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Narrow-body Market Presents Huge Opportunity for W-IFE

London. A new report from award-winning provider of market intelligence services, Valour Consultancy, suggests that wireless in-flight entertainment (W-IFE) will be installed on almost three-quarters of the global narrow-body fleet by 2030, up from just over a third today.

The report, “The Future of in-Flight Entertainment – 2021 Edition,” shows that although W-IFE installs did decrease by 19% in 2020 compared to the previous year, the market has remained resilient in the face of the pandemic with the installed base still managing to grow. This is in contrast to the seatback IFE market, which saw annual installations fall by 60% during the same period and a number of already equipped aircraft removed from the fleet.

David Whelan, author of the report, explains, “The pandemic has accelerated the need to digitalise the aircraft cabin, and many airlines see the installation of W-IFE as a central component of that process, as it allows for touchless seatback pockets, showcasing in-flight catering and retail options on passengers’ own devices. That’s a good example of how W-IFE solutions are moving away from traditional entertainment offerings, such as movies, music and TV shows, and encouraging different forms of ‘in-flight engagement.’”

As a result, Valour Consultancy predicts that there will be a significant change to the way W-IFE systems are installed over the next few years. “Today, the vast majority of W-IFE systems are retrofitted. In 2020, the ratio of retrofit to line fit installations was an unprecedented 96:4 – due in the main to massively reduced aircraft production,” Whelan says.

“However, industry developments, such as the Airbus Open Software Platform (OSP) and Boeing’s Digital Direct, will drive an increasing number of systems fitted at the factory,” he continues. “As such, we believe that line fitments will account for just under half of total W-IFE installs by 2030.”

The report also explores how W-IFE installs are related to the rollout of in-flight connectivity (IFC). In the past few years, unconnected W-IFE systems have taken precedence, but as more airlines adopt IFC in the long-term, Valour foresees that internet-enabled W-IFE will account for 84% of installs by 2030, up from 46% in 2019. “Unconnected offerings will certainly prove useful for airlines looking for a cost-effective way to win back passengers post-COVID, but they will become less relevant as carriers look more holistically at digitalising the aircraft cabin.”

ENDS

For information on the report please contact – david.whelan@valourconsultancy.com

Valour Consultancy is a provider of high-quality market intelligence. Its latest report, “The Future of In-Flight Entertainment – 2021 Edition”, is in its third edition and a key part of the firm’s highly regarded aviation research portfolio. Developed with input from more than 30 interviews with companies across the value chain, the study includes 55 tables and charts along with extensive commentary on key market issues, technology trends and the competitive environment.

Captive Portals Good Focal Point For Building IFC Business Case

It was refreshing to hear Mark Cheyney, Virgin Atlantic’s IFEC Development Manager, talk about the carrier’s in-flight connectivity (IFC) strategy during a recent Global Connected Aircraft podcast. He estimated that rolling out free Wi-Fi will take the airline years, as opposed to months, a statement devoid of marketing spiel. Instead, it reflected awareness of the fact that many airlines today cannot follow the likes of Air New Zealand, JetBlue and Qantas in covering browsing or streaming costs and highlighted the challenge of building a business case for IFC, especially in the current climate.

Cheyney’s interview also highlighted the increased confidence many airlines have around IFC, having grappled with the idea for years; a perspective Emirate’s SVP Retail, IFE & Connectivity Patrick Brannelly attributes partly to confusing marketing material from vendors. What we now see is more carriers with a greater awareness of what success looks like for their brand: A consistent offering across fleets and service providers, and a link between in-flight connectivity and the broader digital passenger journey.

Airlines are gradually moving away from the traditional turnkey offering and are taking on the responsibility for elements of the in-flight Wi-Fi service in pursuit of this success. One of Virgin Atlantic’s goals is to increase take-rates for its IFC services while still operating under a paid-for model. It intends to do so by enhancing the “stickiness” and functionality of its in-flight Wi-Fi portal, a part of the IFC experience many other airlines around the world are also looking at more closely.

Last July, American Airlines introduced a new in-flight Wi-Fi portal to provide a consistent experience across its fleet, harmonising the front end UX as well as the associated payment plans for its Viasat and Gogo-equipped aircraft. Similarly, Cathay Pacific enlisted Deutsche Telekom to provide the IFC portal for its entire connected fleet. It began rolling out on the airline’s A350s at the end of last year, offering a single-click login and “smart-pricing” models based on the length of the flight segment. Both solutions underscore the importance of removing the traditional pain points associated with paying for access to in-flight Wi-Fi by streamlining payment processes.

But the portal will quickly become so much more than a tool for moving take rates incrementally to the right. When executed well, an IFC portal becomes a central gateway to sources of ancillary revenue generation and loyalty, two central components for success in terms of airlines building back from the pandemic. A place where airlines can showcase and allow passengers to engage with the partnerships and solutions designed to enhance the customer experience. American’s upgraded portal, for example, is being tied to its loyalty program, which allows for more personalised features, including the ability to store user preferences for subsequent travel. Similarly, the “.air” portal deployed across IAG airlines allows passengers to use a single set of log-in credentials, no matter which airline they fly with.

IAG has tasked Immfly, the creators of the .air portal, to continue its evolution with new features, products and services that will undoubtedly tie into the wireless IFE provider’s advertising spin-off, QuiverTree Media, formed in October 2020. Immfly is one of an increasing number of companies helping airlines get more from IFC through powerful and engaging portals. Another is Finland-based Reaktor, a software specialist that has won awards for its work with Finnair, and worked with others including airBaltic, ANA and TAP Portugal.

Reaktor is known to support airlines with linking the inflight experience with the rest of the passenger journey. Its Pay Everywhere concept envisages travellers adding a payment method once, and it becoming available for use across the airline’s services, including in-flight. This way, all the data about passengers’ shopping behaviour is in one place, unlocking the potential for a truly seamless and personalised travel experience.

