Leadership in Aviation Business - a conversation with Sergio Aguirre, Gogo Business Aviation

Well first, I agree with your definition in terms of all these things coming together to make a good leader. But I always like to start off with the difference between management and leadership. Management tends to be a position; leadership is more a style. It doesn't matter what your title is in a company, anybody can be a leader in an organization. I would say that leadership is management, you can teach leadership, you can coach, but you can't necessarily... it's a little bit harder. There's a lot of personal things. But from my perspective, what I liked about your definition is that as I think through my career working at Gulfstream, well first I was in the Air Force and that is a very large organization and that has its own ways. An individual sometimes feels very limited in your ability to influence that, but the reality is that even in the Department of Defense, in the Air Force, individuals do have the ability to influence their surroundings and how you approach your work. So that is the beginning of leadership: your attitude. But then going to Gulfstream in a large corporate organization, at least the largest I had been at, you deal with how do you influence people, not manipulate, influence them, motivate them, and influence them without a title. Because there are so many jobs out there where you don't have a title. Product managers, program managers, a lot of organizations have a matrix and they're not the boss, but yet they're accountable and responsible for making something happen. So they can't order somebody to do something, they have to influence them. That's leadership. Working at Gulfstream showed me a lot of that, whether I was working on the floor as an A&P mechanic or in more of an account management role. But then I'd say where I really flourished cross-functionally and got a lot of experience was going to work for startups. Because at a startup, there is no real... the company doesn't have job descriptions that you fit into. The company writes your job description or doesn't even write it down. You start doing a job based on your skills. So what happens is that if somebody needs to do a FedEx run, you do the FedEx work. If somebody needs to do packaging and shipping and receiving, you do that. If somebody needs to sweep the floor, you sweep the floor. So you end up doing jobs that you would not do at a large company like Boeing or Airbus. You help out any part that needs help. So as you acquire all of these experiences and get into leadership roles within a company, as long as you don't forget what you've learned and you use those, I think it's the most effective.

Well, it occurred to me after last night's discussion that I've always said that when I worked at Gulfstream was my favorite job. But as I reflected more on that, I think one of the reasons why I think back so fondly at Gulfstream is because I was close to the aircraft. I was working on the aircraft. And I have to say that as much as I love the other parts and other places, the jobs I've done were a little bit away from the aircraft. It wasn't ground zero anymore. So Gulfstream, my job at Gulfstream holds a special place because that was the last time I was actually working on the aircraft versus providing avionics, communications, and other entertainment systems. So everyone at Embry-Riddle understands that being close to the aircraft makes a difference.

Yeah, because we're in aviation. Sustainability for Gogo, the reality is if you look at Gogo and you look at our footprint, we really don't have an issue with environmental issues. But that doesn't mean we're not affected right now by the issues going on with sustainability and the importance that it has for our industry, because our industry is under attack right now. Last year we had an aircraft in Switzerland at a trade show and there were demonstrators that came on and chained themselves to the landing gear. They were protesting the use of aviation fuels and our carbon footprint as an industry. So even though Gogo has a very small carbon footprint as an industry, we're under attack. So me personally, I'm very active in it and I recognize that as an industry, not only do we have to do a better job communicating our position, but we also have to change things. It's not just 'no, no, no, we're okay.' We need to tell the world what we do well, what are the benefits of it, but also change. Those changes have to do with minimizing our carbon footprint with alternative fuels and some of the technologies. So even though Gogo is not impacted directly as an industry, we are very much impacted. Right now, general aviation is at biggest threat because we still use leaded fuel. People don't consider the fact that the air ambulance, the first responders, the charities, all of that is general aviation. So we need to communicate that to people and talk about the positive impact we have on jobs, on the economy, but equally hard work at minimizing our carbon footprint. It's part of the future. I don't know if that answers your question.

