Internet service provider Gogo is trying to sell its commercial airline as it continues to lose money during the COVID-19 pandemic, the company announced on Monday. CEO Oakleigh Thorne said at a conference call that the company has had “extensive discussions with several parties” and that he “feels[s] optimistic that a deal can happen. ”
A sale would be a huge change of course for Gogo, which was groundbreaking in connection with the flight. But the attempted sale comes because Gogo, like many other companies in the aviation industry, is struggling. The company, which provides flights to major airlines such as Delta, United and Alaska, lost $ 86 million on $ 96 million in revenue in the second quarter of 2020. Its sessions per day in the North American market fell 91
To make matters worse, Thorne said on Monday that Gogo was also damaged by airlines that withdrew dozens of aircraft already equipped with its flight connection technology. (Gogo is not alone; Global Eagle, which handles in-flight Wi-Fi for Southwest Airlines, filed for bankruptcy last month.)
To reduce costs, the company exceeded approximately 600 employees in April, reduced 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 approximately $ 230 million in funding from the government’s Coronavirus Aid, Relief and Economic Security (CARES) Act.
Terminations and other cost-saving measures (such as working with suppliers to negotiate contracts) have helped to create “savings [that] should be enough to flow us through the healthier days, “Thorne said on Monday in the conversation. But, he said, Gogo’s executives believe their job is to “realize the value” of both its commercial and commercial airlines “to our shareholders.” Since the business aviation department has seen a faster recovery than the commercial division – and because Gogo has less competition there – Thorne said he believes the company’s commercial operations would be better if combined with a competitor.
“Gogo Commercial Aviation provides an attractive and unique set of assets” to all buyers, Thorne said. “We are really proud of the commercial aviation team and the huge capabilities they have built and believe it will have a bright future as part of a larger, more integrated unit.”
Gogo has used recent years to develop satellite-based technology to both ease the load on its strained air-to-ground network and to keep pace with more vertically integrated competitors such as ViaSat, which both makes satellites and sells connections to airlines. The company is also working on a 5G network, which Thorne said is still planned for launch in 2021. Thorne did not post exactly what a sale would look like, and he refused to ask questions about the calls that Gogo has already had.
“Everyone agrees [in-flight connectivity] and commercial aviation is an attractive growth industry. Airlines are moving to free service, which will drive the adoption, and OEMs and airlines are ready to run more operational applications as the quality of broadband next door grows in the future, ”said Thorne. “But for [in-flight connectivity] players to capture this attractive growth potential and drive innovation, the industry would benefit from fundamental change through either horizontal or vertical business combinations. “