In the immediate future, we expect to see more examples of airlines making IFC portals a key piece of their in-flight product strategy, with onboard Wi-Fi seen more as an enabler rather than standalone offering. This trend will be amplified by the need for touchless access to products and services during the industry’s immediate recovery from COVID-19. Are we suggesting the portal is a silver bullet to completely unlock the IFC business model? No. But those airlines which embrace the portal as a central hub for onboard services and as a link to the broader digital journey stand a better chance of building a case to move to a free IFC model sooner than anticipated.

This subject is one of many discussed in our newly released report – The Future of IFC – 2020.

Market Roundup on Maritime Connectivity Acquisitions

Acquisitions in Maritime Connectivity

Over the last two months, the maritime and offshore satellite connectivity market has been sparked with a bout of merger and acquisition activities.

ViaSat to acquire Rignet

In late December 2020, ViaSat announced an agreement to acquire RigNet, an American energy connectivity provider for approximately $222 million. It is believed RigNet’s customer base in the energy market is of strong interest to ViaSat, with the upcoming launch of ViaSat-3, a new constellation of three satellites.

About RigNet

Founded in 2001, RigNet is a US-based service provider of connectivity services, applications and cybersecurity solutions primarily for the offshore oil, gas and energy market. The company is headquartered in Houston (USA) and also has offices in the UK, Singapore, Brazil and another US office in Louisiana. It employs roughly 650 staff globally.

In its latest publicly released financials, Q3 2020, the firm recorded revenues of almost $161 million for the first nine months of 2020, down by $18 million from the same period in 2019. RigNet recorded a net loss of $36.5 million for the same period in 2020, almost double of that in 2019. Not exactly a rosy trajectory over the last two years.

The company divides its business into four segments: managed communications services (MCS), applications and IoT, systems integration, and corporate with its biggest segment, MCS, suffering in 2020 compared to 2019.

However, not all is doom and gloom when RigNet, in October 2020, announced a multiple-year contract with an undisclosed offshore drilling contractor to provide fully MCS and global satellite access to its entire global drilling fleet. The new contract also includes RigNet’s machine learning platform, Intelie, and other supplementary applications, intelligence, and network security solutions.

One key challenges the company has faced is the diminishing number of sites that it manages for MCS; a count in Q3 2020 noted 1,190 sites compared to 1,229 in Q2 2020. In Q3 2019, the firm held 1,386 sites.

Valour’s Take

In Valour’s opinion, the justifications for ViaSat intent to purchase RigNet is not some paradigm leap in market growth or unseen grab of untapped assets.

The move is relatively simple one. RigNet provides a relatively steady business in an uncertain business environment, the energy sector, at the moment.

It allows ViaSat to slowly grow its nascent maritime connectivity proposition and meld it with RigNet’s well-known managed communications services business.

This business has a reasonable array of customers, 500 companies, which encompasses 369 offshore production sites, 173 maritime vessels and a number of other sites.

Finally, one of the main quotes of the great Warren Buffet, always try and buy under-priced assets. At the moment, most energy related companies are relatively lowly priced.

Marlink proposed acquisition of ITC Global

Marlink Group, owned by Apax Partners (France), has signed an agreement to acquire 100 per cent of ITC Global, a maritime and energy service provide owned by Panasonic. The value of the deal as yet to be disclosed, if it ever will.

My question is what value ITC Global brings to Marlink Group, the leading retail maritime service provider?

ITC Global

ITC Global is an American satellite-based communications provider which primarily serves the energy, mining, maritime, and NGO markets. The company was originally set up in 2001 and has its headquarters in Houston, Texas. Interestingly, the firm was acquired by Panasonic in 2015 and now operates as a subsidiary of the Japanese company.

In January 2020, ITC Global partnered with Inmarsat to expand its service to providing Ka-band coverage to energy, maritime and yachting customers. The five-year strategic partnership means ITC Global will act as a reseller for FX. ITC Global’s parent company, Panasonic Avionics, signed a similar agreement with Inmarsat in 2018 to provide inflight connectivity.

Valour’s Take

Marlink Group’s potential acquisition of ITC Global is an interesting move within the maritime connectivity sphere.

Not to second guess Marlink’s case, the firm’s maritime satellite connectivity solution, SeaLink, has made remarkable progress in recent years. Over 2020, the firm increased its SeaLink vessel count by 1,000 from 2019.

That said, Marlink Group, in the past, has not been shy to purchase some key players; OmniAccess, Telemar Group, Radio Holland’s VSAT distribution business over 2016 and 2017. Nonetheless, Marlink has strategised a strong surge of organic growth since.

The proposed purchase of ITC highlights two things. Firstly, this period of organic growth has possibly to come to an end. In the Sigmoid Curve, there are critical phases. Development, introduction, growth, maturity and decline. To arrest the decline, it is vital to catch the next opportunity on the rise, before the current one fells. I believe we are in a spell of acquisitions and mergers within the industry with companies scoping out potential suitors and targets.

Marlink Group is very well known for its presence in the maritime connectivity commercial merchant market, and high-end leisure. As such, ITC Global’s strong maritime offshore energy, passenger and enterprise customer base provides Marlink group with a new market segment to master.

Looking at this from other side of the fence, in my opinion, Panasonic Group has conducted a thorough review of its business operations over the last twelve months. This will indubitably entailed picking which businesses and operations will see the group through, in the long term. Unfortunately, it would seem, Panasonic doesn’t see ITC Global as a long term fit for its business portfolio.

Finally, with the downturn of the energy sector, and speculating that Panasonic were looking for an exit plan in maritime, Marlink Group will likely achieve a very good deal price for ITC Global.

What’s next

It is predicted we will see three more notable mergers and acquisitions over the course of 2021.

Can VSAT, Smart Shipping Demand Revive the Hard-Hit Maritime Connectivity Market?

This article was first published in Via Satellite.

