gogo inc is reducing its pile of debt as interest rates rise a move that comes after the aircraft internet provider hived off its commercial aviation unit to focus solely on corporate and private planes gogo anticipates its annual interest expenses going forward will be around 33 million compared with 131 million three years earlier the company last year put in place interest rate caps on its term loan which carries a floating interest rate consisting of the london interbank offered rate plus 375 said gogo chief financial officer barry rowan who has held that post since 2017 “for those of us who have lived through many cycles we’re very sensitive about not being over exposed in that regard” said mr rowan referring to rising interest rates moody’s in march upgraded gogo’s corporate rating from b3 to b2 which is subinvestment grade citing the demand for its services and the company’s declining leverage broomfield colobased gogo best known for its inflight wifi for years burned cash and levered up as it competed for business from major airlines a failed equipment upgrade prior to the pandemic dented gogo’s revenue after the company took on debt to finance the investment the company at the end of 2018 began refinancing its debt load which included dropping the interest rate on its senior secured notes the following year to 9875 from 125 it also used the 400 million in cash from the sale of the commercial business in december 2020 to pay down its outstanding debt replacing its notes with a 725 million term loan that carried a lower interest rate gogo sold the commercial aviation business to intelsat sa a satellite company “that 400 million enabled us to pay down debt and create the strategic and financial flexibility that would serve as the foundation for the business going forward” mr rowan said meanwhile privateequity firm gtcr llc in april 2021 converted into equity 1057 million in gogo’s debt issued in 2018 giving the firm about a 29 stake in gogo at the time earlier this month all remaining debtholders converted 103 million of gogo’s remaining outstanding notes into equity reducing the company’s leverage gogo’s net debt declined to 666 million at the end of the first quarter down from 858 million at the end of 2018 its leverage ratio—measured as net debt divided by earnings before interest taxes depreciation and amortization—fell from just over 12 times at the end of 2018 to under four times as of this month gogo’s commercial division lost around 100 million a year prior to the divestment according to mr rowan it accounted for 64 of gogo’s revenue in 2019 the year prior to the sale with business travel—now its sole focus—making up the rest at the root of the financial woes in gogo’s commercialaviation division were a series of operational setbacks and hurdles the company owns a network of about 250 cell towers across north america that transmit broadband service to aircraft flying over land to provide internet service to large commercial planes and on overseas flights gogo contracted with satellite providers including intelsat those contracts ended up being a drag on the business because the company had to buy a fixed amount of capacity that often exceeded customer demand according to mr rowan gogo four years ago discovered the new equipment it put in place to receive satellite internet service needed to be repaired because it leaked when airlines sprayed their planes with deicing fluid in the winter meanwhile to win contracts from airlines including delta air lines inc and american airlines group inc gogo subsidized the cost of the equipment and installation hoping to make back its money on service but consumer demand for its wifi—at times spotty—was weak and airlines historically took a cut of the company’s revenue analysts said the company assumed travelers would pay more for inflight wifi than they ended up paying said lance vitanza managing director at investment firm cowen inc following the sale the company’s finances appear to be on more solid footing gogo focuses exclusively on business aviation—a category that includes corporate jets chartered planes and personal aircraft gogo this month boosted its revenue guidance for the year to a range of 390 million to 400 million representing an increase of nearly 20 from 2021 citing a strong market for private travel the company reported a 222 million profit during the first quarter compared with a 77 million loss a year earlier total revenue rose 26 to 928 million the total number of aircraft for which gogo provided airtoground internet increased 11 from a year earlier to 6526 gogo’s stock price on tuesday closed at 1898 up 58 from a year earlier