Onboard Wi-Fi Grows In Importance
The airline inflight entertainment and connectivity (IFEC) sector is experiencing major change, with significant consolidation among major players, a new audience to entertain and disruptive technologies on the rise.
IFEC providers Intelsat and Gogo Commercial Aviation (Gogo CA) completed their merger in December 2020, which saw an installed base of more than 3,000 commercial aircraft change hands. Then Viasat and Inmarsat announced their $7.3 billion tie-up in November 2021, with the aim of completion in the 2022 second half.
Valour Consultancy estimates that Viasat and Inmarsat will jointly account for 32% of the global installed fleet and approximately 65% of aircraft scheduled for connection.
The firm had long speculated that IFEC consolidation was inevitable, but the thinking was that this would be driven by satellite operators acquiring IFEC providers, like Intelsat-Gogo, rather than major horizonal consolidation.
Velour inflight connectivity specialist Daniel Welch believes the combination of Viasat and Inmarsat could be good for airlines on two fronts. Existing customers will benefit from the Viasat-3 constellation being interoperable with Inmarsat’s GX network, via a modem upgrade, he said. Meanwhile, airlines at the RFP stage will have one fewer supplier to review. The Viasat-Inmarsat deal will create a giant in the Ka-band segment, but their power gain is likely to be offset by other industry changes, Welch believes.
Historically, airline satcom connectivity has relied on geostationary earth orbit (GEO) satellites—like L-band, Ka-band and Ku-band—which operate from altitudes of around 36,000 km (22,369 miles). However, several suppliers are now looking to use lower-altitude satellites for airline IFEC purposes, such as medium earth orbit (MEO) satellites at 5,000-20,000 km and low earth orbit (LEO) satellites at 500-1,200 km. MEO and LEO satellites can provide high-speed performance because they are closer to earth, creating new connectivity options for airlines.
“LEO satellites will be a real game-changer for inflight connectivity,” Panasonic Avionics product and portfolio management VP Andy Masson said. “First, they are a solution for truly global coverage, even over the poles. In addition, they significantly reduce latency, thereby enhancing the passenger experience.”
Welch agrees this could be a step change.
“I definitely think we’re moving into a really disruptive phase from an IFC perspective,” he said. “On the MEO side, which I think is important to reference because these constellations often get left out of the picture, you’ve got [SES] O3b mPOWER. And then, on the LEO side, the major candidates are SpaceX [Starlink], OneWeb and Telesat [Lightspeed], with Amazon Project Kuiper also likely to be targeting IFC.”
OneWeb—which exited bankruptcy in 2020—has already deployed 428 LEO satellites. That represents two-thirds of the company’s planned 648-satellite LEO network, which will be completed later this year. Meanwhile, the SpaceX Starlink program suffered a setback on Feb. 4, when 40 of 49 LEO satellites were lost because of a geomagnetic storm; however, this is a tiny fraction of over 4,400 LEO satellites already in orbit, with ambitions to grow to 42,000.
Welch believes the Viasat-Inmarsat consolidation is a “natural counter” to the competitive threat posed by LEO operators, like Starlink. “I anticipate this year we’ll see others like Panasonic and Intelsat make their move into this LEO environment,” he said.
Masson confirmed that Panasonic’s expansion into LEO technologies is likely.
“For several years, we have remained bullish about their potential, and we will be incorporating them into our global satellite network in the years ahead,” he said.
But what does this mean for airlines? Welch said LEO and MEO technologies are causing airlines to stall their IFEC decisions, exacerbating delays caused by COVID.
“The message we’ve been giving to carriers is it’s not something where we see an obvious business case that screams out, ‘You need to hold everything; don’t make a decision.’ We don’t see it causing that level of disruption, at least in the early days,” he said.
That is because so many aircraft have already been fitted with Ku and Ka hardware over the past 10 years and the equipment is still generating a business case. Today, 12,000 of 30,000 aircraft worldwide have some form of IFEC system.
“The step down in hardware and data costs [of LEO and MEO] doesn’t appear to justify ripping existing kit from already equipped aircraft,” Welch said.
Anuvu, which was formerly known as Global Eagle Entertainment, is already getting involved in hybrid-satellite networks. Anuvu has over 50 GEO satellites in its network and the Anuvu Constellation will launch in 2023, with two initial microGEO satellites. Meanwhile, on the LEO side, Anuvu will have access to Telesat’s Lightspeed LEO constellation.
“Airlines’ IFEC purchase decisions today must incorporate future compatibility with LEO networks and other emergent technologies,” Anuvu CEO Josh Marks said. “As we approach new technology with LEO, carriers are making long-term decisions that could cost them both money and future flexibility.”
