Gogo is selling its business of providing in-flight internet access and entertainment to commercial airlines to satellite communications provider Intelsat for $400 million in cash.
Chicago-based Gogo, which went public in 2013, has struggled to earn enough money from airlines and travelers to cover the immense cost of delivering service to airplanes. But it has been particularly hard-hit by the COVID-19 pandemic, which has crushed commercial air travel. Gogo furloughed 600 workers in April and said July 30 it would permanently cut 143 jobs.
Gogo reported Aug. 10 that its second-quarter sales fell 55 percent. “It certainly was an extraordinary quarter, but for all the wrong reasons. I think I can sum it up by saying that if you sell internet on airplanes and no one's on the plane, it's tough,” CEO Oakleigh Thorne said before announcing it had been shopping the business.
Intelsat, a satellite provider based in Luxembourg that filed for bankruptcy protection in May, received approval Monday to buy the commercial airline business from Gogo. Intelsat has a $1 billion debtor-in-possession credit facility.
Gogo says it will remain a public company. It plans to use some of the cash to pay down the company’s $1.1 billion in debt.
“This transaction creates a stronger and more focused Gogo, with the singular strategic imperative of serving the business aviation market with the best inflight connectivity and entertainment products in the world,” Thorne said in a statement.
The companies said Intelsat will operate the commercial aviation business as an independent business based in Chicago.
The deal takes Gogo back to its roots, when it was founded in 1991 as Air Cell, a provider of wireless service to business aircraft. Unlike commercial aviation, which is down about 80 percent, Gogo said its business aviation traffic is the reverse.
The business aviation unit has 30 percent higher revenue than commercial aviation. A year ago, commercial aviation was twice as large. More importantly, business aviation is profitable. Commercial aviation is losing money.
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September 01, 2020 at 06:21PM
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Gogo selling part of its business for $400 million - Crain's Chicago Business
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