When it comes to future growth markets, In-Flight Connectivity (IFC) is seen as a vital market for satellite, despite the issues aviation has had over the last year. There are high hopes that once the COVID-19 pandemic eases, the aviation market will see an upsurge, accompanied by strong demand for satellite bandwidth to fuel airline business cases for IFC.
While most airlines have an IFC strategy of some kind, certain airlines stand out. Emirates, the Dubai-based airline, has always been one of the pioneers when it comes to IFC. The company has around 270 planes in its fleet and between 2019 and 2020 flew around 56 million passengers. The airline is one the blue-chip contracts when it looks to deal in IFC solutions.
Patrick Brannelly, Emirates’ vice president of Customer Experience: Service Delivery: IFE, Connectivity & Onboard Retail, is the very definition of an IFC influencer. When he speaks about IFC, the industry listens. Brannelly says while the airline industry in particular has been badly hit by the COVID-19 pandemic, Emirates is bullish that airlines will return to profitability within a couple of years.
“There is an inherent desire for people to get moving again and go visit friends, family, and business colleagues and get the world turning. I don’t think you can stop that,” he says. “We are very bullish that it will rebound. That is buoyed by all of these initiatives like travel corridors, new protocols that everybody has taken in terms of hygiene, and then the vaccines when they come along. That will give people assurances and certainty.”
Satellite is an obvious connectivity solution for airlines as most airlines fly over oceans beyond the reach of terrestrial networks. However, with many players in the market, and solutions over different frequency bands, the choices are not straightforward for airlines. Brannelly is quite outspoken on this issue and says that a couple of years ago the marketing to airlines was “confusing.” This is a significant statement, because if an expert like Brannelly is confused, it’s likely many others are confused as well.
“We are airline people, not telecoms people. That confusion about what was important, whether it was bandwidth, or maximum capacity from the satellite, these were not necessarily the right things to be looking at. Now as I look to the future, connectivity from space to the ground is growing every year. But, to connect to an aircraft, it involves quite a lot of technical integration, which does not happen overnight,” he says.
He looks at the issues when putting new antennas on aircraft. In order to launch a new antenna on an aircraft, five years could be considered fast to do antenna swap-outs. He admits that airlines like Emirates don’t swap from one antenna system to another overnight. “What airlines are looking for is availability, coverage, reliability etc.,” he says.
On the question of preferred bands and frequencies, Brannelly thinks Geostationary Orbit (GEO) is very good for airlines, but Low-Earth Orbit (LEO) could be beneficial with its polar coverage. He admits that he does not think speed is necessarily the most critical thing, unless people think it will be used to watch movies. Brannelly does not believe this is a good use of satellite capacity. “Will we have LEOs on the plane in 50 years’ time? I think we will, the question is how quickly it happens between now and then. But, for example, we could find out there are a whole heap of technical issues around LEOs, as we’ve experienced every time we’ve introduced new systems,” Brannelly says.
Brannelly also points to changing demand from ground-based customers for each of these satellite systems, which is very different and can change rapidly. He believes LEO demand could be saturated by a ground client, and that GEOs are more attractive long-term right now to airlines such as Emirates. “We don’t necessarily need lower latency. Latency is not vital to aircraft unless you are playing PlayStation games. Latency could still be an issue with LEOs and MEOs [Medium-Earth Orbit]. It is nice to have all the options, but it takes a long time for an airline to adopt an option,” he says.
He says it is feasible for Emirates to be using some kind of LEO solution at some point in the 2020s. “Most of the commitments five years out are done. It is simpler sometimes to extend, then go to a new technology. Everything is possible. A lot of it is driven by economics. It is very expensive to switch out technology and equipment. Is it worth spending $300,000 switching out an aircraft, when it is only doing 40-60 flights a month and in service for 12 years? The economics have to work,” he says.
It seems clear it would take a seismic shift for Emirates to consider a LEO solution, and Brannelly admits the airline is much more likely to stay on a GEO-based solution. He points to Inmarsat’s Global Xpress, which he believes is going to transform the experience on Emirates, and that will come with the Boeing 777x in the next couple of years. He believes the key question is how much a solution transforms the customer experience. Customers don’t need megabits per second to use WhatsApp, and if that is 90 percent of the traffic, then airlines don’t need huge layers of capacity.
