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ViaSat Stock Gains on American Airlines Wi-Fi Contract

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ViaSat Inc. VSAT shares jumped close to 5% as the company secured a contract to provide internet access on 100 new American Airlines Group AAL planes.

This contract breaks in-flight Wi-Fi services market leader Gogo Inc.'s GOGO stronghold on the airline's in-flight connectivity business.

Gogo used to deliver in-flight Wi-Fi for the majority of American Airlines' 1,100 aircraft using its ground-based system. However, if too many passengers logged in at the same time, web browsing tended to become slow. In contrast, ViaSat provides satellite-based broadband connections which deliver higher speeds and better quality.

Gogo's shares toppled more than 16% following the announcement, as ViaSat's win represents the loss of a significant piece of business for the former.

Under the contract, ViaSat will equip 100 new Boeing 737 MAX aircraft with satellite-based services, with the aircraft expected to go into service in September next year. Both the parties kept the terms and the value of the contract under wraps.

The new planes will leverage ViaSat's advanced high capacity Ka-band satellite system, including ViaSat-1, ViaSat-2 and ViaSat-3 satellite platforms. The airline will capitalize on ViaSat's first two generation satellite platforms. According to ViaSat, its offering will enable users to do practically anything online, including video and music streaming.

Passengers these days consider high-speed Internet as a standard amenity for airlines. They expect to be able to stream video and music, and browse the web, without the glitches that are common to ground-based systems. This has heightened the rivalry among broadband providers.

ViaSat has, till date, installed its system on about 500 commercial airplanes. This figure includes most of the United Continental Holdings, Inc.'s UAL Boeing 737 fleet as well as the JetBlue Airways' aircraft.

In fact, ViaSat recently announced a multi-year agreement with leading aerospace company, Dassault Aviation. Per the deal, ViaSat will equip the first Falcon 8X with its Ku-band terminal to deliver advanced Internet and corporate network access to operators. In addition, in February, ViaSat secured a deal to deliver Wi-Fi services to the domestic fleet of Qantas Airways.

ViaSat is preparing to launch two new satellites to increase its coverage areas, with one slated for launch in less than seven months. The ViaSat-3 platform will help to form a global broadband network with sufficient network capacity to allow better consumer choices with an affordable, high quality, high-speed Internet and video streaming service.

Going forward, ViaSat expects robust growth as it capitalizes on its competitive advantage and strong demand for its highly cost-effective satellite bandwidth products. The company expects strong growth opportunities in satellite services and government systems segments, which should drive top-line growth in the coming quarters.

ViaSat currently carries a Zacks Rank #3 (Hold).

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VIASAT INC (VSAT): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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