Specialist
Former senior executive at Global Eagle
Agenda
- Operating environments for in-flight connectivity (IFC) vendors – commercial and business aviation traffic expectations for the remainder of 2020 across geographies
- Cost structure analysis – fixed vs variable, material differences among key vendors Gogo (NASDAQ: GOGO), Global Eagle (NASDAQ: ENT) and ViaSat (NASDAQ: VSAT)
- Consolidation trends – various strategic optionality scenarios
Questions
1.
Could you give an overview of IFC [in-flight connectivity] vendors, the differences in their business models and any key trends or drivers in this market leading up to the coronavirus pandemic that you would encourage investors to monitor?
2.
How much white space do you believe remains in the total market opportunity for IFC vendors? Who do you think has the best growth prospects?
3.
Which white-space areas do you think could have lower ARPA [average revenue per account], such as servicing less developed countries or short-haul flights? How might this metric compare against players’ average revenue, given your comment that efficiency is as important in maximising revenues as market penetration?
4.
Could you outline the impact of the coronavirus pandemic on the in-flight connectivity industry, including your growth expectations for the remainder of 2020?
5.
You mentioned that Gogo historically had its installations subsidised. Do you expect that the market will not experience a reversion to subsidisation, given how airlines’ biggest challenge is foregone revenues from grounded aircraft?
6.
How close would you say the relation is between service and equipment revenues and airline traffic? How do differences in players’ service models affect this relation? Could a player such as Viasat experience a smaller decrease in revenues in the immediate term than Gogo?
7.
Can you elaborate on whether it is solely Global Eagle’s cash position or its diversified business model which gives it more resilience than competitors? It has interests in the media and content as well as maritime and government parts of this market. What other factors might help players’ weather the coronavirus pandemic across the industry?
8.
Are there any major differences in players’ supply chain partnerships? Can we dive deeper into that, given your emphasis on how risks differ between companies in this area?
9.
How could the impact of the coronavirus pandemic differ for Gogo due to its diversification via Bizjet? Gogo reported that this part of its business had not experienced significant headwinds in the company’s last earnings call. Why is that revenue stream not drying up due to decreases in airline traffic during the coronavirus pandemic?
10.
Could you outline fixed vs variable costs for IFC players? What do you expect management teams to be immediately focused on around optimisation and stripping out unnecessary spend?
11.
You mentioned that Gogo has likely been able to renegotiate contracts, given the 67% broadband pricing decrease it announced. Yet, the company’s management also said two-thirds of Gogo’s rest-of-world contracts are going to be up for renewal in the next three years. How could comms pricing be trending downwards across the industry? What impact does the way players’ purchase capacity – such as paying for blocks – have on their flexibility in cutting costs here?
12.
What strategic options do you think players could pursue in this market? Are there any roadblocks for Gogo and Global Eagle pairing up as opposed to Gogo and Viasat? How do you assess the need for industry consolidation?
13.
How do you think positive commentary on the long-term need for consolidation balances out with media uncertainty and balance sheet distress? What’s your base-case scenario for how the landscape evolves for suppliers? Who could be the winners and losers over the next few years?
14.
Do you have any closing remarks on in-flight connectivity? Is there anything we haven’t highlighted which you think we should?
