American Airlines Dismisses Lawsuit and Gogo Shares Rebound

February 22, 2016, 8:52 PM UTC
American Airlines passenger planes are seen on the tarmac at Miami International Airport in Miami, Florida, June 8, 2015. AFP PHOTO/ROBYN BECK (Photo credit should read ROBYN BECK/AFP/Getty Images)
Photograph by Robyn Beck — AFP/Getty Images

American Airlines dismissed its lawsuit against the world’s biggest in-flight Wi-Fi provider, Gogo, on Monday, and shares of Wi-Fi provider are lifting off by 10.15%(GOGO).

The airliner filed a lawsuit against Gogo earlier this month in an attempt to break off its contract. American wrote that an alternative Wi-Fi provider, ViaSat, offered “materially” better services. After Gogo filed a report stating that it planned to give American another offer on Feb. 16, the airliner dismissed the suit.

“American has dismissed the lawsuit without prejudice. If Gogo chooses to submit a proposal in response to a competitive offering, we will evaluate it,” an American Airlines (AAL) spokesperson told Fortune.

The contract between American Airlines and Gogo, which affects roughly 200 of American Airlines’ older planes, has been the source of dispute between Gogo and American Airlines in the past week.

The airline received a competitive offer from ViaSat (VSAT) in early February, and attempted to break its contract with Gogo though a lawsuit, claiming that the smaller company offered faster Wi-Fi for a lower cost.

In accordance with the airline and Gogo’s agreement, American Airlines has the choice to move to a different competitor if it receives a better offer. Gogo would also be allowed to submit an alternative competitive agreement.

In a previous interview with Fortune, a Gogo representative said the company planned to offer American Airlines an alternative satellite technology, 2Ku, which is superior to its current air-to-ground (ATG), cell tower based service.

But American Airlines still has the chance to refuse Gogo’s offer and potentially break off contracts with the Wi-Fi provider throughout its fleet.

“(Dismissing the suit) doesn’t mean at all that American is going to stick with Gogo as a customer,” said Andrew Gasperi, an analyst with Macquarie Capital. “There are still headwinds ahead for Gogo.”

“We fear American’s refusal to adopt it before today may indicate it has already made up its mind. Separately, a successful termination by American may enable other airlines that use Gogo’s ATG to follow suit, particularly Virgin Media and United, which currently use multiple providers for in-flight WiFi,” wrote Andrew DeGasperi, an analyst with Macquarie Capital on Feb. 16.

American Airlines represents roughly 15% of Gogo’s revenue, Macquarie Securities reported.

Fortune is waiting for a response from Gogo.

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