The past year will be known as a year of strife and great difficulty for the maritime satellite communication market, as a number of key applications have been greatly affected by the restrictions of the COVID-19 pandemic.  In Valour Consultancy’s H1 2020 Maritime Connectivity report, we highlighted how the trade sanctions between the United States and the Republic of China badly affected world trade. The current and prolonged effects of COVID-19 have, and will continue to be much worse. However, the pandemic has also highlighted the need for technologies that will provide the “green shoots” of recovery in the digitalization and communications realm of commercial maritime.

Reflections on 2020

The L-band market is believed to have been quite resilient to the troubles of 2020, with estimated global revenues in 2020 assumed to have declined by $25 million from 2019, and the number of vessels using L-band technology decreasing by 2,680 in the same period. Inmarsat, the biggest maritime L-band provider, no longer discloses its financial figures since it was purchased. However, it’s FleetBroadband business is expected to have only slightly reduced from 2019.

Iridium, like many companies, has only released its Third Quarter (Q3) 2020 financial results at this point. But Iridium’s commercial voice and data service (maritime forms part of this segmentation) revenues were down by $3 million for the first nine months of 2020, compared to the same period in 2019. Furthermore, the majority of this drop is attributed to the aviation rather maritime operations, as stated in the financial report. Its broadband revenues were actually up $4 million, and Internet of Things (IoT) data revenues flat for the same first nine months of 2020 versus 2019.

Delving into the Very Small Aperture Terminal (VSAT) market, Valour Consultancy estimates the retail market, the total value of airtime sold directly to the end user, dropped to $1 billion in 2020, a decline from $1.15 billion in 2019.

The passenger market, in particular sea cruises, has come to a complete standstill. The number of active VSAT connected passenger vessels have fallen from nearly 4,100 in 2019, to less than 700 in 2020. Although this is a dramatic market fall, the key question is what portion of service fees for satellite connectivity will redundant vessels have to pay — full, partial, or none?

The answer is yes and no.

From a wholesale perspective, large batches of capacity and bandwidth are agreed and contractual obligations for payment are scheduled years in advance. As such, even though demand for connectivity has reduced due to vessels being docked, service providers will nonetheless still need to pay for these services. The key questions are whether the end users will pay the service providers, or deferred? One could see how working in Inmarsat or Marlink’s accounts receivable team could be challenging.

Service providers offering customers flexible payment term contracts would have brought in only a  fraction of their 2019 revenues if customers are not contractually obliged to pay for redundant vessels. As we understand it, most merchant vendors will have to pay 80% of their monthly contracted ARPU if not in use. With passenger cruise vessels, it’s uncertain whether they will pay the full ARPU per vessel in their service level agreements. My guess is yes — but smart connectivity providers may opt to tie their customers down to longer contract terms if customers are unable to pay current bills.

Offshore energy has also been badly hit, and Valour Consultancy anticipates 2,500 vessels/assets were made redundant in 2020. However, companies in this application are much more astute at catering to this in their service level agreements and have clauses for reduced service payments during periods of downtime.

The challenge with articulating how revenues are affected within the industry depends on multiple factors, such as wholesale or retail provider of connectivity services. Our gut feeling is maritime wholesale satellite revenues were flat to slightly up in 2020, compared to 2019; however, service provider retail revenues (to the end user) were possibly down by between 10-15%.

Revenues generated from 2020 VSAT Ku- and C-band equipped vessel market are predicted to decline by 19% and 17% from 2019’s standings, respectively. With the number of active vessels using the Ku- and C-band systems are also anticipated to decline between minus 11% and 5% over the same period.

Interestingly, Inmarsat has reported an increase in its FX fleet and as such, we have noted an increase in Ka-band equipped vessels, standing around an estimated 10,000 ships by the end of 2020. The company no longer reports its financial results; however, Valour Consultancy believes the firm has increased its FX vessel count by 10% and reflected this in the global Ka-band commercial revenues, thought to be around $255 million by the end of 2020.

The Next 12 Months

In the long term, vessel numbers with VSAT connectivity are expected to increase to nearly 66,000 by the end of 2029, and we project to see maritime VSAT revenues return to the same levels as 2019. The take up of VSAT services for broadband connectivity, combined with a decline of L-band connected vessels, will still remain the primary driver of the market going forward. A notable milestone is retail VSAT and Mobile Satellite Service (MSS) maritime services surpassing $2 billion by the end of 2025.

A Bright Spot in Smart Shipping

Despite the downturn of maritime connectivity services in 2020, one technology segment within the market has grown and will continue growing for many years: maritime digital applications and smart shipping technologies.

There is a realization that maritime digital applications and smart shipping technologies have come to the forefront of the industry. With the restricted movement of crew, depressed freight rates due to limited demand, and closed facilities, monitoring and managing assets without human interaction is crucial. The largest penetration of smart shipping technologies is within the passenger and offshore energy markets. However, we actually see the biggest untapped potential within the merchant sector. Container vessels, tankers, and bulk carriers are all prime targets for these solutions. Valour Consultancy estimates smart shipping solutions sold to merchant market amounted to $139 million in 2019 and will almost quadruple by the end of the decade.

Valour Consultancy foresees the current pick up of the merchant market as a positive sign for smart shipping and maritime IoT services. With the operational headaches and inability to perform key functions at sea, shipping companies will likely invest heavily in remote monitoring, optimizations, and control.

Airlines Must Break Down Barriers to Benefit from In-Flight Digital Advertising

Global digital advertising spend in 2020 reached US$332 billion and was set to overtake traditional, non-digital ad spend for the first time. With this in mind, it may come as a surprise that in-flight digital advertising is far from lucrative. With fill rates currently hovering around just 30% for video adverts and 20% for static/display adverts, IFEC-driven advertising yielded airlines an estimated $266 million in 2019.