It's interesting because about two years ago we hired an outside consultant and I said, 'You know what, most people don't know about Gogo is that in addition to our aviation side, we also deploy and manage a network.' That means that all these cell towers you see, we have about 250 of those across the United States and Canada to provide our cell network. Most of ours are in remote areas. So we have Gogo people that are literally going up into the mountains to work on these, to deploy them, to fix them, or when you have hurricanes down here, we have first responders that come in when everything is still shut down to make sure that we have adequate coverage. So our people are confronted with wildlife, storms, falls from the tower. So that's why I said no, I don't want an outside group, I want a Gogo responsible person for both safety and regulatory things. She just gave me a briefing last week on all safety issues. I'm happy to say that even before she came on board, we have a very, very strong safety culture. The group that has the best safety record are the guys and gals running up and down those towers up in the mountains. Our biggest issue right now is paper cuts and slips from the ice. But it's something we take very seriously. Luckily, we haven't had any very serious events. Our field service engineers and technicians, they're out on the aircraft helping flight departments and OEMs troubleshoot, and they're working on the aircraft. So there's a high degree of emphasis there around being safe around an aircraft. I'm probably not the only person that's banged my head on the trailing edge of a flap, but it's a real risk.

It's amazing how it's changed. When I started working in aviation communication, it really was about work and productivity. That's it. At first, it was just a phone call, just staying in touch with the ground. Then with the onset of higher speeds, we were able to do email. It was always just about that. But now communication is not about work. It really is about life, entertainment, staying connected. It's also about more efficient and safer operation of the aircraft in flight. Much of the communications that we do now also provide the flight crews with advisory type data and information. Especially in the older aircraft, they can get more accurate, more reliable, and more current weather information from the internet than they can from some of the older narrowband systems in the aircraft. So it's quite important. We get a lot of feedback from different things that people use the internet for, and it does touch people's lives to make it better. Simple things like one executive told me she loves our system because now when she's on the road, she can call her kids at home and say good night. That's not something we thought about when we were thinking about technology, but it's how it impacts people's lives. Another individual who owns his own aircraft, a very successful businessman, spoke so passionately about our product that I wanted to hire him for our marketing organization. He described it as a businessman and entrepreneur who has to fly all over the western United States. The last thing he wants to do when he gets home on Friday night is catch up on email and phone calls to end off the week. Having a communication system on board allows him to be done by the time he gets home, so he's with the family. So it not only has an entertainment and work environment, but there's a really big benefit to your quality of life and to the safety of operation of the aircraft, which I'm very proud of.

That's one of the reasons why we've continued to invest. Over the last past two and a half years and counting, including what we're going to invest this year, Gogo will invest about $300 million in that 5G technology and on the new technologies coming out, which is the low Earth orbit satellites and electronically steered antennas. It's a tremendous investment because no matter what you do, applications and user profiles and the internet continue to demand more and more throughput. I'll give you an example. All the background services that Google and Apple do for positioning or whatever on your phone, when that started, we noticed that it was using one third of the capacity in the aircraft. The customers didn't even know it was being used. Then when you start getting into cloud-based storage and you decide to sync your computer to the cloud and upload all those files, that all happens in the background. So if a company wants to be successful in inflight connectivity, you have to continue to invest. That's why we've invested about $300 million by the end of this year in both satellite and 5G technology to the ground.

