PARIS — The business of providing in-flight connectivity (IFC) to commercial airlines continues to be a high-growth story as the latest Smart Plane Indicator survey from Euroconsult demonstrates. Revenue is up and the number of airlines adopting IFC has more than doubled, to 72, as of 2016 compared to 2012.
The total number of IFC-equipped commercial aircraft was 6,500 in 2016 and will more than triple, to more than 24,000, by 2020, according to the Euroconsult forecast. The backlog of jets to be fitted with IFC gear, an operation that can take a plane out of service for a couple of days or more, was 3,800 as of May 1. This figure does not include planes that are moving from Gogo Inc.’s ATG, or air-to-ground, IFC service to the Gogo 2Ku satellite-based service.
As might be expected, the larger fleets, meaning those with more than 50 aircraft, have been quicker to install IFC. Euroconsult found that 48% of these fleets had made the move, compared to just 10% of airline fleets of 21-50 aircraft.
The services provision side is still dominated by five companies. Two of them, Inmarsat and ViaSat Inc., offer Ka-band through their own satellites, although ViaSat also has a Ku-band service in areas without Ka-band coverage.
Inmarsat has deployed its Global Xpress satellites that have both military- and civil-Ka band, and is complementing its satellite-based service in Europe with an ATG offering, being deployed with Deutsche Telekom, called the European Aviation Network.
ViaSat is expanding its North American IFC with the ViaSat-2 satellite, in orbit and scheduled to enter service late this year, and through a joint venture with Paris-based Eutelsat, whose orbiting Ka-Sat capacity will be combined with the ViaSat-1 and ViaSat-2 to cover the North Atlantic air routes.
The three other principal service providers — Panasonic Avionics, Gogo and Global Eagle Entertainment (GEE) — are busy cutting deals with satellite fleet operators to secure sufficient bandwidth to cover customer demand. It’s a strategy fraught with risk as satellite prices continue to decline.
It’s all the more risky because airlines have not yet determined what strategy to adopt for IFC. Will some or all passengers be able to access a basic service as part of their ticket price, or will IFC be “free” only for premium passengers, with the others asked to charge per flight leg? Will third-party revenue — from Netflix, Amazon, Google or others — be a significant factor in the future business model?
Who pays for the IFC hardware installation, and what effect will a free-for-all policy have on the existing in-flight entertainment offers?
Finally, how many service providers will remain standing once the major fleets have signed on to long-term deals and the industry’s growth reaches a plateau? Ferocious growth may not mean ferocious earnings once the major airline fleets are spoken for.