This is frustratingly low considering passengers travelling by air, a captive audience with proven disposable income, represent a desirable demographic that advertisers are keen to reach. A survey from in-flight programmatic advertising specialists Inadvia on the impact of COVID-19 saw 82% of respondents say reaching in-market travellers will be important in their marketing/media strategy following the pandemic.

So, what’s stopping advertisers from working more expansively with airlines? The reasons are many. Passenger numbers don’t always give brands the scale they want, and lengthy IFE content refresh cycles of 30-40 days preclude them from many campaigns.

In some cases, airlines themselves are the issue, with strict policies about who and what they are willing to promote. Such policies prevent some carriers from engaging meaningfully with programmatic advertising, a solution that automates the advertising workflow, from trading (the buying and selling of media), to serving (delivering the right ad to the right person) and reporting (proving the ad was served to the person). There’s a common misconception that programmatic advertising means a loss of control over the ads featured, but this isn’t the case – platforms such as Inadvia’s allow blacklisted brands or sectors to be inserted up-front and to ensure creative approval is received for every campaign. More and more advertisers are buying and running their digital campaigns in this way today.

Another barrier is the airline industry’s inability to target adverts to passengers beyond those flying on certain city pairs, for example, as well as the lack of available analytics regarding an ad’s performance ­– some airlines can still only provide a picture or video of an ad playing on a seatback screen. This is changing, albeit slowly, as industry bodies such as APEX’s Ad Delivery Working Group forge ahead with creating an industry standard for advertising data; and its Airline Advertising and Ancillary Revenue Committee (ARC) works to simplify related discussions between all involved parties.

Another significant development is that new in-flight entertainment (IFE) platforms are being designed with digital advertising capabilities and e-commerce in mind. Many now focus on engagement rather than traditional entertainment, such as movies and TV shows. ScootHub, developed together by AirFi and Scoot’s catering partner SATS, includes access to travel guides and an in-flight map, which provide the opportunity for geo-specific ads. Similarly, easyJet is trialling ePax, a platform created by Black Swan Data and catering company gategroup, that will use machine learning to present customers “with more of what they want, based on factors such as flight destination, flight duration and time of day, as well as insights generated by a wealth of inflight retail data.”

With Google Chrome set to follow Safari and Firefox and end its support for third-party cookies by 2022, publishers who collect and own their own data (referred to as first-party data) will be in an incredibly strong position and become far more enticing partners for advertisers searching for fully transparent and compliant ways to reach their target audiences. As well as the contextual insights mentioned above, airlines naturally have access to a range of first-party data from customers, such as their age, gender, frequent flyer status and more. If this is embraced properly, there is a huge opportunity to attract significantly more advertising investment into the sector.

We predict that while the take rate for seatback IFE will remain at 75% between now and 2030, a positive experience with increasingly sophisticated wireless IFE (W-IFE) platforms will drive their take rate from around 30% today up to 50% by 2030. Likewise, increased targeting, combined with more flexibility from airlines – like the incorporation of dynamic ad insertion, which allows advertisers to act on any analytics they receive by swapping out their creative updates more frequently – will also improve the uptake of digital in-flight ads.

None of the aforementioned solutions require IFC to function (indeed, the real-time bidding process used for some programmatic ads on the ground would be a costly and unnecessary use of an airline’s available bandwidth). However, targeting and measurement will continue to improve as a result of more widespread IFC. Connectivity will certainly make display ads more attractive, because passengers can click through to beyond a bespoke-built offline mini site, the cost- and time-intensive option for airlines without IFC. Advertisers will be willing to pay to transact with passengers more easily.

IFC will also mean there’s potential for passengers to engage with more ads. A greater adoption of freemium models will likely require passengers to interact with video and display ads before their sessions commence. In future, interstitial ads could also be introduced, much like those in use by YouTube. Between now and 2030, there’s potential for the take rate for freemium IFC to break past the 60% mark, a further attraction for advertisers.

As all these changes continue and programmatic advertising becomes more widespread, we believe the fill rates for both video and static/display adverts will top out at 80% by 2026 (it’s unlikely to hit 100% because there will always be routes or targeting criteria less desirable to advertisers than others).

Overall, we predict the in-flight digital advertising market will be worth $3.3 billion by 2030, which is representative of a 10-year CAGR between 2020 and 2030 of 42.9 per cent – quite astounding given the extent to which revenues have declined in 2020 and 2021 due to COVID-19. It’s finally time for the aviation industry to catch up with the capabilities – and the rewards – seen in digital ad space on the ground. More on this topic can be found in Valour Consultancy’s forthcoming report “The Future of In-Flight Entertainment Content.

Holistic Repurposing of Offshore Energy Assets – 2020 – Free Whitepaper

Valour Consultancy is pleased to release its latest whitepaper covering the “Repurposing of Offshore Energy Assets”, primarily focused upon those in the North Sea.

Offshore platforms are traditionally viewed as single-purpose structures supported by a small village of personnel devoted to that purpose. In the same way that many villages renewed themselves after their main industry declined, for example cotton mills, the coal industry and, in some places, the oilfield, platforms need to adopt a portfolio of alternative commercial endeavours to prosper. This paper suggests that instead of expending large sums of money to remove the structures, that money is used to regenerate the platforms providing income and work and benefitting the country and the company accomplishing the refit.

This paper examines the investigation into alternative uses which appear, so far, to address single option use, either wind power or wave power or other alternative, arriving at the unsurprising conclusion that there would be a negative return on investment (ROI). The paper goes on to suggest that a synergistic combination of six or more processes installed on a platform would not only be profitable but also assist the company responsible for the platform and nation in whose territory the platform stands meet its carbon reduction targets.

The paper offers an alternative scenario in which geothermal is used to power the platform, while wind and wave power are exported to shore. It also suggest that the exclusion zone around the platform is used for aquaculture with nutrient poor surface water fortified by seawater drawn from just above the seabed. The seabed can also be used for energy storage. Seaweed grown in this scenario could be used for medicine, food, chemicals or for carbon sequestration or from ethanol production. Further projects to generate revenue suggested are making fresh water for export to drought-stricken Southern European and North African countries and using the platform as a base for tethered dirigibles which would act as low-cost communication hubs for countries bordering the North Sea and as monitoring stations for shipping and fishing vessels.