Despite these market changes, some airlines are pressing ahead with their connectivity decisions. LATAM Airlines has selected Intelsat’s 2Ku system for its Airbus narrowbodies, with up to 160 aircraft slated for installation over the next three years. Meanwhile, Greek carrier Aegean Airlines has opted for Inmarsat’s European Aviation Network (EAN) Wi-Fi for its entire fleet of Airbus A320 and A321s, with rollout anticipated by 2025.
“As air travel begins to pick up, offering a seamless passenger experience is critical for airlines and inflight Wi-Fi is an integral part to achieving this,” Aegean said.
Different Passenger Demands
Business travelers have adapted to remote working through the pandemic, creating huge reliance on Zoom, Microsoft Teams and cloud-based storage. Meanwhile, leisure travelers are leading the return to flying and they expect to be able use streaming services, such as Netflix, Spotify and YouTube, as well as social media and messaging platforms, onboard an aircraft. The common denominator is a rise in bandwidth-intensive applications, creating even greater reliance on high-speed internet.
“Passengers expect the same level of inflight connectivity that they have in their living room, and airlines have to adapt,” Intelsat regional director for airlines sales Nick Silvester said. “They used to see it as a cost, but increasingly they see this as an investment.”
Silvester said this is leading to a “digital divide” between airlines with IFEC and those without.
In an Inmarsat survey, 41% of respondents said inflight Wi-Fi has become more important in the wake of the pandemic, and this seems to be backed up by user data.
“Our EAN inflight broadband solution experienced record demand from passengers last year, with takeup rates substantially higher than before the pandemic,” Inmarsat Aviation president Philippe Carette said.
This creates revenue-generating potential for cash-strapped airlines, including digital inflight advertising, which is forecast to grow from $266 million today to $3.6 billion by 2030, according to Valour research. Inmarsat Aviation global sales VP Chris Rogerson said this additional revenue could be “a boon” for airlines on the path to recovery.
Craig Foster, who specializes in inflight entertainment at Valour, sees IFEC increasingly being used as a passenger-service tool.
“The way in which we view IFE is changing,” he said. “We’ve talked about the ‘E’ in IFE becoming less about entertainment, such as showing traditional audio/video content, and more about engagement with the passenger.”
This was already happening pre-COVID, but Foster said the pandemic has “lit a fire” under the trend of touchless and personalized cabin service. For example, Singapore Airlines’ LCC Scoot and Corendon Dutch Airlines are using IFEC for in-seat ordering from passenger devices. For Scoot, the system has removed 156 tonnes of paper annually, saving more than 13 tonnes of fuel and over 41 tonnes of carbon dioxide.
“Since COVID-19 began, passengers have been asked not to walk about the cabin, and since childhood, most of us were taught not to press the flight attendant call button unless absolutely necessary. This is very courteous, but not ideal if the passenger really would like to buy some duty-free [product] or have a refreshment,” Corendon Dutch Airlines manager of cabin crew and inflight sales Gert-Jan de Vries said. “With AirFi’s in-seat ordering, we provide a more discreet way for our guests to request what they want, when they want it. The result is that our guests are more content during the flight and, as an airline, we earn additional revenue that might have otherwise been lost.”
Airlines are also increasingly using IFEC for passenger loyalty.
“What we are seeing is that airlines are rewarding their high-value guests by differentiating the service. So, even if they’re in economy, they’re bundling free Wi-Fi as part of the loyal guest experience,” Welch said.
“You could be next to someone who’s chosen a low-cost seat in economy, and they don’t have any access to Wi-Fi, but you do. It’s a smaller step to offering [connectivity] free to all. It’s free to few; for everyone else, it’s a paid model, or at least a free messaging model that you pay to upgrade to a browsing or streaming service.”
Viasat sees new IFEC business models emerging that could support free connectivity and a better passenger experience, such as free access to premium content, like sports games.
“Passenger engagement and promotional activity will continue to positively impact the value of inflight connectivity. What better opportunity to incentivize someone to try a streaming service or application?” Viasat commercial aviation VP and general manager Don Buchman said.
This push for novel content could become more relevant as airlines strive to keep pace with passenger needs.
“The increased adoption of streaming apps during COVID means that people have seen a lot of Hollywood new releases already,” Anuvu’s Marks said. “How do you find the right new content that is fresh for passengers? We are doing a lot of testing on adding streaming-like, short-form content, as well as independent and special interest content.”
Thales’ InFlyt Experience chief technology officer Tudy Bedou said greater demand from streaming platforms also means content is becoming scarcer. “Acquisition costs doubled with the emergence of the streaming platforms,” he said.
Meanwhile, airlines are preparing for higher levels of cabin integration, such as smart sensors, connected galleys, touchless lavatories and promotional screens.
The whole IFEC value chain is going through significant changes, with suppliers joining forces, evolving content demands and a constant squeeze on airlines to generate revenue and loyalty.
“As technologies become smarter, more digitized and multifunctional, so will disruption to the IFEC supply chain,” Marks said.