“If people are downloading 4K Netflix content to their device before flight, they won’t need more satellite in the next ten years,” he says. “The data on LEOs is also not infinitely cheaper. It is a complex mix. You need the right coverage for your airline. We need very global coverage for our network. The price of data is important, as well as the price of integrating systems on the aircraft, and the demand and the likelihood that passengers will pay for it. Revenues in the connectivity business this year are massively depleted as there are fewer passengers.”
Right now, Emirates has a 100 percent connected fleet. All of its 777s are on Ku-band, as well as many of its A380s. The company is retrofitting its A380s from Swift Broadband to Ku-band. It has invested in upgrading all its aircraft to High Throughput Satellite [HTS] with Panasonic. The challenge Emirates faces is that many passengers think in-flight data is free, but it is still premium. “The 777x will arrive with Inmarsat GX, which should be another step up. It is all about being the best in class. That is what Emirates has always strived for. We strive for our customers to have the best customer experience possible,” Brannelly says.
One of the big questions with COVID having such a profound impact on the aviation market, is whether customers will ultimately pay for connectivity going forward. Will it become the expectation, and how do airlines justify such an investment? Brannelly says the jury is still out on airlines’ ability to provide unlimited free Wi-Fi across the board.
“Some of these new satellite technologies are providing ‘all-you-can-eat’ packages which will enable that, versus the ‘pay-per-megabyte’ options. You see this even in your personal behavior. Unlimited data is now pretty common on more mobile phones, whereas a few years ago, people were buying megabyte packages. The models of how the airlines get the money back are all changing, but the demand is there. We have to work out how to keep funding it,” he says.
Brannelly admits there have been surprises in changing user behavior over the last few months, and the volume of data and connections on short flights has doubled on some routes. “I didn’t think it would go up so much,” he says. “There is a great desire to be constantly connected right now. Whether that lasts long term, I don’t know. I think it will.”
For Emirates, it is all about evolving and making the consumer experience better, regardless of the connectivity mode the airline uses to achieve that. Only recently, the airline rolled out the ability for passengers to view onboard menus via the Wi-Fi portal, as well as in its app. Brannelly believes its connected airline app is the future and anyone travelling without this app is “missing a trick.” Emirates aims to enhance the amount of control a passenger can have on a personal device. More and more in the future, Brannelly believes passengers will make purchases on board on their own devices.
He cites the example of in-flight retail, which has bounced back strong, helped by the ability to get credit card approvals in-flight. Emirates is now doing millions of dollars in sales and upgrades each month. Airline connectivity has also enabled options for the crew, who have a chat program to chat with engineers for troubleshooting. “Cabin crew are increasingly in a live environment now and there are a lot of positive opportunities to exploit,” he says.
While 2020 was undoubtedly a unique year, it also saw a significant deal in the IFC sector. Intelsat managed to secure a deal to acquire Gogo while in Chapter 11, giving the company an enhanced presence as a vertically integrated player in the IFC area. Brannelly believes vertical integration typically helps airlines, as they are very low-margin businesses. Removing the middle-man (while he carefully says he does not see Gogo as a middle-man) does help increase supply chain efficiency.
“I think part of this merger activity is the realization that In-Flight Connectivity is growing in importance. When connectivity started in the early 2000s, people were talking about it being a multi-billion dollar business, but that took a while to manifest. I think the future is looking very much more like that, and this is driving these corporate moves. It is tough to make money in connectivity, but vertical integration reduces costs,” he says.
He adds: “I am sure there are some creative or financial benefits in the background we are not aware of, but in the long-term, I think it is a smart move.”
Brannelly also believes more industry consolidation is coming in this market. “Warren Buffett said ‘When the tide goes out, you see who is swimming naked.’ We have seen a bit of that this year,” he says. “I think the industry consolidation isn’t over and more changes are coming. It will resolve to a good place with two to three dominant, quality players. How that chess game will play out with all the vendors and technology is yet to be seen.” VS