Some of the greatest business ideas get their inspiration at restaurants. Just look at Jimmy Ray. In 1991, he sketched on a napkin the concept for a telephone system to be used on aircraft. He felt so strongly about the idea that he eventually started Aircell, which became the only authorized company to use cellular frequencies according to FCC and FAA regulations.
Since then, Aircell has gone through lots of changes — not the least of which is its name, which now is Gogo — and it has become the world’s largest provider of in-flight Internet connectivity.
Nearly 1,200 commercial airplanes use the Gogo system. Some of Gogo’s customers include Delta Air Lines (NYSE:DAL), AMR Corp.‘s (NYSE:AMR) American Airlines, Virgin America and US Airways (NYSE:LCC). The company also has a thriving business with private plane operators like NetJets and Gulfstream.
Gogo likes to say its service is “everyone’s favorite part of flying.” Besides providing access to the Internet from laptops and Wi-Fi devices, it also offers entertainment options like television shows and movies. Passengers can even do some shopping at 30,000 feet.
A key asset for Gogo is its vast mobile network, which includes FCC spectrum and propriety systems of cell sites. The company also has software to help manage the bandwidth to make the Internet experience fast and reliable.
For the first nine months of 2011, Gogo posted revenues of $113.8 million, up 89% over the same period a year ago. While there was an operating loss of $26.5 million, it is down from $66.4 million last year.
For the long haul, Gogo’s prospects look bright. One trend is the emergence of the “connected lifestyle,” in which people want to be online at all times. Consider that a Gogo-commissioned survey reported that about 17% of its customers have changed their flight plans because no Internet access was available.
The airline industry constantly is looking for ways to boost revenues. Offering in-flight Internet access — and premium entertainment — seems like a smart route to take.
Tom Taulli runs the InvestorPlace blog “IPO Playbook,” a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of “All About Short Selling” and “All About Commodities.” Follow him on Twitter at @ttaulli. As of this writing, he did not own a position in any of the aforementioned stocks.