Connected in thin air
Many business executives refuse to fly on charter jets that don’t have Wi-Fi and cellphone capability, according to John Wade, executive vice president and general manager of Aircell Business Aviation Services LLC in Broomfield.
“The reason people fly business aircraft is for the time efficiency, and for a business executive to be cut off from the Internet, is almost an anathema,” Wade said. “I think it has reached the tipping point. It’s as important on a business aircraft as the seats and the lavatory.”
Wade believes Aircell is poised to help. Aircell’s most popular product is Gogo Biz – an Internet connectivity system that works by linking wirelessly with cellphone towers on the ground. Aircell has installed more than 2,000 of the systems on business planes. The company, and parent Gogo Inc. in Itasca, Illinois, rolled out a cellphone talk and text service in 2013.
Wade’s sales pitch to charter jet owners and others: An owner faces a potential loss of $300,000 to $500,000 in revenue per year, if a jet can’t be rented out because it doesn’t have broadband capability.
The revenue estimate comes from an hourly rental rate of $4,000 to $8,000 per hour multiplied by the potential number of hours a charter jet might fly on an annual basis, Wade said.
Aircell’s equipment box and two hockey puck-size antennas sell for $60,000 to $100,000, with customers paying an additional sum to have the system installed. With Wade’s potential loss calculations, the Aircell system pays for itself in less than a year, he said.
Large market to tap
Only about 6,000 business jets – about one-third of the 18,000 business jets registered in the United States – have broadband connectivity installed, Wade said. That means the sky’s the limit for Aircell’s growth in the next several years, he said. The cellphone talk and text service costs about $10,000 to install on a private plane, he said.
“We’re in the early days. At some point, the vast majority of business aircraft will have connectivity on board,” Wade said. “We have a long way to grow.”
Aircell, with 200 employees in Broomfield, is the business aviation division of Gogo Inc. (Nasdaq: GOGO), a company focused on selling inflight Internet and phone connectivity equipment for commercial jets. Aircell’s revenue was up 42 percent at $34.8 million for the quarter ended Sept. 30, because of a 37 percent increase in equipment revenue and a 51 percent increase in service revenue, according to a Gogo earnings statement.
Gogo Biz system hardware is made by Honeywell in New Jersey and shipped to Broomfield, where subcontract manufacturers do additional work on the product, Wade said, without giving specifics. It then goes through quality testing before being boxed up and sent to customers. Aircell received an exclusive FCC frequency license in 2006 to build the mobile broadband network for commercial and business planes.
The company has more than 200 ground-based towers in the United States, including Alaska, and soon will have service in parts of Canada, according to Tom Myers, a company spokesman. Gogo owns some of the towers and leases the rest.
Competition in wings
Parent company Gogo Inc. competes with some other companies in the commercial space, according to industry watchers. For example, Global Eagle Entertainment in Westlake, California, through subsidiary Row 44, sells a satellite-based system that Southwest Airlines uses for Internet connectivity. Gogo and Aircell also have a satellite-based system, available for sale, but it hasn’t been as popular as the ground-to-air system, Wade said.
Global Eagle Entertainment spokeswoman Karin Pellmann said she wasn’t aware of any direct competition for Aircell’s proprietary ground-to-air system, however.
“It’s such a young industry to begin with. There’s a lot of opportunity in the market,” Pellmann said.
Overall, Gogo Inc. is forecasting revenue between $395 million and $415 million for 2014, a 49 percent increase over 2013. Specific growth forecasts have not been announced for Aircell, although the company is growing rapidly, Wade said.
Because of the growth, Aircell plans to move into new digs in the Interlocken Advanced Technology Park sometime in the next two years. The company is expected to be the first tenant in the unoccupied EOS building in the Interlocken business park, taking 112,300 square feet of the 186,000-square-foot building.
City of Broomfield officials recently approved a $222,062 tax-incentive package that requires Aircell to have more than 150 employees. Gogo has more than 600 employees in total in Broomfield, Illinois and London.
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Connected in thin air