In-flight internet provider Gogo is trying to sell its commercial airline business as it continues to lose money during the COVID-19 pandemic, the company announced on Monday. CEO Oakleigh Thorne said on a conference call that the company has had “extensive discussions with multiple parties” and that he “feel[s] optimistic that a deal may happen.”
A sale would be a huge change of course for Gogo, which pioneered in-flight connectivity. But the attempted sale comes as Gogo, like many other businesses in the air travel industry, is struggling. The company, which provides in-flight connectivity to major airlines like Delta, United, and Alaska, lost $86 million on $96 million in revenue during the second quarter of 2020. Its sessions per day in the North American market dropped 91 percent, from 125,000 before the pandemic to just 11,000 in April, though the company says those crept back up to about 40,000 so far in August.
Making matters worse, Thorne said Monday that Gogo was also hurt by airlines retiring dozens of planes that are already equipped with its in-flight connectivity tech. (Gogo is not alone; Global Eagle, which handles in-flight Wi-Fi for Southwest Airlines, filed for bankruptcy last month.)
Gogo says daily in-flight internet sessions dropped 91 percent in April
To cut costs, the company furloughed some 600 workers in April, slashed executive pay, and laid off another 143 in July — the majority of which were in the company’s commercial aviation division. Gogo applied for but did not receive around $230 million in funding from the government’s Coronavirus Aid, Relief, and Economic Security (CARES) Act.
The layoffs and other cost-cutting measures (like working with suppliers to renegotiate contracts) have helped generate “savings [that] should be adequate to tide us through the sunnier days,” Thorne said Monday on the call. But, he said, Gogo’s executives believe their job is to “realize the value” of both its commercial and business aviation businesses “for our shareholders.” Since the business aviation division has seen a faster rebound than the commercial division — and since Gogo has less competition there — Thorne said he believes the company’s commercial business would be better off if it was combined with a competitor.
“Gogo commercial aviation brings an attractive and unique set of assets” to any buyer, Thorne said. “We are really proud of the commercial aviation team and the tremendous capabilities they’ve built, and think it will have a bright future as part of a larger, more fully integrated entity.”
Gogo has spent the last few years developing satellite-based technology to both lighten the load on its strained air-to-ground network and to help keep pace with more vertically integrated competitors like ViaSat, which both makes satellites and sells connectivity to airlines. The company is also working on a 5G network that Thorne said is still slated to launch in 2021. Thorne didn’t lay out exactly what a sale would look like, and he declined to take questions about the talks that Gogo has already had.
“Everyone agrees that [in-flight connectivity] and commercial aviation is an attractive growth industry. Airlines are moving to free service, which will drive adoption, and OEMs and airlines are poised to drive more operational applications as the quality of in-flight broadband grows in the future,” Thorne said. “But for [in-flight connectivity] players to capture this attractive growth potential and drive innovation, the industry would benefit from fundamental changes through either horizontal or vertical business combinations.”