American Airlines had filed suit to drop its contract with in-flight WiFi provider Gogo Inc., because their competitor ViaSat can offer better performance. Following this news, Gogo Inc's stock dropped 27 percent on February 16.
Gogo, a Chicago based company admits that American Airlines does have a right to annul the contract under certain circumstances, if better technology was offered by a different company. However, before any such annulment, Gogo must be allowed to make a counter-offer.
Gogo has long said its 2Ku Ku-band satellite in-flight WiFi is the best in class, a statement disputed by Viasat. ViaSat offers a Ka-band technology using its own satellites and hardware.
ViaSat recently announced an expansion of its broadband portfolio with the addition of two more super-high-throughput satellites to be introduced over the Americas and Europe, the Middle East and Africa in the next three years, with still another to be ordered for the Asia-Pacific.
ViaSat is launching its ViaSat-2 satellite in early 2017 and has said that will provide a higher throughput than what it can offer today, in addition to covering a broader geographic area to include the Atlantic air and sea routes.
On February 16, Gogo issued the following statement about the American Airlines lawsuit.
“We have received certain inquiries regarding a declaratory judgment action filed against Gogo by American Airlines last Friday.
“We have no comment on the merits of this litigation, but we would like to note that American is a valued customer of ours and that we look forward to resolving the disagreement regarding contract interpretation that led to this declaratory judgment action.
“By way of background, given the rapid pace of technological development in our industry, our airline customers expect to be able to take advantage of advances in technology and we understand and support that.
“Our contract with American contains a provision that addresses this expectation. Under the provision, if certain conditions are satisfied, including if a competitor offers connectivity services that materially improve on the Gogo early generation air to ground system that American has chosen to use on certain fleets, American can notify us.
“If American gives the notice required by the contract, we have the opportunity to submit a competing proposal – for any technology in our portfolio. If we decline to submit a proposal, or if American reasonably determines that our proposal is less favorable than the competitor’s, American may elect to terminate the contract with respect to the aircraft that are the subject of the notice.
“Earlier this month, American notified Gogo that it considers a competitor’s connectivity service to offer a material improvement over our early generation air to ground service with respect to a portion of American’s fleet representing approximately 200 aircraft. We plan to submit a competing proposal to install our latest satellite technology – 2Ku – on this fleet. We believe that 2Ku is the best performing technology in the market and look forward to discussing our offer with American.”