Well, kind of like what I was talking about, but I'll give you an example. That investment I'm referring to is one of the ways. We've done two things from an aircraft technology standpoint. Back in about 2017, we decided... I know that you've probably seen that aviation is usually about 7 to 10 years behind technology, and a lot of that is for good reason. We want to use technology that's very stable, especially when you're talking about flight critical issues. Internet's not that. So there were two things going on. In business aviation and even in commercial aviation, typically the way technology was deployed was you would build a radio to communicate on certain frequencies, get that installed in the aircraft, and when something new came out, you had to take that system out, remove the hardware, change the wiring, change the antennas, and it was a brand new system. We thought the first thing we wanted to do is stop that and put something in the aircraft that would allow us to add technology without having to do a complete rip and replace. So we came up with a software-hardware platform that has been very successful. We call it the advanced platform. It's a software-based system that allows us to do just that. So when a Gogo customer decides they want to add 5G, they don't have to replace boxes or put new wiring. It's a software upgrade. We have to put new antennas because there are new frequencies allocated, but it's less disruptive. You go from a four-week downtime to a three-day to a week downtime, which means real cost savings in installation. Plus, people don't buy airplanes for them to sit on the ground. So from an architecture standpoint, we did that in 2017 and have been progressing. We build everything on this advanced platform. But the other thing that I think is going to solve the problem in a very positive way is having systems that have capacity and a lot longer legs in terms of usefulness in terms of bandwidth and capacity. 5G and low Earth orbiting satellites do that. They both provide much greater capacity into the aircraft at a much lower bit cost or megabyte cost. That allows people to actually do a lot more for either the same or a lower cost. It's very similar to what's going on in aviation right now to when laptops first came out. Processing power was doubling constantly. You went from an 8080 computer to a 286, 486, and then Pentium chips. Every time you went and bought one, it was about the same price as the older one, but you were getting a lot more capacity. That's the phase that airborne communication is in right now. Once we get these LEO networks deployed and operational and 5G out there, you'll start seeing the upgrade costs go down, data consumption going up, but the cost going down in real terms, not just at the megabyte level but at the monthly cost to the flight department as well. It's very exciting right now. LEO technologies, everybody's heard of Starlink, but there's another network out there that we use called OneWeb, which was actually the first one, and Amazon's launching another one. So there's going to be so much capacity for ground-based and aviation. But those satellites now... I'm going to geek out on you a little bit here. A geosynchronous satellite, which is what aviation has always used for the past 20 some odd years, is a satellite that costs about between two and five billion dollars. They launch three satellites to cover the whole world, and those satellites stay up from anywhere from 15 to 20 years. LEO technology has a life of about five to seven years, maybe they'll get 10 years out of it once they figure out fuel burn, but let's call it seven years right now. So that means those satellites are going to be replaced every five to seven years, which means they're not going to have to wait 20 years for new technology. Satellite technology will continue to improve, and the efficiencies will continue to improve. The same with the antenna. These electronically steered antennas have no movable parts, which for an aircraft is great. They've existed for a long time, but really the military was the only user because it was very expensive, very heavy, and had very high power consumption. The technology has broken through, and now we have systems that we can afford to put on a corporate business jet. But that technology is relatively new too. So between the evolution of satellite technology with these new LEOs and the electronically steered antenna, those technologies will change. The advanced platform doesn't change; we just add new software to take advantage of the new RF modulation. Sorry, I'll stop there.

Sorry. It allows you to maintain your growth and obsolescence. The customers are happier because their system is continually improving without them having to put the aircraft out for maintenance or new certifications. Very important. So we're on the verge of that.

Well, it's funny because I tell people that I'm accountable for everything but responsible for nothing. That goes back to the point of leadership and being able to influence people. When you have a team of people that are really subject matter experts in supply chain, finance, marketing, and engineering, you need to listen to them. But having worked at all those different places and done everything from fuel tank inspections, return aircraft to service, calibrate altimeters, on the business side dealing with customers as an account manager, dealing with introduction of new technology and understanding the impact to your schedules with certification, you get all of this knowledge. It allows you to understand what those subject matter experts are telling you, maybe not to the level that they have it, but you have a good rounded understanding of the complete operations from shipping and receiving all the way to warranty and everything in between. When you take all that experience and use it wisely, you gain your team's trust. But the other thing it does is that there are certain things that only experience and time give you. It's referred to as wisdom or knowledge or battle scars. Sometimes it gives you enough confidence to look at a subject matter expert and though you may have done it different if it was you, you yield to them because you have confidence and you know enough about what they're doing that you trust them. So it really does help day to day. And I like messing with the certification people because I did that for a while, so they don't expect the president of the company to know anything about certification. I start throwing out a paragraph here and paragraph there, and all of a sudden they're like, 'How come he knows that?' So that's the fun part of it. But yeah, it's all very beneficial if you use it right.

That is the most important thing you can do. I tell people, Gogo, Embry-Riddle, Gulfstream, Boeing, those are pieces of paper. What makes a company and gives a company a personality and a culture is the people. You have to start with a good team. It's the most important thing.

I think the Air Force did a couple things for me. First of all, I was like most people that joined the military, I was pretty young, so it was a rite of passage to adulthood if you will. But I think one of the things that it helped instill in me was a work ethic, a structure. Sometimes you're asked to do things that you don't understand why, and you just have to do them. When you're younger, that's not always easy. You want to understand why, and sometimes there's not time to explain why, you just have to do it. So I think I would say work ethic, respect for the chain of command. I'm a big advocate for the chain of command, which is not the same as hierarchy. Communication is what the chain of command is all about, respecting people's rights and duties and responsibilities. You can't hold somebody accountable if you don't let them make the decision. I think the military taught me a lot of that.

