Gogo, the in-flight internet provider, has found a buyer for its commercial airline business. Intelsat, the world’s second largest satellite operator by revenue, has agreed to purchase Gogo’s Wi-Fi business for $400 million in cash, the companies announced Tuesday. It’s an unlikely pairing, mostly because Intelsat filed for Chapter 11 bankruptcy in May.
The bankruptcy was seen as a means for Intelsat to begin paying down its nearly $15 billion debt load while positioning itself to participate in a Federal Communications Commission spectrum clearing program, the company has said. The FCC is clearing out the C-band (4-8 GHz) to make space for 5G customers, and Intelsat is participating in the program that could net the company nearly $5 billion by selling airwave licenses it currently owns. The company operates a fleet of roughly 50 satellites and has another, Galaxy-30, scheduled to launch this summer on an Ariane 5 rocket.
The sale represents a huge shift for Gogo
It expects to pay for the transaction utilizing the cash it has on hand, as well as borrowings under its $1 billion debtor-in-possession credit facility. The company says it has obtained approval from the US Bankruptcy Court in Richmond, VA, to complete the acquisition, which is expected to close before the end of the first quarter 2021.
The commercial airline business will remain independent and headquartered in Chicago, the companies said. “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,” Oakleigh Thorne, Gogo’s president and CEO, said in a statement.
The sale represents a huge shift for Gogo, which pioneered in-flight connectivity. But it comes as Gogo, like much of the air travel industry, is struggling due to the ongoing coronavirus pandemic.
Gogo, which is based in Chicago, provides in-flight connectivity to major airlines like Delta, United, and Alaska. The company lost $86 million on $96 million in revenue during the second quarter of 2020. Its sessions per day in the North American market dropped 91 percent, from 125,000 before the pandemic to just 11,000 in April, though the company says those crept back up to about 40,000 so far in August.
To cut costs, the company furloughed some 600 workers in April, slashed executive pay, and laid off another 143 in July — the majority of which were in the company’s commercial aviation division. Gogo applied for but did not receive around $230 million in funding from the government’s Coronavirus Aid, Relief, and Economic Security (CARES) Act.
Gogo has spent the last few years developing satellite-based technology to both lighten the load on its strained air-to-ground network and to help keep pace with more vertically integrated competitors like ViaSat, which both makes satellites and sells connectivity to airlines. The company is also working on a 5G network that is still slated to launch in 2021.