Yesterday, Delta Airlines announced that it has launched inflight internet access on a few east-coast shuttle flights with AirCell's GoGo Inflight Wi-Fi Service. According to the linked article below, Delta is planning on completing the roll out of this service to its entire fleet, including Northwest, by sometime in 2010. It is quite the commitment, including some rewiring of a plane. 

http://www.washingtonpost.com/wp-dyn/content/article/2008/12/15/AR2008121500869.html

The other beneficiary to this commitment by Delta Airlines is Guestlogix (GXI.V). According to the release, passengers are required to pay $9.95 for unlimited access on flights less than 3 hours, and $12.95 on flights more than 3 hours. According to Management at Guestlogix, its Mobile Virtual Store will be used by Delta to execute the financial transaction and invoke access.

Guestlogix has deployed its onboard retail network with Delta Airlines, American Airlines, Southwest Airlines, GermanWings, AirAsia X, and Saudi Airlines among others and receives a percentage transaction fee for every onboard retail transaction. It has a backlog that includes airlines such as Westjet, US Air, British Airways, and Ryanair among others. Guestlogix has integrated its retail systems with Thales onboard entertainment systems, and has a distribution partnership with logistics monster LSG Air Chefs.

I think that there are a couple key points for consideration. First, the increased transaction volumes and higher valued transactions should help to increase high margin revenue for GXI beginning in 2009. Second, the integration between AirCell and Guestlogix is interesting. Both Companies are heading towards dominance in their respective niches, which likely creates some future partnership synergies.

Guestlogix continues to be a high growth story defined by rate at which it can roll-out its platform to airlines and rail carriers worldwide, then by the scope of merchandise that it can transactthrough its platform. Last quarter, Management claimed that its solution was available on flights serving nearly 220 million passenger trips worldwide, and that it had nearly 700 million flights under contract, inferring that well over 400 million passengers trips were still to be rolled out.

There continue to be timing risks on deployments and I expect that the Company should perform to approximately $20 million to $22 million for 2009, up from a forecasted $11 million this fiscal year. I think that we may see the Company post a breakeven quarter for Q4 2008, with consistent earnings growth throughout 2009. Investors could see between $0.07 and $0.10 EPS next year, depending on the timing of roll-outs and the cost of equipment lease facilities. Regardless, GXI.V remains a solid early stage growth Company with a chance to become dominant in a niche. Although there are 7 to 9 analysts that cover the story, investors do not seem to care because the stock has been trading at $0.50 range for an extended period of time with little volume.

I do not own shares in GXI.V, nor do I receive compensation in any way from the Company.

Ron Shuttleworth
RES Free Thinking