Number of Aircraft Offering IFC Reaches New Heights
According to our quarterly in-flight connectivity (IFC) tracker, the fourth quarter of 2022 saw the installed base of connected aircraft surpass the 10,000 marker for the first time, underlining the market’s resilient growth in the post-COVID era. Just over 18 months ago, the IFC installed base increased for the first time after sliding for more than a year because of pandemic-fuelled retirements and lease returns. Since then, the pool of connected aircraft has continued to track upward, increasing by more than 1,100.
Almost 75 per cent of the activations that have taken place in this window have been on narrow-body aircraft and the pool of aircraft with an active Ka-band system onboard has grown by more than 900 – significantly outpacing growth of Ku-band installs.
This leads us nicely into the changing competitive landscape, where Intelsat remains the largest IFC service provider, but Viasat continues to increase its share of the active installed base. Buoyed by recent headlines with Delta Air Lines and Qantas, Viasat has established a sizable backlog and is expected to overtake Panasonic Avionics as the second largest service provider in terms of connected fleet by the second quarter of 2023.
Migration to Free IFC Gathers Pace
Viasat is also shaking up the competitive North American market with Delta Air Lines rolling out free-to-all Wi-Fi in a move that aligns its IFC offering to that of JetBlue. Delta’s strategic move raises the bar for its domestic competitors, and with Wi-Fi access becoming increasingly influential in the decision-making process for passengers, we think other carriers in the region will follow suit, expanding free services beyond messaging.
Starlink is also ramping up the migration from paid to free IFC as it has quickly added AirBaltic and Zipair to a customer list that already boasts Hawaiian Airlines and JSX.
All this activity has led to us fielding a lot of questions on whether we’re now at the turning point for the IFC business model and if we’ll see a flurry of airlines transitioning to free-for-all IFC. It is reasonable to assume more airlines are now looking at what’s going on around them and some will take the decision to invest in free to keep up with competitors or to differentiate. But paid IFC is going nowhere fast.
Despite Starlink’s disruptive commercial model, the reality is that free-to-all IFC remains an expensive proposition for the majority of airlines to justify. With this in mind, our expectation is that we’ll see adoption of the free-to-all model rise in highly competitive markets, such as North America, and an expansion of free-to-some IFC elsewhere.
ESA’s Bring Optionality to Regional Jets Market
Electronically steered antennas (ESAs) are set to revolutionise the regional jet market as the first wave of next-generation antenna technology enters service from 2024. The vast majority of regional jets are currently connected with air-to-ground (ATG) hardware, as traditional fuselage mounted satcom antennas (FMAs) were seen as too big and heavy for smaller jets and turboprops. But this has shifted, with help from the emergence of ESAs that are scalable in size.
Several companies are currently working on ESAs destined for the aviation sector, but notable amongst them, in the context of regional jets, is Starlink and STELLAR BLU. The former has installed its active phase shifter-based antenna on JSX’S Embraer ERJ fleet. STELLAR BLU, meanwhile, has built a terminal around Ball Aerospace’s electronically steered antennas that it will also be fitting onto Alaska Airlines’ Embraer E175s as part of Intelsat’s multi-orbit network with OneWeb, replacing the operator’s ATG solution.
As things stand, more than a third of all regional jets are equipped with in-flight Wi-Fi; the majority of which are in North America. These aircraft represent a significant retrofit opportunity, and our belief is that most will be upgraded to satcom services as LEO networks become active.
Airline Retail is Modernising
Increased and enhanced collaboration with suppliers, improvements in technology and changing passenger behaviours has shifted the dial from the traditional blanketed in-flight ancillary products and services such as duty free to more personal, targeted and experiential offerings.
Digitalisation is helping some airlines reset their in-flight retail ambitions, reducing their overall financial losses and contributing to their ongoing post-COVID recovery. For others, it is offering new opportunities to fully unleash the potential of their onboard products and services, achieving sustainable growth.
Despite challenges from elevated fuel prices, and market-wide inflation as part of an uncertain macroeconomic global outlook, easyJet for example has just posted a 67% increase in its ancillary revenue from £458 million in the six months up to March 31 2022 to £765 million for the same period a year later. Is it too much a stretch to link at least some of this increase to its partnership with AirFi, which late last year rolled out its portable streaming solution to more than 100 aircraft in the airline’s fleet, allowing passengers to connect to and browse easyJet’s onboard shop?
We certainly expect to see more and more LCCs and leisure carriers roll out similar solutions in future and as part of our quarterly in-flight entertainment (IFE) tracker, have begun to monitor the rise of “in-flight engagement” platforms that are more an onboard storefront than a means of entertaining passengers with traditional movies and TV shows.
Through such collaboration and improvements in technology, airlines are transitioning to large scale retailing in flight and a true differentiated omni-channel experience, with the ability to offer, order and settle transactions on board the aircraft.
Increased capabilities and flexibility of onboard systems and platforms, such as crew apps, point of sale terminals and enhanced IFE systems, is enabling airlines to offer a full range of travel products such as bookable destination content.
Such solutions allow airlines to move beyond the Passenger Name Record (PNR) to fully personalise the shopping experience, regardless of loyalty status or cabin class. Using artificial intelligence can help recommend products based on browsing and purchase history, while also providing dynamic offers and order management, helping brands, logistic suppliers and airlines themselves make better-informed decisions about onboarding products and pricing.
Where once ancillary revenues were just a supplementary revenue stream, digitalisation and improvements to the digital ecosystem can maximise the value of customer data to better align onboard products and services to passengers, design out waste and increase advertising revenues.
Find Out More
Preliminary market estimates and forecasts relating to these topics is available now as part of soon to publish reports on The Future of In-Flight Connectivity, The Future of Flat Panel Antennas and Onboard Ancillary Revenues and Payment Solutions.