Gogo (NASDAQ: GOGO) has announced that it will furlough approximately 60% of its workforce and reduce compensation for most other employees effective May 4, the company said.
The action is part of a broad-based cost reduction plan due to the impact of COVID-19.
The furloughs will impact more than 600 employees across all three of Gogo´s business segments. The time and duration of those furloughs will vary based on workload in individual departments.
Salary reductions will begin at 30% for the CEO, then 20% for the executive leadership team, and feather down from there. In addition, Gogo´s Board of Directors has agreed to reduce their compensation by 30%. Certain types of employees, such as hourly workers, will not have their compensation reduced.
Approximately 60% of Gogo´s revenue comes from its two commercial airline segments. Passenger traffic on commercial airlines using Gogo´s service has declined 95% this month compared to the prior year, resulting in a projected 60-70% reduction in sales for the month of April.
The remaining 40% of Gogo´s revenue comes from its business aviation segment which has seen a sharp decrease in flight activity. Additionally, since many business aircraft are flying less frequently, there has been an increase in requests for one-month account suspensions and a dramatic decrease in new plan activations for the month of April.
In addition to personnel actions, the Gogo 16-lever plan includes, among other actions, renegotiating terms with suppliers, delaying aircraft equipment installations, deferring purchases of capital equipment, reducing marketing and travel expenses and eliminating non-essential spend.
Gogo announced today that it has applied for a USD 81 million grant and a USD 150 million loan under the recently enacted CARES Act. If Gogo receives government assistance, it will modify the personnel actions to comply with the terms of that assistance.
Prior to today´s announcement, Gogo has already implemented several cost-cutting measures related to personnel, including a hiring freeze, suspension of 2020 merit salary increases, and deferral of the CEO´s 2019 bonus.
Gogo had USD 216 million cash on hand as of the close of business on April 20, 2020, including USD 22 million drawn under its revolving credit facility.
Gogo is an Inflight Internet Company and a provider of broadband connectivity products and services for aviation.