First, it was a really good basis for understanding all the systems around the airplane. What I love about the A&P, and this is if you talk to people from other parts of the world where they have different systems, they view this as a weak link in our system. What I mean by that is that an A&P mechanic is authorized to do a lot. My first job was as a sheet metal guy, structure guy, big hammer, rivets, a lot of banging. But an A&P mechanic needs to know structures, needs to be able to work on hydraulic systems, electrical systems, avionics, communication. That's a lot. From a career standpoint, I would encourage everybody to get an A&P license no matter what you're doing, because it teaches you the entire aircraft. So when you're talking to a pilot or when you're out in the field working, there are specialists, and thank God because you probably don't really want me doing too many altimeter calibrations. But theoretically, I was approved to sign them off. So to me, it's the general understanding of the aircraft. It is the best overall. From there, you need to go into specialize so that you don't hurt somebody.

I'll tell you something interesting about aviation, business aviation in particular. Worldwide, by 2030, there will be 40,000 business aircraft flying worldwide. 75 to 80% of those operate in and out of North America. Today in North America, we have about, depending on whether you include turboprops or not, about 25,000. Of those 25,000 aircraft, only one third have a broadband system on board. Worldwide, only about 10 to 15% of aircraft have a broadband solution. Many of the aircraft have communication systems on there, but they're communication systems that are literally measuring kilobits, not megabytes, in terms of capacity. So we have this goal of capturing 50% of all of those aircraft worldwide. One of the things that we've done is satellite technology has usually been reserved for only the largest, most expensive transatlantic, transpacific aircraft. A broadband system on those aircraft historically cost about a million dollars to install and in the area between $10,000 to $40,000 a month for internet connectivity. What Gogo has done successfully from the very beginning, from when we started 30 years ago, is taking a situation like that and breaking the model 100%, breaking the technology and the economic model. Most people know Gogo because of our air-to-ground system. Our satellite system, which we refer to as Galileo, we worked with two very well-known companies: OneWeb, which has a satellite constellation of lower orbit satellites, and Hughes Electronics. We did something very different. Typically, when you design a communication system for an aircraft, you go to the network and ask for their specifications, then you design your antenna and your radio around those specifications. I said we're not going to do that again because every time you do that, you end up with something the size of a very large desk weighing hundreds of pounds which uses a lot of power. So I said no, I want to target an antenna that I know has been successfully installed on every single business jet. We found a form factor called an intermediate gain antenna. Textron installs them on everything from a CJ1 on up. So there's no size limitation. I said this is the size of antenna we need to design an antenna that will work on this constellation. We went to them and said we want to work with you on this, and they said no, it's not big enough. I said this is the key. Then we found Hughes. So what we did is we designed, Hughes really is the key in that electronically steered array antenna technology. We sat down with them and Hughes, and we all jointly worked on how to build an antenna this size. The reality is that Hughes changed some of their technology, OneWeb changed their architecture to accommodate our antenna. So now we have an antenna that will be certifying this year that will fit on any size business jet. Our cost, which is still going to sound ridiculous to you, we are selling that antenna for about $170,000. So installed, you're going to be talking about $300,000. But compare that to a million dollars. Our maximum monthly fee is going to be about $10,000 for unlimited, and most flight departments will pay probably in the area of $5,000. So from $40,000 to $10,000 for unlimited, with normal people using $5,000 to $10,000. So we're going to be able to install it on any aircraft around the world. That's why we think we're going to get to 50% of that unused population worldwide by 2030, with a Gogo system whether it's 5G or satellite depending on where they're at.