The existing subsea pipeline network would be ideal for transport of product to shore. Advanced AI and monitored automation means that manning on such facilities would be minimised and may even be discounted altogether.

The whitepaper suggests that it is eminently possible to have all these projects on-going on the same platform at the same time. Indeed, with sufficient process integration, and smart design, these projects can assist each other. Oilfield engineers develop a unique suite of capabilities while designing and building platforms and oil wells and oil distribution pipelines that would allow them to draw on the many disciplines that would be needed for such a diverse project.

Valour Announces Several Key Improvements to its Quarterly IFE and IFC Trackers

In 2016, to supplement our in-depth annual deep dive into the in-flight connectivity (IFC) market, Valour Consultancy launched a quarterly tracker product designed to keep those with a vested interest in the area updated on installation activity and key trends. One year later, we announced a similar product, which tracks the market for wireless in-flight entertainment (W-IFE) systems. Both trackers were the first of their kind and have proved to be extremely popular with our client base, which, we’re proud to say, consists of a “who’s who” of the IFEC and cabin technology value chain.

Not content to rest on our laurels, and in keeping with our ongoing commitment to continually improve and adapt, both products have undergone a transformation in 2020. The quarterly IFC tracker, for example, has been hugely expanded to show the total addressable market of aircraft that have not yet installed a system and are not currently earmarked to have one fitted in future. As a result of the massive disruption caused by COVID-19, we also added a new feature allowing users to see which connected aircraft are currently active, versus those that are grounded. The quarterly W-IFE tracker saw the “W” dropped as we expanded our focus to the entirety of the IFE market, providing data on seatback and overhead IFE system equipage, in addition to wireless. Another addition to the IFE data was the inclusion of server and WAP manufacturers for each deployment.

The biggest change, however, is the way in which we present this data. For the last four years, subscribers have received an Excel workbook containing current and historic data, as well as a PowerPoint summary detailing key announcements during the reporting period and its effect on the numbers contained within. Starting with the IFC tracker, we’ve now created an additional online user-friendly dashboard that allows clients to better visualise and interact with the data. It includes:

  • Dynamic charts that allow you to remove specific data and export them to JPEGs for your presentations
  • Raw quarterly data that can be filtered based on your query and exported to CSV or Excel
  • Raw addressable market data that can be filtered based on your query and exported to CSV or Excel

We’re in the process of bringing to life our IFE data in the same way and starting in 2021, we’ll also begin to dive more deeply into the type of content being provided on wireless systems. This is especially important as the “E” in IFE moves away from entertainment in the traditional sense of the word and more about maximising engagement with passengers. To this end, you’ll soon be able to see whether a system shows movie/TV content, as well as games, ePublications/eBooks, destination content, seat-to-seat chat, music/other audio, buy-on-board, plus whether or not it forms the basis of an IFC portal too.

Looking ahead, we’ve every intention of continuing to modernise our deliverables to generate better insight in a more efficient way. What subscribers see today is stage one of this process and further enhancements will be made incrementally in the future. Indeed, we’re close to finalising a partnership that will give us the ability to provide IFE and IFC equipage down to the tail level. More information on this important development will be provided via the usual channels in due course.

If you’d like any additional information on these trackers or if you have any thoughts or feedback on other improvements that we could make, then we’d be delighted to hear from you. And if you’d like to arrange an online demonstration to take a closer look at what we have to offer, then please let us know. We can be reached at info@valourconsultancy.com.

Marlink Remains Largest Retail VSAT Service Provider in 2019

In Valour Consultancy’s latest maritime connectivity report, The Future of Maritime Connectivity – 2020 edition, Marlink Group remained the largest retail service provider for VSAT communication services in 2019. The global service provider increased its revenue market share from 23.1 per cent in 2018, to 23.9 per cent in 2019. 

Marlink has proactive approach to customer service ensuring all its clients and their vessels are functioning at an optimal performance. This has been a particularly poignant matter during the COVID-19 pandemic with large numbers of merchant seafarers stranded at sea away from their friends and families. In addition, the company’s history in the maritime market and strength across all the applications at the firm has also aided its mission of staying at the top of the VSAT retail market. Valour Consultancy estimates that Marlink had more than seven thousand vessels subscribed to its SeaLink VSAT service today. 

Valour Consultancy ranked Speedcast second in the retail VSAT market in 2019. Like Marlink, the company also increased its market share from 2018 primarily due to its acquisition of Globecomm. However, the firm has gone through some financial turmoil recently, filing for Chapter 11 in April 2020 and it will be interesting to see how it will perform in the next 12 months. 

Inmarsat continues to play a strong dual role in the market, providing wholesale MSS and VSAT satellite capacity to its value added resellers (service providers) and also serving some key customers directly. The firm, purchased by a private equity consortium in 2019, has done a good job of switching its large existing MSS customer base to its FX VSAT offerings whilst also getting its VARS to commit to fulfilling a number of vessels on its FX services. An example of this is demonstrated by Inmarsat’s strong relationship with Mitsui O.S.K. Lines (MOL), one of Japan’s largest shipping companies, who announced they plan to continue the roll out of FX across the remainder of all its owned and managed vessels  

Another notable maritime connectivity player has been KVH Industries. The firm has performed exceedingly well with its Agile Plans VSAT leasing service and reported shipping more than 10,000 VSAT antennas cumulatively earlier this year. Note this is across all mobility and land verticals. Nevertheless, its strength does reside within maritime and the firm has recently introduced its successful leasing plan to leisure market customers, opening up a significant number of vessels for new business. 

Unfortunately, Global Eagle has suffered somewhat over recent years and its market share dropped from 10 per cent in 2018 to less than 8 per cent in 2019. This is as a result of having lost a number of key passenger and offshore energy clients to other service providers in recent years. 

