American Airlines’ choice to split an order between ViaSat Inc. and Gogo Inc. for in-flight Wi-Fi services had a rough effect on Gogo.
The company’s stocks have tumbled the most in more than three months after the decision, which left unanswered the question of who will provide services for 400 aircraft.
American Airlines Group Inc. chose ViaSat for satellite-based connections on its upcoming Boeing Co. 737 Max fleet of roughly 100 jets; at the same time, Gogo’s new 2Ku service was selected for 134 Airbus Group SE A319s and A320s, according to Casey Norton, a spokesman for the airline.
It is also the company’s right to disrupt Gogo connections from 550 planes, including 150 that will soon be retired and won’t need the upgrades.
American Airlines has yet to decide which provider will be chosen for the remaining 400 planes as they switch from the current ground-based offerings to faster satellite systems.
Offering speedy internet for its customers in the air is quickly becoming the standard for airlines. In this all-connected era we live in, passengers want to remain connected even at flying altitudes, being able to chat through social media, and stream music.
This ability is often impaired by the frustrating malfunctions that come from being constrained to ground-based systems. So the rivalry between internet providers has increased significantly.
“Basically, American is telling Gogo, ‘You are going to have to compete with ViaSat,”’ explained Tim Farrar, founder of Telecom Media Finance Association in Menlo Park, California.
Gogo dropped 15 percent to $9.38 in New York, after a previous fall of 16 percent for the biggest intraday decline since February 16. Meanwhile, ViaSat rose 4.3 percent to $72.90.
“At the end of the day, worst-case scenarios are off the table, the downside is bracketed” to 550 planes at most; having Gogo’s 2Ku installing on 140 planes will also allow the company to compete head-to-head with ViaSat.
As the world’s largest airline, American is in a favored spot of being able to have “multiple suppliers” for broadband Wi-Fi; this practice helps them ensure that all planes are equipped as quickly as possible.
American’s decision to use the 2Ku technology for some planes is important for Gogo, as the company was at risk of losing the airline as a customer. Gogo’s new platform has been slow to roll out while it awaits regulatory certification for the new systems on various aircraft.
Image Source: Lufthansa
