Shares of Gogo (GOGO - Get Report) plunged in morning trading after a report from the Star-Telegram said American Airlines (AAL) filed a lawsuit against the company, claiming its contract with Gogo lets it renegotiate or end its agreement if another company offers better internet service.
WHAT'S NEW: American Airlines filed a lawsuit against Gogo in a district court in Tarrant County, Texas on Friday, saying it has informed Gogo that it has found a faster internet provider in ViaSat (VSAT - Get Report) , the Fort Worth Star-Telegram reported yesterday. The airline said that its contract with Gogo, its current provider of in-flight Wi-Fi, contains a provision that allows it to renegotiate or terminate its deal if another internet provider offers better service. American Airlines said it is evaluating all of its options to determine what best meets "the needs and wants" of its customers, according to the Star-Telegram. ViaSat's service is currently installed on United Airlines (UAL - Get Report) , JetBlue (JBLU - Get Report) and Virgin America planes (VA) , American noted.
GOGO RESPONDS: In response to the lawsuit, Gogo said in a regulatory filing that it received "certain inquiries regarding a declaratory judgment action filed against Gogo by American Airlines" and that it has "no comment" on the merits of such litigation. The in-flight internet provider said the American Airlines is a "valued customer" and that it looks forward to "resolving the disagreement regarding contract interpretation that led to this declaratory judgment action." Gogo acknowledged the provision in the airline's contract that would allow it to renegotiate or end the agreement and added that it received notification from American earlier in the month that it considers a competitor's service to offer a "material improvement" over that of Gogo. The internet provider also said that it intends to submit a competing proposal to install its latest satellite technology on the airline's fleet of over 200 planes.
PRICE ACTION: In morning trading, Gogo dropped 40.4% to $8.28. Meanwhile, American Airlines fell 0.7% to $390.30 and ViaSat jumped 10.74% to $69.16.
Reporting by Sam Martinelli.