Why Gogo Inc. Stock Plunged 47.6% in 2016

Image source: Gogo, Inc.

What happened

Shares ofGogo Inc.(NASDAQ: GOGO)declined 47.6% in 2016,according to data provided byS&P Global Market Intelligence, as one of its key customers awarded a large contract to a competitor.

So what

Gogo's biggest troubles surfaced early in the year, as American Airlines Group (NASDAQ: AAL) stated it believed a competing company would be able to offer faster service than Gogo at a lower cost. So after failing to receive a release from its existing contract, American Airlines filed a lawsuit against the in-flight entertainment specialist in February, causing shares of Gogo to plunge 27% in a single day.

Then in June, Gogo stock plunged againafter rival ViaSat (NASDAQ: VSAT) announced it was selected to provide in-flight Wi-Fi on American Airlines 737 MAX fleet, with the first planes utilizing ViaSat's Ka-band satellite system scheduled to go into service in September 2017.

"We believe we are now approaching the end of an era where passengers have paid very high prices for very slow connections," ViaSat CEO Mark Dankberg stated at the time.

Now what

To be fair, Gogo simultaneously signed an amended agreement with American Airlines to continue providing in-flight wireless internet to around 560 aircraft in its current domestic fleet, including equipment and services to transition around 140 mainline aircraft to Gogo's newer, highly regarded 2Ku technology. However, Gogo also worried investors by confirming 550 Gogo-installed mainline aircraft currently under contract are "subject to deinstallation at any time at American's option."

That's also not to say Gogo won't continue to win new contracts with its latest technology going forward. But given its tumultuous relationship with American Airlines and with competition bearing down, it was hardly surprising to see investors taking a big step back from Gogo in 2016.

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Steve Symington has no position in any stocks mentioned. The Motley Fool is short Gogo. The Motley Fool has a disclosure policy.