American Airlines is suing its in-flight Wi-Fi provider, Gogo. The airline imposes an ultimatum to Gogo: improve the internet service speed or they will terminate the contract.
The lawsuit filed alleges that Gogo is not living up to the terms of their contract, Buzzfeed News reported. Moreover, American Airlines claims that it has received a better offer from ViaSat, which promises to exceed Gogo's service.
The petitioner contends that its contract with Gogo allows it to renegotiate in case a rival company offers a materially better service. Since the news, Gogo's stocks plummeted on Wall Street by 27%, as reported by Star-Telegram. In Tuesday, the Chicago-based company's stock fell as much as 42% while its rival ViaSat posted a 13% rise in stocks.
Gogo spokesman, Steve Nolan, said that the company intends to submit a competing proposal which promises better service by using their latest satellite technology called 2Ku, Time reported. However, its submission will not guarantee continued partnership with the American Airlines, which will still evaluate all of their options.
"We believe that 2Ku is the best performing technology in the market and look forward to discussing our offer with American," Nolan said in a statement, adding that the company had no comment on the merits of the suit.
Around 14-15% of Gogo's revenue comes of American Airlines with set prices for passengers. The company owns roughly 80% of the in-Flight Wi-Fi market. Meanwhile, ViaSat and other competitors are paid by Airlines.
"American continually evaluates in-flight connectivity service to determine what best meets our customers' needs and wants," said American Airlines in a Statement.
Gogo is at risk of losing 200 American Airlines aircrafts that uses its service. If the contract is terminated, other airline companies might follow suit.
Meanwhile, Gogo is also under fire for allegedly drawing customers with monthly subscriptions that has no cancellation option.