Valour Consultancy’s take on the retail VSAT maritime connectivity standings in 2019: 

Looking Forward 

According to the IMF in its June 2020 outlook update  – “Global growth is projected to decline by  –4.9 per cent in 2020, 1.9 percentage points below the April 2020 World Economic Outlook (WEO) forecast. The COVID-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated, and the recovery is projected to be more gradual than previously forecast. In 2021 global growth is projected at 5.4 per cent. Overall, this would leave 2021 GDP some 6.5 percentage points lower than in the pre-COVID-19 projections of January 2020. The adverse impact on low-income households is particularly acute, imperiling the significant progress made in reducing extreme poverty in the world since the 1990s 

Valour Consultancy anticipates glass half full perspective. Yes, passenger and offshore energy markets have been decimated by the fear of the pandemic, travel restrictions and the unknown of what is nextNonetheless, other markets have remained less affected, if not up from 2019. The effect of having so many seafarers in the merchant market stranded at sea has been to increase crew welfare video, messaging and telephone communication usage over the last six months. Some of the super wealthy have also seconded themselves on their private superyachts for the period. In addition, the demand for overall food produce such as seafood has remained stable and the market is likely to remain steady over the year. There are many notable pain points in maritime satellite connectivity right now but also a few good ones. Our maritime connectivity report will be providing an October update on 2020 and new projections for 2021 onwards. For more information please click here 

GX+ Further Evidence North America Remains Key IFC Battleground

Many reading this will be well aware of how important the North America region has been in the context of IFC. Carriers in the region were amongst the early adopters of IFC, globally, aided by the launch of Gogo’s Air-to-Ground network, which at one point served more than 2,600 aircraft. In true chicken and egg fashion, a number of familiar names in the industry are headquartered out of North America too, most notably Astronics, the aforementioned Gogo, Global Eagle, Honeywell, Intelsat, Viasat…the list goes on. As a result, the region accounted for 89 per cent of total connections back in 2014 and this share still hovered close to the 60 per cent mark at the end of Q2 2020, despite increased IFC adoption around the world.

Over time though, broad adoption of IFC has led to the addressable market in North America falling quite substantially in recent years, down to approximately 20 per cent of commercial aircraft originating in the region. Of these aircraft yet to find a home with an IFC service provider, most are now regional jets that tend to fly short segments and are therefore arguably better suited to wireless-IFE rather than full-blown IFC. This has naturally led vendors to seek new airline wins elsewhere, with a substantial number of aircraft originating out of Asia, Europe and South America still unconnected today.

Taking the above into account, one could be forgiven for questioning the decision to launch a US-based network, as Inmarsat and Hughes did last month with the unveiling of GX+. But it is worth noting that the top 6 largest connected fleets, globally, are all based in North America, and this doesn’t factor in Air Canada, which sits 11th on that list. Furthermore, a number of the aircraft within these connected fleets are coming to the end of existing contracts and/or are equipped with first generation hardware that is quickly becoming obsolete versus current demand and the new hardware now available on the market.

For the prize on offer, one need look no further than Viasat. In the last two years or so, the Carlsbad-based internet service provider has significantly increased its installed base of connected aircraft and is estimated to have a 16 per cent share of all connected commercial aircraft at the end of Q2 2020 (up from 0.5 per cent at the end of 2017*). A majority of this increase can be attributed to the retrofit programs it has won in the U.S alone, most notably with American Airlines and jetBlue. In the case of American Airlines, Viasat added more than 500 single aisle aircraft to its network across a two-year window. Opportunities of this size, globally, are becoming increasingly rare as more of the larger established carriers now typically offer an IFC service on board or are already under contract to do so in the near future. China is a notable exception here but is excluded from the point as regulation will limit involvement from vendors that are not registered in Mainland China and have the appropriate licences. The impact of COVID-19 is also expected to dampen new opportunities, globally, through airline bankruptcies and limiting non-essential expenditure.

It is common knowledge that Inmarsat has long sought a route into the North American IFC market, and it had previously hinted at collaborating with Hughes to support its cause. But to do so at this stage, the operator will go toe-to-toe with Intelsat (through its acquisition of Gogo) and Viasat, two players which, like Inmarsat, offer customers the cost and performance benefits that come through vertical alignment; a sign of things to come, globally, in the IFC sector as far as we’re concerned. Clearly then, whilst vendors will continue to skirmish for airline wins all over the world, North America is seen as a market ripe for disruption in the coming years. This is great news for carriers in the region but is anticipated to pose a significant challenge to incumbents such as Global Eagle and Panasonic Avionics that, like most, are hurting from the impact of COVID-19, but are not in the position to pass on the benefits of being vertically aligned.

*- excludes aircraft that were serviced by Thales

Biometrics and Digital Identity are Key in Ensuring the Future of Air Travel

Guest blog written by John Devlin, co-founder of P.A.ID Strategies, with whom we are partnered on producing a soon-to-be published report on smart airport technologies.

Air travel has been massively impacted and disrupted in the past six months. Until Covid-19 hit, the biggest challenge facing airport operators and airlines was how to cope with an ever-increasing demand for air travel and the limited infrastructure to support it. Now, they are scrambling for survival as the industry has been turned on its head and looking to cut costs and develop new means of handling and processing passengers.

Here are a few points demonstrating how steep a cliff the industry has fallen off:

  • At the height of the pandemic and lockdowns in various countries, passenger volumes were down over 90% and in August were still ~80% down on the same time last year in the peak summer months
  • As a result, the Airports Council International (ACI) stated that airports globally will see an expected drop in income of $104.5 billion in 2020 with passenger volumes revised down from 9.4 to 3.8 billion (a 59.6% decline)
  • Heathrow Airport alone estimates that Covid-19 has cost it £1 billion since March
  • Gatwick Airport, London, announced in its 1H20 results that passenger numbers were down 66% for the first 6 months of the year, with revenues declining 61.3% effecting a loss of £321 million

It doesn’t stop there. Whilst flight volumes are increasing, passenger numbers are lagging. The bulk of an airport’s operating costs are related to airport movements whilst their revenues come from passenger spend, which further increases price pressure on airports.

