Morgan Stanley analyst Simon Flannery said the possibility of Delta (DAL) launching a free Wi-Fi offering has been viewed by some as a significant positive catalyst for Gogo (GOGO), helping the latter's shares gain about 60% since early August. The firm's North American Airlines analyst contends that "free Wi-Fi is a matter when and not if" for the industry, but Flannery is skeptical of Gogo's ability to drive value as a satellite reseller under this model. As take rates potentially triple, Gogo would need to buy significantly more satellite capacity, which could significantly hurt margins, contends Flannery. Meanwhile, ViaSat (VSAT) has noted it has multiple gigabits of Ka capacity available over Delta hubs like Atlanta and this could be an opportunity for them to take share as they have proven capabilities and cheaper Ka capacity compared to Gogo as a Ku reseller, the analyst tells investors. Flannery reiterates his Underweight rating and $3 price target on Gogo shares and has an Equal Weight rating with an $82 price target on ViaSat.

Morgan Stanley lowered the firm's price target on Gogo to $12 from $15 and keeps an Equal Weight rating on the shares. The delayed rollout of the company's 5G offering raises uncertainty around how quickly Gogo can ramp up customer migration to the upgraded service once launched, while long-term competitive pressure from LEO operators such as Starlink is likely to limit upside, the analyst tells investors.