Craig Foster & Summer Staninski (published Oct 2024)
In a recent blog, we examined the collapse of SmartSky Networks and speculated on how other aviation players might react to the fast-advancing Starlink. Now, just weeks later, long-time SmartSky adversary, Gogo, has announced its acquisition of Satcom Direct, confirming predictions of further industry consolidation. In this follow-up piece, we examine the motivations for the $375 million deal, as well as the ramifications for the wider industry.
2 Become 1
The move immediately creates an entity much better positioned to counter Starlink’s rapid rise, which is now posing an existential threat to the status quo. Instead of offering two almost indistinguishable OneWeb services through separate value-added resellers (VARs), the newly fortified Gogo will present a unified LEO solution. By joining forces, they avoid duplicating efforts, are able to streamline resources, and can focus on delivering a single, more competitive product – significantly enhancing their ability to stand up to Starlink’s relentless onslaught.
Whilst it might sound like hyperbole to describe the arrival of Elon Musk’s company in this way, its recent impact cannot be understated. In winning the business of United Airlines and Air France and, in the process, more than doubling the number of aircraft under contract to 2,500, Starlink isn’t just knocking on the door – it has kicked the thing clean off its hinges. About a fifth of those tails are business jets, and though only a small number are equipped today, onlookers sense – much like an English bowler watching Steve Smith stroll up to the crease on day one of an Ashes test match – that the numbers are about to quickly pile up.
Gogo understands that simply going toe-to-toe with its principal antagonist won’t be enough, especially since Musk can reach into his deep pockets to continuously undercut other players with a LEO-only solution. In acquiring Satcom Direct, the Boulder-based bizav behemoth is betting big that a multi-orbit, multi-band strategy that combines air-to-ground (ATG), LEO, and GEO solutions will make it a formidable opponent. On the satellite side, this encompasses more than just OneWeb; it also includes L-, Ku-, and Ka-band services across different orbits. Satcom Direct brings its expertise as a leading distributor of SwiftBroadband (SBB), JetConneX (JX), and Intelsat’s Ku-band FlexExec solution, along with reselling Iridium Certus, just like Gogo.
A BizAv Behemoth
We estimate that the two companies account for around 18,000 in-flight connectivity terminals found on business jets and turboprops – a staggering 85% of the global total. Gogo alone covers all 7,000 North American tails equipped with ATG and has already placed an order for 2,000 shipsets of Galileo, its version of OneWeb. Satcom Direct supports more than 1,000 JX-equipped aircraft and more than 100 with FlexExec. Additionally, Satcom Direct has likely secured a not insignificant number of customers for its own OneWeb solution, although figures remain undisclosed. Together, the companies hold a 68% share of SBB-equipped aircraft, and their combined reach will extend to some 7,500 tails with Iridium connectivity.
Gogo-Satcom Direct BizAv IFC Terminal Installed Base – 2023
Source: Valour Consultancy
What Becomes of the Broken VAR-ted?
For Iridium, the tie-up presents both opportunities and risks. On one hand, the consolidation of its two largest VARs under one entity creates a more powerful distribution channel that could help it gain a stronger foothold in the market, thanks to streamlined sales and support network.
On the other hand, with so much of its Certus distribution now dependent on a single company, Iridium becomes vulnerable to strategic shifts, especially if Gogo-Satcom Direct prioritises competing solutions. While the merger might foster closer collaboration, it could also reduce Iridium’s negotiating leverage and increase risks to its long-term market position.
Things get particularly interesting when considering how Viasat might react given its turbulent history with Gogo. The two weren’t always at odds. Back in 2012, Gogo became a VAR for Global Xpress (GX), the commercial aviation equivalent of JX, and three years before that, Gogo – then Aircell – added SBB to its portfolio. However, relations soured in 2015 when Gogo launched its 2Ku solution, sparking a public dispute that re-ignited the tired old Ku- versus Ka-band debate.
