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. When the first ViaSat-3 class satellite platform launches in 2019, it will more than double the capacity again.
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The new Boeing 737 MAX aircraft are expected to be delivered to American Airlines beginning next year, with at least 100 units being added to the carrier’s fleet by 2022.
ViaSat now operates a high capacity ka-band satellite network that provides Internet access to a handful of airlines, including JetBlue and Virgin America in the US.
The contract that American Airlines signed with Gogo contained a clause that allowed the airline to switch its Internet provider if it were to find one that improves materially on the current offering by Gogo.
They expect to be able to stream video and music, and browse the web, without the glitches that are common to ground-based systems.
ViaSat says its service provides 12Mbps to each seat, speeds it promises will offering “at home” multimedia streaming options, as opposed to the regular old email checking pace now available on most domestic flights.
ViaSat has, till date, installed its system on about 500 commercial airplanes. Meanwhile, it also provides services to numerous air fleet. Those dates coincide with the introduction of two ViaSat 3 satellites.
Going forward, ViaSat expects robust growth as it capitalizes on its competitive advantage and strong demand for its highly cost-effective satellite bandwidth products. The company also has 400 other aircraft that it plans to upgrade to satellite service, but has not announced any agreements.
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ViaSat now carries a Zacks Rank #3 (Hold).
