Intelsat announced on Monday that it has decided to part with $400 million in cash to buy the commercial aviation arm of Gogo.
The Gogo install base involves 21 airlines and over 3,000 aircraft, Intelsat said, and includes among its customers nine of the world’s top 20 carriers.
“Consumer demand for in-flight connectivity is expected to grow at a double-digit rate over the next decade, notwithstanding the impact of COVID-19, ” Intelsat CEO Stephen Spengler said.
“We are growing beyond satellite connectivity to expand into consumer-optimised managed services.”
Intelsat said passengers would get connectivity that could handle video streaming, browsing, and cloud-based applications, while airlines would get a fully integrated platform.
“This transaction will combine Intelsat’s next-generation high throughput space assets with Gogo’s best-in-class 2Ku antenna to uniquely position Intelsat to deliver more cost-effective and advanced commercial aviation broadband connectivity services,” the company said.
For its part, Gogo said it would use the money to pay down debt and focus on its business aviation segment, which it said was an “attractive and underpenetrated market” that was going through a “sharp recovery”.
Gogo further said Intelsat intends to operate the commercial airline business as a separate unit led by current president John Wade, and would remain in Chicago.
“As part of the transaction, Gogo will enter into a 10-year network services agreement under which Intelsat will have exclusive access to Gogo ATG services for the CA market in North America, subject to minimum revenue guarantees of $177.5 million,” Gogo said.
Provided the deal gets the proper approvals, it is expected to close in the first quarter of 2021.
In May, Intelsat filed for chapter 11 bankruptcy.
“Our success has come despite being burdened in recent years by substantial legacy debt. Now is the time to change that,” Spengler said at the time.
“We intend to move forward with the accelerated clearing of C-band spectrum in the United States and to achieve a comprehensive solution that would result in a stronger balance sheet.”
For its second-quarter releases released in August, Intelsat reported total revenue of $482 million, down $27.4 million, and a net loss of $405 million, which was a reduction on the $530 million lost during the second quarter of 2019.
The company said it spent almost $300 million during the quarter on costs related to its bankruptcy and reorganisation.
Intelsat said on Monday it intended to fund its Gogo commercial airline purchase from cash on hand and its debtor-in-possession financing. The US Bankruptcy Court for the Eastern District of Virginia, Richmond Division, approved the deal on Monday.