American Airlines Strikes WiFi Deal With ViaSat: Gogo Stock Suffers

(RTTNews) - Internet service provider Gogo's stock declined around 16 percent on Friday as American Airlines ditched the firm for rival ViaSat Inc. to provide satellite-powered WiFi to aircrafts.

Worried by the poor performance of Gogo, its current provider, American Airlines filed a lawsuit back in mid February, notifying that it has found a faster Internet service offered by ViaSat. Gogo then said it intends to submit a competing proposal.

In the lawsuit filed in a Texas court, the airline asked a judge to allow the company to break its existing contract with Gogo. There was a clause in the contract allowing American Airlines to switch providers if it finds one service that materially improves on Gogo's current offering.

ViaSat's satellite-based WiFi experience is said to be 8 to 10 times faster than any existing in-flight WiFi solutions. The service is currently used by United, JetBlue, and Virgin America.

As per the new contract, American Airlines will outfit its 100 new Boeing 737 MAX aircrafts with ViaSat's in-flight internet service by next September.

In a statement, ViaSat noted that the new American planes will tap into the power of ViaSat's advanced high capacity Ka-band satellite system, which will include ViaSat-1, ViaSat-2 and ViaSat-3 satellite platforms. When the first ViaSat-3 class satellite platform launches in 2019, it will more than double the capacity again.

Mark Dankberg, ViaSat chairman and CEO, said, "We believe we are now approaching the end of an era where passengers have paid very high prices for very slow connections. Our agreement highlights a significant initial step for American to deliver an onboard Wi-Fi experience every passenger will want to use."

Meanwhile, Gogo reportedly will continue to provide service to a number of American's fleet, including 134 Airbus planes. These have been outfitted with the WiFi provider's 2Ku satellite service.

On Friday, Gogo stock fell 16.08 percent at $9.29 and American stock dropped 2.72 percent to $30.81. ViaSat stock gained 4.53 percent to settle at $73.08.