In aviation, I consider aviation to be kind of like one of those professions where what we do really does matter on lives. So to me, you have to be proficient at what you're doing because safety is involved, people's lives are in your hands. I put it up there in terms of the seriousness of our jobs as that of a brain surgeon or doctor because lives are at stake. So proficiency is table stakes. But I think that the two things that are not either taught at school or that are extremely valuable and essential are two things, and they're quite simple from a leadership standpoint. The most important thing, and I don't know that you can teach this in a college setting, is humility. Humility is the most important quality in a leader because you have to be humble enough to know that there are smarter people in the room that you have to yield to. That is really hard to do when you're convinced you're right and they're wrong. But you have to ask yourself, these are three people that are arguing against me that are very intelligent, and am I really smarter than these three people? It takes humility to yield to that. I used to think that Steve Jobs was an arrogant man until I found out that he went and hired somebody to teach him how to build a store. He literally hired an executive from a store before he created the Apple Store to walk him through malls and show him how to set up stores. I thought to myself, I don't think I would have been that humble. I think I've been to plenty malls, I know how a store works, I could set up a store. But as arrogant as he may have been perceived, as strong-willed as he was, he had enough humility to say I don't know, there is an art to how to set up a store and how to do this right. So humility is one. The other thing, and people at work know this, I have something written on my whiteboard and I write it in my notebook for every day. I start off by saying I am going to be positive, constructive, humble, and happy. So what is not taught is this attitude of your ability to view things in a positive light and be proactive. Most of the time when a problem arises, we all go negative. We start to come up with everything that's going to go wrong, and everybody starts going down that rabbit hole. But something that's not taught in school, and I don't know that it can be, but to be aware of it as a student, as an individual, to take a step back and ask the question differently. Instead of saying why can't we do something, ask yourself how can we do something. When you get people talking about how something could be possible, you will see a change both in your thinking and in your attitude. You will become a more positive person because so many times there is a viable solution. Not always, but to me, having a positive attitude and having a willing spirit to do whatever job there is are key. Couple that, and that'll be the difference between when you go into the workforce. There will be plenty of other smart people there, but not all of them, and very few of them take this attitude of 'yeah, send me, I can do it' or 'let me figure out how to do it.' So having a positive, constructive attitude in a work environment.

Shut up and listen more.

I would love to play a musical instrument. I admire people that play musical instruments, and I forced all my kids to do it. But there's something about music to me that is just... have you ever been in a bad mood and you put on the radio or a CD or whatever your Apple, and by the time you get to wherever you're going, the song has got you in a happy mood? It's such a great thing. So I would love to play an instrument.

Well, I spend, even though I live in Colorado, I spend most of my time either in the mountains or on the beach because I raised my kids in California. I typically will walk anywhere from four to 10 miles on the weekend on the beach. I just think it's a really good time. I like to go early in the morning, take my dog before the game wardens and all the park rangers show up. I let my dog run on the beach, so I am a rule breaker.

I have an Australian Shepherd. It's my fourth one. I love them. Her name is Montana. She's a big bone girl. I like her a lot. She's my puppy.

I have an aviation and a non-aviation answer for that. My non-aviation answer is my grandfather. I am the... my mother is the youngest of 14. She was born in Central America, Nicaragua. I'm the youngest of 10. I never met her father. He died when she was very, very young. He was born in the late 1800s. My grandfather was an English gentleman who decided to go to Nicaragua, which is not everybody's first place on the map, at the turn of the century, the 1900 turn of the century, to go start a coffee farm in a place called Matagalpa, which is not even that well known today, let alone then. So I would love to figure out what was going through his mind. How do you go... I don't know where he was from in England, but he went down there and started a coffee farm. He ended up marrying a local girl, and those are my grandparents. So I would love to figure out what his story was. Was he running from the law? I don't know. But that's my non-aviation one. From an aviation one, I've always loved the underdogs. I have a great admiration for people who have always been told no and never accepted no. When I think about some of the pioneers in aviation that were told they couldn't fly because they were a woman or because of their race, Bessie Coleman, tremendous. Or people like that. So I think somebody like Bessie Coleman. And then I always get the other Betty's name wrong. She was a local girl from here, Betty Skelton. What I like about her, she was in the 50s. She won the US Acrobatics Awards three years in a row in the 40s. She always flew barefooted. When she couldn't do that anymore, she had kind of done everything she wanted to do in aviation. She came from an aviation family, her family had FBOs here. Then she decided to get into car racing. Because she was a woman, they wouldn't allow her to race. But because of her acrobatic experience and she was a very well-known personality, she used to drive cars barefooted too. She would do it in June dresses. She wanted to race cars, and they wouldn't let her. So you know what she did? She broke the speed record just to prove that she could do it. She ended up becoming an executive, a marketing executive for GE and for Ford. She was the pace car driver. People like that, you can tell them no all you want, they're just going to still do what they feel is right. So I love those type of stories.

