Internet company Gogo is trying to sell its commercial airline business as it continues to lose money during the COVID-19 pandemic, the company said on Monday. Oakleigh Thorne CEO said on a conference call that the company had “extensive multi-party discussions” and that he “feels”[s] optimistic that a deal could be reached. ”
A sale would be a big change of course for Gogo, who pioneered in-flight connectivity. But the attempted sale comes because Gogo, like many other companies 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 revenue of $ 96 million in the second quarter of 2020. Daily sessions in the North American market fell 91
Thorne said Monday that Gogo was also injured by airlines who withdrew dozens of planes that were already fitted with their in-flight connectivity technology. (Gogo isn’t alone; Global Eagle, which manages in-flight Wi-Fi for Southwest Airlines, filed for bankruptcy last month.)
To cut costs, the company took around 600 employees on leave in April, cut executive salaries, and laid off another 143 in July – most of them in the company’s commercial aviation division. Gogo applied for but did not receive around $ 230 million from the government’s Coronavirus Aid, Aid and Economic Security (CARES) Act.
The layoffs and other cost-cutting measures (such as working with suppliers to renegotiate contracts) have helped “make savings [that] should be enough to get us through the sunnier days, ”Thorne said on Monday when we called. However, Gogo executives believe it is their responsibility to “realize” the value of the commercial and corporate aviation business “to our shareholders”. Since the Aviation division has recovered faster than the Commercial division – and Gogo has less competition there – Thorne believes the company’s commercial business would be better off if combined with a competitor.
“Gogo’s commercial aviation offers an attractive and unique asset to every buyer,” said Thorne. “We are really proud of the commercial aviation team and the tremendous skills they have built, and believe that they have a bright future as part of a larger, more integrated company.”
In recent years, Gogo has developed satellite-based technologies to both relieve the strained air-to-ground network and to keep pace with vertically integrated competitors such as ViaSat, which both manufacture satellites and sell connectivity to airlines. The company is also working on a 5G network, which Thorne said is set to launch in 2021. Thorne did not specify exactly what a sale would be and declined to ask questions about the conversations Gogo had already had.
“Everyone agrees [in-flight connectivity] Commercial aviation is an attractive growth industry. Airlines are moving to a free service that will drive adoption, and OEMs and airlines stand ready to develop more operational applications as the quality of in-flight broadband increases in the future, “said Thorne. “But for [in-flight connectivity] In order to exploit this attractive growth potential and drive innovation, the industry would benefit from fundamental changes through horizontal or vertical company mergers. “