  • Accordingly, Gatwick has cut CAPEX by £157 million this year and plans cuts of £196 million for 2021 with OPEX reduced by £100 million – but this is by compromising and consolidating air traffic into a single terminal, over 70% of staff furloughed and large scale redundancies are planned

Whilst the numbers are (slowly) ticking upwards, our expectation is that passenger volumes will have only recovered to near 2019 numbers by 2023-24, so it is important for airports and airlines to find new, more efficient ways to operate their businesses and recover at least some of their lost revenues.

New Partnerships, Processes and Strategies to Ensure Survival and Plan for the Future

Airports and airlines are looking to implement solutions to enhance “safety” (or the perception of it) and encourage passengers back to fill the flights that are taking place. There are various approaches and technologies that can help them do this. We initially looked at the adoption of biometrics and digital identity in airports three years ago and there has been an increasing number of pilots and trials in the time since. COVID-19 will only accelerate adoption of eGates and self-service kiosks with airports keen to reduce costs and increase efficiency with more automation so that they can prioritise their resources to where needed given the huge drop-off in passenger volumes.

Additionally, new business models and partnerships are being explored by sector specialists so that airports, airlines and traditional suppliers can work together more closely. There is also a move away from the bespoke solutions typically demanded in aviation to more COTS approaches and more use of the public cloud to knit all the various systems together and reduce costs, improve delivery times, etc.

Further, the sector is looking to reassure travellers by reducing human interactions and minimising necessary contact. The added advantage is that these solutions also (typically) reduce OPEX and increase efficiency, plus give more control and increase digital footprint, which gives more data on users and can help drive further advances with analytics and track and trace (if necessary and acceptable).

A Smarter and Better Passenger Experience Utilising Biometrics, Digital Identity and Mobile

There is even a potential silver lining, once the immediate concerns have been addressed. Whilst numbers are depressed, airports and airlines are able to restructure their businesses and operational processes, form new partnerships, adopt new business models and plan how they will not only recover but build back better. If they are able to garner industry and government support, new standards and processes, based upon smartphones, biometrics and digital identity, can be designed and implemented to give the customer more choice and flexibility without the restrictions of traditional inspections. Want to have your bag-tags automatically printed when you enter the airport? And to create a biometric token when you get to the airport so you can seamlessly make your way through all passenger checkpoints and board your plane without having to repeatedly show your passport and boarding pass? How about checking-in to your flight when checking out of your hotel? Give permission for the airline to share your digital identity with your destination country for quicker passage through customs and border control? Well, soon we may be able to do just that.

Note: P.A.ID Strategies and Valour Consultancy have combined their respective areas of expertise in biometrics, identity, security and aviation to develop a new market research report entitled “The Seamless Passenger Journey in Smart Airports”. The report will assess the potential for biometrics, digital identity and smart solutions for self-service, automation and traveller processing to improve the passenger experience, increase efficiency and build revenue streams for airports and airlines as they initially cope with the disruption resulting from COVID-19 and plan their strategies to recover and build back better. More information and the report proposal can be found here: https://valourconsultancy.com/wp-content/uploads/2020/10/The-Seamless-Passenger-Journey-in-Smart-Airports-Report-Proposal.pdf

With New LCC Announcements Set to Come, Wireless IFE Remains Robust in the Face of COVID

One of the first questions we were asked once the enormity of the COVID-19 situation became apparent some seven months ago was its likely impact on the in-flight entertainment (IFE) industry. Indeed, one of the messages we received from a well-respected name in the industry back in March was that he suspected “traditional IFE would not bounce back”. At that time, it was not hard to see why. Throughout the travel continuum, there is an obvious reluctance for people to interact with touchscreens of any kind, be they installed in the seatback or situated on a kiosk in the airport check-in area. In fact, the decision has, in some cases, been taken out of the hands of passengers and airlines alike. India’s Ministry of Civil Aviation, for example, suspended the use of seatback displays as a health and safety measure to limit the spread of the virus.

Then there are the not insignificant costs associated with content acquisition and maintenance, which have already compelled financially squeezed airlines to switch off systems and in some cases, I’m sure, think twice about whether they want to install the technology in future. Additionally, seatback IFE is inextricably tied to the hugely impacted wide-body market – almost every one of these aircraft is delivered with an embedded system fitted at the factory and this has been the case for years now. To put this into perspective, a total of 76 twin-aisle aircraft (excluding freighters and so-called bizliners) were delivered by Airbus and Boeing between the start of this year and August 31st. In the same period last year, the number was 212. That’s a 64 per cent reduction in the number of aircraft that would normally make up a sizeable portion of the seatback IFE market.

Sadly, the prospects for wide-bodies in the short- to medium term don’t look all that rosy either. According to our own internal forecast, deliveries won’t return to pre-pandemic levels until around 2026. We must also consider that the attach rate for seatback IFE on narrow-bodies has been falling for a while now. There have been several recent high profile examples where carriers – particularly in North America where adoption of seatback IFE in the single aisle market has always been higher – have opted against fitting these systems on their newest aircraft. In 2019, the attach rate stood at just under 26 per cent and we expect this to fall to 13 per cent by 2030. The decline would be even more pronounced were it not for the forthcoming arrival of long range single aisle aircraft like the Airbus A321XLR (and any rival Boeing might bring out in the next few years), which will doubtless be equipped with wide-body-esque amenities.

