Gogo, the in-flight Internet provider, announced Monday that it is selling its commercial airline business because of continued losses during the COVID-19 pandemic,media The Verge reported. Oakleigh Thorne, the company’s chief executive, said on a conference call that the company had “extensive discussions with a wide range of parties” and that he was “optimistic that a deal could happen”.
The sale would be a huge change for Gogo. But gogo, like many other companies in the air travel industry, is in trouble as it tries to sell. The company, which provides in-flight connectivity services to major airlines such as Delta, United and Alaska, reported revenue of $96 million and a loss of $86 million in the second quarter of 2020. Its daily sessions in North America fell 91 percent, from 125,000 before the pandemic to just 11,000 in April, although the company said they had rebounded to about 40,000 in the year to August.
To make matters worse, Thorne said Monday, Gogo has also been hurt by the airline’s decommissioning of dozens of aircraft already equipped with its in-flight Internet technology. (Gogo isn’t the only company affected by the new crown pandemic; Global Eagle, which handles in-flight Wi-Fi for Southwest Airlines, filed for bankruptcy last month.)
To cut costs, the company laid off about 600 workers in April, cut executive pay and cut 143 jobs in July, most of them in the company’s commercial aviation division. Gogo applied for the government’s New Crown Virus Assistance, Relief and Economic Security Act (CARES) program, but did not receive about $230 million in funding.
Layoffs and other cost-cutting measures, such as partnering with suppliers to renegotiate contracts, have helped create “savings that should be enough to make it enough for us to get through the sun,” GoGo said by phone Monday. But he said GoGo executives believed their job was to “realize the value of our commercial and business aviation business for our shareholders”. Because the public aviation sector is rebounding faster than the commercial sector — and because GoGo is less competitive there — Thorne says he thinks the company’s business business will grow better if it is combined with its competitors.
“Gogo Commercial Airlines brings an attractive and unique asset to any buyer,” Thorne said. “We’re really proud of the commercial aviation team and the tremendous capabilities they’ve built on, and think it’s going to have a bright future as part of a larger, more integrated entity.”
Gogo has been developing satellite-based technology over the past few years to ease its tight air-to-ground network load and help keep pace with more vertically integrated competitors such as ViaSat, which makes satellites and sells connections to airlines. The company is also developing a 5G network, which Thorne says is still planned for 2021. Thorne did not elaborate on the details of the sale, and he declined to comment on the negotiations that Gogo has been negotiating.
“Everyone agrees that (in-flight Internet) and commercial aviation are an attractive growth industry. Airlines are moving to free services, which will drive adoption, and OEMs and airlines are preparing to drive more operational applications as the quality of in-flight broadband grows in the future. Thorne said. However, for players to capture this attractive growth potential and drive innovation, the industry will benefit from fundamental changes in the horizontal or vertical business mix. “