Internet provider Gogo is trying to sell its commercial airline as it continues to lose money during the COVID-19 pandemic, the company announced Monday. CEO Oakleigh Thorne said in a conference call that the company “has had extensive talks with multiple parties” and that he “feels[s] optimistic that a deal can happen. ”
A sale would be an enormous change of course for Gogo, who pioneered in connection with flights. But the attempted sale comes as Gogo, like many other companies in the air travel industry, struggles. The company, which provides in-flight connectivity to major airlines such as Delta, United States, and Alaska, lost $ 86 million to $ 96 million in revenue in the second quarter of 2020. Its sessions per day in the North American market fell 91 percent, from 125,000 before the pandemic to just 11,000 in April, although the company says those will shrink to about 40,000 by August.
Making such a case worse, Thorne said Monday that Gogo was also hurt by airlines retiring dozens of planes already equipped with its tech in-flight connectivity. (Gogo is not alone; Global Eagle, which handles 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 laid off another 143 in July – most of whom were in the commercial aviation division. Gogo has applied for but received about $ 230 million in funding from the Government’s Aid, Relief and Economic Security Act (CARES).
The layoffs and other austerity measures (such as working with suppliers to negotiate contracts) have helped generate ‘savings’ [that] should be enough to tide us through the hot days, “Thorne said Monday about the call. But, he said, Gogo executives believe it is their job to” realize the value “of both their commercial and business value. airlines ‘for our shareholders.’ Since the business aviation division has seen a rapid rebound than the commercial division – and since Gogo has less competition there – Thorne said he believes the company’s commercial business would be better off if it were combined with a competitor.
“Gogo commercial aviation brings an attractive and unique set of assets” to every buyer, Thorne said. “We are really proud of the commercial aviation team and the enormous capabilities they have built, and think it will have a bright future as part of a larger, more integrated entity.”
Gogo has spent the last few years developing satellite-based technology to both ease the burden on its tight air-to-ground network and to help keep pace with more vertically integrated competitors such as ViaSat, which makes both satellites and connecting connection with airlines. The company is also working on a 5G network that Thorne said is still slated to launch in 2021. Thorne did not explain exactly what a sale looks like, and he declined to comment on the talks Gogo already had. .
‘Everyone agrees [in-flight connectivity] and commercial aviation is an attractive growth industry. Airlines are moving to free service, which will support the adoption, and OEMs and airlines are ready to run more operational applications as the quality of in-flight broadband grows in the future, ‘Thorne said. “But for [in-flight connectivity] players to capture this attractive growth potential and drive innovation, the sector would benefit from fundamental changes through horizontal as well as vertical business combinations. ”