Enter wireless IFE (W-IFE), which has exhibited remarkable growth in recent years, and which looks set to continue on this trajectory from here on in. Why? Two reasons: First, W-IFE costs a lot less than seatback IFE – an extremely important consideration in these unprecedented times. In fact, we estimate that the average cost per seat for W-IFE (both fixed and portable) was about $381 in 2019. The equivalent figure for seatback IFE was just over $6,000. And it’s getting less expensive too thanks to a frankly insane number of vendors vying for a slice of the pie and with new entrants joining the party all the time. VuLiv and GoMedia being the two most recent examples. Second, W-IFE, by its very nature, means using your own device, which is undeniably preferable to touching a screen many others have come into contact with previously. In the interests of balance, cleaning regimes have been stepped up a notch since the pandemic was declared and our expectation is that the PED will become the de-facto control device for seatback systems in future. Furthermore, hardware development has arguably reached its zenith and rapid commoditisation will ensure that the cost per seat of seatback IFE will fall hugely over the next few years. As airline balance sheets improve, its current unattractiveness will somewhat reverse.

W-IFE also provides the foundation for airlines to exit the stone age, radically transform their operations and exploit much-needed new ancillary revenue opportunities. With paper based menu cards and the in-flight magazine now a thing of the past, the “E” in “IFE” is rapidly becoming less about entertainment in the traditional sense of the word and more about maximising engagement with passengers. We need only look to Ryanair as an example. The notoriously cost-conscious LCC is set to launch a new W-IFE solution next month on 50 aircraft and a key part of the proposition is a touchless shopping experience for food, beverages and other goods and services. The platform will also support targeted and measurable advertising based initially on the passenger’s language, the origin and destination of flights and the content viewed. My spies tell me that other well-known LCCs in Europe and Asia will announce that they are launching similar solutions before the end of this year, while many airlines that have already adopted W-IFE will also enable digital buy-on-board in the very near future.

What does all this mean in numerical terms? Well, we think that 2020 will end up seeing just over 1,100 installations of W-IFE. This represents a decline of about 19 per cent year-on-year – a quite remarkable feat given the utter devastation the virus has wreaked upon the industry. In addition to those set to reveal their hands before the year is out, airlines new to the world of W-IFE that have commenced (or significantly expanded) rollouts include: Spicejet, the IAG Group and Lion Air Group. Combined, this activity will see the W-IFE installed base grow to 8,261 – up from 7,975 in 2019. The eagle-eyed amongst you will note that last year’s installed base plus this year’s expected installs does not equal the projected installed based for 2020. And that’s because there were a large number of systems deducted from the total due to aircraft retirements and de-installations. By 2030, we believe that the number of aircraft with a W-IFE system will grow to exceed 21,000.

Given the evidence before us, it would be quite easy to agree with the industry contact mentioned at the beginning of this blog and declare that seatback systems have finally entered into a terminal decline after previous reports of its death were greatly exaggerated. That is not the view we’d take, however. Airlines will increasingly move towards ensuring passengers encounter multiple transient hardware interfaces on longer journeys, each supported by cloud services and enabling a hyper-personalised lifestyle experience. The passenger PED will become the continuity and comfort display, or the companion that connects their entire journey. The IFE screen will become secondary in value and the conduit through which all manner of traditional and non-traditional content – consistent with the airlines’ brand positioning and passenger preferences – will be displayed. In short, an enabler of services. Seatback IFE is still not dead, therefore, it will just be reborn under a different guise.

PR: Despite Pandemic, IFC Terminal Installed Base in Business Aviation to Reach 32,000 by 2029

August 13, 2020 13:00 British Summer Time (BST)

London. A new report predicts strong take-up of in-flight connectivity (IFC) systems on business aircraft over the next ten years. According to Valour Consultancy, an award-winning provider of market intelligence services, the number of IFC terminals installed on business jets will rise to almost 32,000 in 2029 – up from 20,689 at the end of 2019.

The report – “The Market for IFEC and CMS on VVIP and Business Aircraft” – predicts a sharp drop-off in installation activity in 2020 as a result of the COVID-19 pandemic but sees the market picking up more quickly than commercial aviation. “Annual installations of IFC systems on business aircraft are set to fall by 28 per cent in 2020 compared to 2019 said report author, Craig Foster. “While 2021 will be another tough year, the launch of several new solutions will provide impetus. Deployments from SmartSky Networks, Iridium (with Certus) and SES/Collins Aerospace (LuxStream) are all expected to ramp up at this point in time. Intelsat and Satcom Direct will resume new installs for the FlexExec service too” he continued.

Foster also highlights how the market could benefit from current and ongoing airline capacity reductions and people looking less favourably on travelling through crowded airports and in cramped commercial aircraft cabins. “So-called health corridors are starting to emerge as increased interest in flying privately from those who haven’t previously done so acts as a catalyst of the recovery. Many fractional providers are reporting that recent months have seen record enquiries from new customers. We also expect to see more business jets being used by corporations to transport employees beyond the C-suite to protect them from COVID-19 and recent moves to create more flexible business models will help support these added users” said Foster.

The report also takes a look at the closely-related markets for in-flight entertainment (IFE) and cabin management systems (CMS). Due to the higher costs associated with installation of these systems and private aircraft owners and operators said to be prioritising IFC when pulling back on discretionary spend, the impact of the outbreak is expected to be more profound in 2020 and 2021. “While IFE/CMS vendors have been harder hit, the adoption of wireless in-flight entertainment (W-IFE) and full CMS functionality on smaller aircraft like small cabin jets and turboprops is expected to increase, expanding the total addressable market beyond the mid- to large-cabin aircraft that have long been the staple of the market” concluded Foster.

Valour Consultancy is a provider of high-quality market intelligence. Its latest report “The Market for IFEC and CMS on VVIP and Business Aircraft – 2020 Edition is the newest addition to the firm’s highly-regarded aviation research portfolio. Developed with input from more than 30 companies across the value chain, the study includes 85 tables and charts along with extensive commentary on key market issues, technology trends and the competitive environment.

Contact: info@valourconsultancy.com

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