My wife and I are very active and we volunteer. I do probably about 5 to 10 hours a week where I volunteer. My wife does it like 50 hours a week. We focus on Bible education, and we teach people the Bible. To me, that is the charity that we're most involved with. I'm a big proponent of... I heard a quote from a very successful man, and they were asking him what advice he gives to people. He said, 'Pick a moral compass. I don't care what religion it is, but pick something.' Because when you have a moral compass, regardless of what religion it might be or what drives your moral compass, it gives you an anchor so that you make decisions and you have standards based on that belief versus the influences that you're going to get from others. In business, that's proven very important to me because when you get into the business environment, you have to make decisions, and sometimes there's pressure to make a commercial decision or from an aircraft standpoint, not to ground that aircraft. You have to have a very strong moral compass before you are confronted with that decision. For me personally, it's my belief in a God. So that's what I do.

I'll first tell you that I hate being a public company. We're at the point in time in our company where we really don't need to be a public company. I would love to see Gogo come off of the exchange. Being a public company is a very useful tool when it's used correctly. Here's an example of how becoming a public company is the right choice: when you have an idea or you have access to technology that requires a greater level of investment than you have access to capital, then you can go out to the markets and say, 'Here's my idea, please invest in it.' That's how you generate additional money to fund those projects. So there is a very legitimate role for a public company. Gogo, those $300 million that we just invested, we self-funded that. We don't need access to the capital markets. We did in the past, but we don't today. Part of the agreement I have with my boss is that he is responsible for the board of directors and for the street, which includes the analysts, and I take care of the business operations and the business aviation marketplace. So thankfully, I don't have to be involved directly with it. But I can tell you that we are very fortunate. The two largest owners of equity in our company, about 60% of our company is owned by two firms, and they're family-owned firms or private-owned firms. One of my bosses has owned 30% of the company for 27 years, so he's not a quick turn and burn type guy. He has seen the growth, he understands the roadmap, and he's very comfortable with not yielding to the pressures of quarter-to-quarter earnings. The other entity that owns 30% of the company has multiple holdings in business aviation, so they understand business aviation, and they too are very comfortable and convinced about our growth. What they do with the analysts is they really try to educate them. We give them a five-year projection of revenue, EBITDA, units online, and all the other key metrics, and we explain it to them. We spend a lot of time with them. That allows us to weather those quarter-to-quarter issues. But you have to be very deliberate about educating the analysts so that they understand where you're going and why. No surprises.

Sure. I was working at Gulfstream, and one day my boss, the general manager, calls me into his office and he goes, 'Hey, I understand we had an issue with this aircraft and that you took care of it, you did X, Y, and Z.' I go, 'Yeah.' He says, 'Well, why didn't you tell me about it?' I was a little offended, like what do you mean why didn't I tell you? It's my job. I'm not going to come ask you how to do my job. I didn't say that part, but I just said, 'It's my job, right?' But in my mind, that's what I was thinking. He goes, 'No, and that's why you're really good at your job, because you do it and you do a good job and you just handle things. But I would like to ask you for a favor. Anytime you're making a decision that can get me fired, would you please tell me about it?' So I've used that to this day. Yes, we have a level of independence, you're expected to do your job, but if the decision you're getting ready to make can get your boss fired, you better tell them. I think it's a pretty good rule.

I would just say congratulations on your career choice. Aviation is a phenomenal industry. I once made a mistake of thinking I was going to get out of this industry. I was flying back from Europe and I had two connections to get all the way to the West Coast. In both connections, walking through the airport, I ran across people that I had worked with in the industry that were long lost friends. I have friends all around the world. I don't think there's a country I can't go to where I won't be invited to somebody's home for dinner. It is a tremendously beautiful and impactful industry. Regretfully, there are not enough of you. We need more people coming into this industry. So congratulations, I'm very happy. Stay to it. I was so happy to meet Rafael who is in finance because the one thing I tell people is at Gogo, we don't just have pilots and A&Ps. We've got software engineers, we've got finance people, we've got logistics people. It takes everybody. The one thing that is true is that eventually they all developed or started working there because they have a passion for aviation. So aviation is not just about flying and fixing airplanes. There is so much to do in it, both on the commercial side and account management. So it's a great career. Encourage all your friends to take a look at it.

Thank you.