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The success of De-icing Modification Boosts Fleet Availability for Gogo Inc (NASDAQ:GOGO) Fleet

Gogo Inc (NASDAQ:GOGO) announced the success of the de-icing modifications aimed at curbing de-icing fluid contamination on the company’s 2Ku North American airplane.

Revised Adjusted EBITDA as a result

The modification’s success informed the company’s decision to revise its annual Adjusted EBITDA guidance from the previous $45 million to a more ambitious $60 million for 2018. The new adjusted EBITDA guidance takes into account the forecasted de-icing costs for the 4Q 2018.

Gogo reported that as of December 31, 2019, there were no records of 2Ku system degradation on aircraft that had undergone the de-icing modification thus saving the company from spending the allocated amount for subsequent de-icing operations.

In light of the Federal Aviation Administration statistics on airports that have experienced de-icing activity, Gogo approximates that in 2018 alone planes with the company’s de-icing modifications took over 5,000 de-iced flights. As of the end of 2018 over 675 planes, or rather 97% of the North American Fleet had been equipped with the de-icing modifications.

Typically a majority of the global de-icing activities are based in North America; however, Gogo will carry out the de-icing modification to existing 2Ku installations on international aircraft in line with every airline’s routine maintenance program. Upon the request of a particular airline, Gogo will include the de-icing modifications protocol to all the aircraft equipped with its proprietary 2Ku installations.

Improved Flight Availability

Aside from saving on de-icing costs, the recent de-icing modification raised fleet availability across the entire 2Ku fleet to about 98% for December as opposed to nearly 90% for the same period in the previous year.

Meanwhile, the company has issued a disclaimer warning that future results may not necessarily be the same as the company never experienced all potential weather and de-icing conditions.

The company’s President, John wade stated that “On December 11, 2018, we announced zero incidents of 2Ku degradation on aircraft installed with Gogo’s recent de-icing modifications and we are pleased to announce that this success extended through the end of 2018.”

Shares Jump before Losing Ground Later

As expected, the news on the adjusted EBITDA and the success of the company’s de-icing modification trials pushed up the company’s stock by about 16.8% during the Wednesday business day.

On the subsequent trading, session stock climbed 3.93% closing at $3.70. The shares opened the day with a price of $3.56 then traded to the day’s high of $3.76 before nose-diving to a low of $3.25 and later gaining ground to close at the above-mentioned price.

Source: Stockcharts.coms

A closer look indicates that the shares are trading close to its 52-week low of $2.64 as opposed to the 52-week high of $10.93. As of the Thursday’s market day, Gogo had a market valuation of $323.59 million.

Gogo’s Financials

Well, the Adjusted EBITDA is not even close to saving the company from loss-making. While profitability regarding the adjusted EBITDA is inarguable, it is unfortunate that the company is still in the ruins when it comes to net income.

In the first nine months of 2018 ending September, Gogo has reported a net loss of approximately $102.3 million and an even devastating free cash flow loss of $199 million.

For the Q3 2018, Gogo posted consolidated revenue of $217.3 million representing a YoY increase of 26%. Service revenue increased by 5% YoY to $160 million.

The company’s equipment revenue increased to $56.9 million from $19.5 million for the same period in 2017. It is, however, worth mentioning that Gogo’s net loss dipped 17% year over year to an impressive $37.7 million.

Among the notable activities that took place during the quarter include Cathay Pacific and air France launching commercial 2Ku service. Also, Gogo TV went live in five airlines including Delta Airlines and American Airlines.

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