Gogo Inc shares surged by as much as 24%, marking the biggest decline in more than two years after the company announced today that American Airlines has withdrawn the lawsuit it filed against it. As of this writing, the stock had risen 10.75% to $11.13.
American Airlines withdraws lawsuit against Gogo
American Airlines filed suit against the in-flight Internet service provider earlier this month in an attempt to terminate its contract. The airline argued that the terms of its contract allowed it to terminate that contract if it found a better offer from another in-flight Internet service provider. According to the Star-Telegram, Gogo disputed the clause which stated that American could renegotiate or terminate the contract for a better rate. The contract covers Wi-Fi service for approximately 200 airplanes operated by American Airlines.
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Gogo issued a press release today stating that the airline had dismissed the lawsuit, and a spokesperson for the airline confirmed the news to Bloomberg. However, the case was dismissed without prejudice, according to the Star-Telegram, which means that American can still refile the lawsuit at some point in the future if it finds the need to do so.
The lawsuit stated that ViaSat offers faster Internet service and is used by United Airlines, Virgin America and JetBlue Airways. Currently American uses Gogo for domestic and regional service and Panasonic for international service.
Gogo to submit new proposal to American Airlines
Gogo isn’t totally out of the woods though as American is still considering a switch to another provider. The company has agreed to submit a new proposal to the airline to compete with ViaSat for the contract, according to Bloomberg. The new proposal must be submitted within 45 days.
The in-flight Internet service provider said its proposal is to install its newest satellite technology, which it calls 2Ku, on American’s planes. It also officially acknowledged that the agreement it previously had with the airline triggered that 45-day deadline for them to submit a competitive proposal.
If Gogo’s new offer doesn’t beat offers made by its competitors, American Airlines has the option to give a 60-day notice to terminate the previous contract.