Shares of Gogo Inc. plummeted after client American Airlines Group Inc. told the airline Wi-Fi provider that competitor ViaSat Inc. offered better service.
Gogo shares fell 35 percent to $9.03 at 11:37 a.m. in New York, after earlier touching $7.90. ViaSat, which provides Internet connectivity services to airlines such as United Continental Holdings and JetBlue Airways Corp., surged 9.3 percent to $68.28.
American Airlines filed a declaratory judgment action last week against Gogo, which provides in-flight Internet service on some of its fleet, the Wi-Fi company said in a filing Tuesday. Its contract with American can be terminated if a competitor can materially improve upon Gogo’s service, which has been offered on some of the airline’s flights since 2008.
The competitive service clause isn’t included in all of Gogo’s contracts for in-flight Wi-Fi, the Internet services company said in an e-mailed statement, without providing specifics.
American informed Chicago-based Gogo earlier this month of a proposal from ViaSat, and Gogo will have a chance to respond with its own proposal, Casey Norton, an American spokesman, said in an interview. The Fort Worth, Texas-based airline took asked a judge to protect its rights under the contract, Norton said.
“We continually evaluate in-flight connectivity service to determine what best meets our customers’ needs and wants,” Norton said. “We’ve notified Gogo of a competitor’s offering, and we will evaluate all of our options.”
Gogo said in its filing that it had no comment on the litigation. “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,” Gogo said.
ViaSat, based in Carlsbad, California, declined to comment on American Airlines, saying only that it’s in discussions with airlines about its in-flight service.
Gogo said it plans to submit a competing proposal to install its latest satellite technology, known as 2Ku, on about 200 American planes. The Fort Worth Star-Telegram reported on the legal action against Gogo on Monday.
–With assistance from Lisa Pham and Justin Bachman.
This article was written by Michaela Ross and Mary Schlangenstein from Bloomberg and was legally licensed through the NewsCred publisher network.
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Photo credit: Gogo CEO Michael Small (R) at the Skift Global Forum in October 2015. Skift