The fallout saw Gogo exit its role as a reseller for SBB and JX, leaving Satcom Direct as the largest distributor of these services within the Inmarsat ecosystem. Now, with Gogo’s acquisition of Satcom Direct, the dynamics shift once again. Satcom Direct’s stranglehold on SBB and JX is now paired with Gogo’s focus on Galileo, creating strategic tension for Viasat. The satellite operator, which bought Inmarsat in 2023, now has to contend with its largest business aviation VAR being absorbed by a rival that is investing heavily in a competing solution. Indeed, Gogo has already committed more than $50 million over four years to purchase OneWeb capacity. That’s on top of a $170 million hardware contract with Hughes Network Systems.
In some ways, the situation parallels Inmarsat’s earlier decision in commercial aviation to go direct-to-market. A decision which marginalised some of its VARs and led to the exit of Collins Aerospace and SITA from the cabin connectivity game. Now, the question is whether Viasat might consider a similar direct approach in business aviation, potentially reshaping the market and affecting how Viasat’s current customers, previously served through Satcom Direct, will be supported. However, for now, Satcom Direct is still a key partner, and it remains to be seen what Gogo’s approach will be. What’s certain is that Viasat’s leadership will be closely analysing this development, mapping out various scenarios that could shape the firm’s future direction.
The Antenna Dilemma
Gogo is set to launch Galileo in Q1 2025, in line with the OneWeb network going live. The company has already begun shipping Hughes half-duplex (HDX) hardware to light jet customers, with a full-duplex (FDX) version expected for heavier jets in the first half of next year.
This brings into question the fate of Satcom Direct’s OneWeb-capable electronically steered antennas (ESAs). The company is collaborating with QEST, Stellar Blu Solutions and Gilat Satellite Networks on separate designs to strengthen its Plane Simple lineup. Whether Gogo will continue these relationships post-acquisition is unclear, but having five different terminals optimised for a single network does seem excessive and counter to the pursuit of economies of scale typically achieved with standardised production and shared components.
With Gogo announcing plans to fully-embrace a multi-orbit offering, we can likely expect to see at least one GEO and LEO capable alternative survive any cull. However, it’s doubtful the company will work with Gilat again anytime soon. The firm has a chequered past with Gogo, prematurely announcing back in 2019 that it would supply tail-mount antennas (TMAs) to a “Tier-1 business aviation service provider.” While stopping short of naming names, let’s just say it didn’t take a certain resident of 221B Baker Street to figure out who Gilat was referring to. And let’s also just say that Gogo was less than pleased, putting an end to any TMA-based ambitions and instead, shifting focus to the development of Galileo.
Let’s Talk About Flex
Sticking with the subject of tail-mount antennas (TMAs), we might also question the future of two services that rely on this type of hardware. Given Gogo’s pivot away from such solutions, it’s arguable that FlexExec may find itself on the chopping block – especially considering its already uncertain future following SES’s acquisition of Intelsat, which brought with it a direct competitor in the form of LuxStream. Despite being on the market for several years, neither solution has gained significant traction, and the lower CAPEX and OPEX associated with LEO solutions may be more appealing to their target market – operators of older aircraft with lower hull values, where more “premium” services like JX often prove too costly.
More Multi-Orbit Deals on the Way?
Whether LEO solutions can thrive as standalone offerings or ultimately become bundled with GEO networks is a question for another time. However, with Ka-band LEO from Amazon Kuiper and Telesat Lightspeed on the horizon – and Viasat seeking a natural LEO partner – we likely haven’t seen the last of multi-orbit-driven M&A activity in this industry.
In our forthcoming report, “The Market for IFC in Business Aviation“, we offer a 10-year outlook on all in-flight connectivity solutions. In it, we reveal that the NGSO category (which combines all high-capacity LEO and MEO options) is expected to experience a remarkable 59.8% CAGR over this timeframe. Exciting times lie ahead!
