Inflight Wi-Fi

Why Gogo Thinks AT&T Won’t Steal Its In-Flight Wi-Fi Customers


In-flight Wi-Fi Internet access offered by Gogo

Photograph by James Leynse/Corbis

In-flight Wi-Fi Internet access offered by Gogo

When AT&T (T) made its move into high-speed in-flight Wi-Fi two weeks ago, the announcement jolted investors into visions of doom for Gogo (GOGO), the industry’s largest player. Gogo executives turned Monday’s earnings report into an exercise in apocalypse prevention, emphasizing improved profitability and efforts to install its equipment on new planes as Boeing (BA) builds them.

Gogo shares surged 7 percent in morning trading after cratering more than 34 percent in the past month, mainly because of AT&T’s decision to launch a 4G LTE network for in-flight connectivity by the end of 2015. Can a better-than-expected quarter during which Gogo lost $16.9 million make investors lose interest in the threat of AT&T?

Here’s how Gogo made a case for itself: “The simple answer is our next-generation solutions … will be faster and will be flying sooner than AT&T’s proposed solutions,” Chief Executive Officer Michael Small told analysts. “We keep seeing competitors talking about what they will do tomorrow and comparing it to what we did yesterday.”

AT&T, Small pointed out, faces numerous approvals from federal regulators for its equipment and will need to reconfigure much of its existing network to work in aviation. “What they have on the ground will not be highly useful for the aero market,” he said. “We are the company with the shiny new products, and we intend to keep it that way.” Among those new products is an in-flight text-messaging service Gogo is testing on business aircraft and expects to roll out widely later this year.

The in-flight Wi-Fi industry has been beset by capacity shortfalls as companies try to figure out how to transmit more data to airplanes traveling faster than 500 miles per hour. The slow Wi-Fi speeds and dropped signals, which are gradually improving, have been developing much the way ground cellular networks once suffered from routine service glitches.

In the future, however, Gogo, Row 44 (ENT), and others—including AT&T—see a robust ecosystem of streamed video, texting, radio, and other in-flight entertainment. How to make the in-flight connection work fast, error-free, and at a price more people will pay is the central issue for the industry, which is largely in its early days. “There is no doubt that people see the attraction of connecting aircraft,” Small said, referring to AT&T. “I’ve yet to run into a person who disagrees with that vision of the future that all aircraft will be connected.”

Gogo is now included on 2,056 airplanes—a 9 percent increase from a year ago—and the company recently won a contract to equip Air Canada’s (AC/B:CN) North American fleet. Gogo is also working to install its satellite service on Delta Air Lines’ (DAL) international fleet by the end of next year. The first plane with the connectivity, a 747, was completed in March.

Bachman is an associate editor for Businessweek.com.

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Companies Mentioned

  • T
    (AT&T Inc)
    • $34.5 USD
    • -0.12
    • -0.35%
  • GOGO
    (Gogo Inc)
    • $15.92 USD
    • -0.50
    • -3.14%
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