One of the pioneers in providing in-flight internet service is logging off.

Gogo (NASDAQ:GOGO) is selling its commercial aviation unit to satellite operator Intelsat for $400 million in cash. The business to be sold is Gogo's best-known unit, but Gogo will remain a public company focused on providing data and services to business jets.

"Following a competitive strategic review process, we're confident this transaction unlocks the full value of the [commercial aviation] business for shareholders," Gogo CEO Oakleigh Thorne said in a statement. "Combining [the commercial aviation business], the leading inflight connectivity [IFC] provider, with Intelsat, the world's largest global satellite operator, will create the leading vertically integrated IFC business in the world, with the additional resources and scale to support continued growth and innovation as demand for commercial air travel recovers."

A plane flying above the clouds.

Image source: Getty Images.

The Gogo business currently serves 21 commercial airlines, including nine of the global top 20, and has its antennas installed on more than 3,000 aircraft. The commercial business has been under pressure in 2020, as the COVID-19 pandemic has led to a drop in airline travel. Gogo in late July said it would eliminate 143 positions, mostly in its commercial division, due to the impact of COVID-19 on aviation.

Gogo said it would use the proceeds from the sale to pay down some of its $1.2 billion in debt.

Intelsat is actually buying the business while operating under bankruptcy protection, having filed in May to restructure its debt. The company said its existing debtor-in-possession lenders, the source of the funds it needs to operate while in Chapter 11, have agreed to amend the credit agreement to facilitate the purchase and that Intelsat's key stakeholders support the transaction.

Intelsat has a constellation of satellites, but needs customers for its capacity. Combining the two businesses should give Intelsat volume, while bringing down the cost of providing Gogo's services for commercial aircraft.

"A priority growth objective for Intelsat is to extend our reach closer to the millions of customers who use our satellite capabilities to stay connected around the world," Intelsat CEO Stephen Spengler said in a statement. "The addition of Gogo's commercial aviation business is a significant step toward this goal."

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