extra day. Although a traditional date for women to propose to men, many local proverbs warn that such a year brings misfortune.

And so it seemed for Gogo, when earlier in the month American Airlines filed a declaratory judgment action against it, citing it considered a ‘competitor’s connectivity service to offer a material improvement over Gogo’s early generation air-to-ground service with respect to a portion of its fleet representing approximately 200 aircraft, out of the 900 Gogo equipped craft.

In response Gogo informed the US Securities and Exchange Commission that it intended to “submit a competing proposal to install our latest satellite technology – 2Ku – on this fleet. We believe that 2Ku is the best performing technology in the market and look forward to discussing our offer with American.” American later dismissed its lawsuit.

In a curt nod to the ongoing and public dispute, Gogo president and CEO Michael Small said in Gogo Inc’s. Fourth Quarter and Full Year 2015 Earnings Conference Call (25 February) “The movement is surprising given the rapidly changing technology and pricing environment in our industry, we value our partnership with American. We’re competing for the suites of business, we’ll deliver a 2Ku upgrade proposal that gives American option to get faster, cheaper open-ended technology onboard these aircrafts.

“We hope that when they wave a long range value of our service, they will join the other carriers that have already built a 2Ku backlog of more than 800 aircrafts.”

He then went on to allude to a new modem, the company will announce in the coming weeks, capable of handling 400Mbps, as well as the adoption of an open architecture platform, stating “We’re not gambling on a single closed system that ties us to a few satellites. Instead we are betting on an open architecture that will allow us to take advantage of whatever greater innovations the Googles, the OneWebs, SpaceXs, the SESs, and others will bring to the market.”

Small expects 75 2Ku planes to be flying this year, quadrupling that number in 2017.

Before handing over to Normal Smagley, executive vice president and CFO, Small admitted “the recent action by American validates what they have 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 decision. Our air-to-ground technology is still an engineering marvel that we will keep improving. I’m extremely excited about our 4G ATG service for business aviation and the prospectus 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 way for some of their aircrafts. That’s why we’ve added Ku satellite service to our portfolio and have 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 passé, they are risky. Speed, adaptability, access to new technologies – these are the differentiators to the future and Gogo now possesses them.”

Continuing the earnings theme, SES has announced its financial results for the year ended 31 December 2015. In recent days, the company has signed important agreements with Panasonic and Gogo to provide capacity for connectivity services. Panasonic Avionics has signed a long term contract for its highest bandwidth commitment to date of high-powered, HTS spot beam and wide beam Ku-band capacity, on the SES-14 and SES-15 satellites. Gogo has signed one of the largest satellite capacity deals ever struck in the aero market to meet growing demand for high-speed inflight connectivity on travel routes over the Americas, contracting spot beam and wide beam capacity aboard SES-14 and SES-15.

SES will launch seven new satellites between 2016 and end-2017. These seven satellites will increase available capacity by 180 net (36MHz) transponders, or 12% of current total available capacity, while capacity in the International segment will grow by 21%. Three of these satellites (SES-12, SES-14 and SES-15) will also carry a total of 36GHz of HTS capacity, which is equivalent to around 250 (36MHz) transponder equivalents.

As more companies report their full year 2015 earnings, with positive forward looking statements for 2016 and beyond, it may well be that the soothsayers are wrong. Leap years can be fortuitous.

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