COVID-19 has had a particularly devastating impact on the aviation industry, with travel restrictions and stay-at-home orders resulting in the widespread grounding of aircraft around the world. Airlines have lost billions of dollars in revenues and are still mired in uncertainty as to when their operations will return to pre-pandemic levels.
Against this backdrop, however, In-Flight Connectivity (IFC) providers are optimistic about the mid- to long-term prospects for their industry. Changes in online behavior as people have adapted to working, schooling, and consuming entertainment content at home are expected to accelerate what was already strong demand for high-speed broadband access in the air. IFC providers anticipate a greater appetite among airline passengers for access to bandwidth-heavy applications when they travel – the expectation being that their airborne internet experience will match what they are used to on the ground.
While the last several years have been about the novelty of on-board Wi-Fi and proving the technology works, the focus over the coming years will be on adding capacity and finding ways of monetizing IFC so that airlines not only recoup the costs of installing and running it, but also benefit from ancillary revenue opportunities and operational efficiencies.
"We see where our industry needs to go next, which is the most exciting part over the next three to six years, is the increase in capacity," says John Peterson, vice president and general manager for Services and Connectivity at Honeywell Aerospace. "With an increase in capacity comes a decrease in cost and an increase in accessibility."
Some of that capacity will come from Low-Earth Orbit (LEO) and Medium-Earth Orbit (MEO) satellites, which promise lower latency than the Geostationary (GEO) networks that currently serve the satellite-based IFC market. IFC providers are keeping a close eye on developments in the LEO/MEO space, with many expecting these constellations to eventually provide a complementary service to GEO networks.
"In the next decade, we see an extensive redefinition of what a great user experience means, while also seeing major paradigm shifts in technologies that are coming into fruition and are going to enable us to deliver on that expectation," says Mike Pigott, executive vice president of Connectivity Operations at Global Eagle.
Despite this mid- to long-term bullishness, IFC providers have felt the effects of their airline customers' pandemic-induced pain.
"From a COVID perspective, all capital spending from airlines that’s not critical to keeping an airplane flying has pretty much come to a screeching halt," says Honeywell's Peterson. "It's behavior that we would expect from companies that are going through a temporary tough time. You conserve your heat around your vital organs until you can get to safety again."
The pandemic has put retrofitting and new aircraft ordering on pause for a while, notes Sabine Taillardat, head of SITA For Aircraft's cabin connectivity services portfolio. However, she adds that "despite the COVID situation, we are receiving active requests from our customers to develop new features on their in-flight services."
Other providers agree that while business has dropped as passenger numbers have declined, IFC decisions are still being made and the market has not come to a standstill.
"We've seen the amount of passengers drop tremendously. All in all, I think that impact has been felt throughout the industry and at all providers," says Frederik van Essen, vice president of Intelsat's Aero division. But he adds that well-capitalized airlines seeking a competitive advantage are actively increasing their investments in IFC right now while many of their aircraft are grounded.
This point is echoed by Don Buchman, vice president and general manager of Viasat's Commercial Aviation division. He points to Delta Airlines' announcement earlier this year that it had selected Viasat's Ka-band IFC solution for more than 300 narrow body aircraft. The order includes both linefit and retrofit installations, and will see Delta's IFC services split between two providers – Gogo and Viasat.
Buchman describes Delta's announcement as "an example of an airline that's taking advantage of the downtime to not take a step backwards, but to lean forwards and go with the next technology." He also points to Dutch carrier KLM's announcement during the pandemic that it is equipping 18 Boeing 737-800s and 21 Embraer E195s with Viasat's IFC solution as evidence that deals are still being done.
Viasat has seen a decrease in the number of on-board Wi-Fi sessions that is proportional to the decline in passenger numbers, says Buchman. However, this has been largely offset by increased demand for Viasat's residential internet service.
"We've got multiple verticals and so during the pandemic we've had a shifting of demand from airlines to more residential users, who are using the system for work-from-home and education-from-home," says Buchman.
When passenger numbers do start to rise again, IFC providers anticipate that demand for high-speed on-board Wi-Fi will be higher than ever. Both Viasat and Intelsat conducted recent surveys to determine the impact of the pandemic on demand for In-Flight Connectivity. Viasat surveyed 500 U.S.-based travelers and found that more than 60 percent of respondents thought on-board Wi-Fi was more important than it was prior to the pandemic, while 43 percent said they had a stronger desire to use it than they did pre-COVID.
Similarly, Intelsat's survey of airlines, service providers, and original equipment manufacturers found that 65 percent of respondents anticipated an increase in the number of passengers who expect to be connected in flight, while 85 percent predicted an increased appetite for connected cabin-crew applications.
"I think, long-term, the trend towards more connectivity for aircraft is undeniable, it's unstoppable, and airlines have realized that," says Intelsat's van Essen.
The next challenges are to move to a free Wi-Fi model where airline passengers can easily connect to the internet without having to pay, as they commonly do in hotels and coffee shops, and to enable carriers to leverage the connectivity pipe to achieve operational benefits.
"People are accustomed to free Wi-Fi. But Wi-Fi is not free. It costs a billion dollars to put up a satellite, it costs millions of dollars to set up a ground network, and it costs hundreds of millions of dollars to get the equipment on to the aircraft to make the whole thing work properly. On top of that, the cost per megabyte to an airplane is very high compared to what you pay on a ground network," says Honeywell's Peterson.
"The way you make it positive to an airline to have Wi-Fi is to have a complete network solution, not just a passenger solution," he adds.
Alexis Hickox, head of Marketing, Commercial Aviation and Networks Services at Collins Aerospace, agrees that connectivity providers must show a "clear return on investment through operational as well as ancillary benefits.”
She adds: "From an operational perspective, we've got a number of ways we can help. We integrate our CabinConnect solution with smart routers or aircraft interface devices which facilitate ACARS [Aircraft Communications Addressing and Reporting System] over IP, and also connected applications like live weather, which bring about savings from fuel, MRO [maintenance, repair and overhaul] and AOG [aircraft on ground] costs as well."
When it comes to monetizing IFC and moving to a free Wi-Fi model, Viasat highlights the growing use of sponsorship deals between airlines and online retailers.
"A lot of the momentum we were building up pre-pandemic on what we call sponsored internet is coming in," says Buchman. He points to JetBlue Airways, which has a sponsorship deal with Amazon whereby passengers who use the free Wi-Fi are offered a 30-day trial of Amazon Prime; and American Airlines, which provides domestic passengers with access to Apple Music through the complimentary on-board Wi-Fi service.
"Coming out of the pandemic, we think we've got some really good products to bring to the market to help airlines get more reach into their passengers and create more monetization," says Buchman.
Another key development on the horizon is the launch of multi-orbit satellites and what this could mean for the IFC market.
Global Eagle, which does not own satellites but follows what Pigott describes as an "opportunistic model of satellite leasing and payload acquisition" to serve the mobility markets, is optimistic about what LEO and MEO constellations will bring to the IFC sector.
"Fundamentally, LEO/MEO constellations are going to greatly improve the customer experience by allowing very low latency communication and enabling a very pleasurable experience on a wide variety of end-user applications," says Nancy Walker, senior vice president of Commercial, In-Flight Connectivity at Global Eagle.
Collins' Hickox is also optimistic about the promise of LEO/MEO technology. She says: "There is absolutely no doubt that LEO and MEO will bring a lot of advantages for the airline industry as a whole. It's adding capacity, capability and options for the market, plus a lot of opportunity for a premium passenger experience."
Rockwell Collins signed a memorandum of understanding with OneWeb in 2015 to provide satellite communication terminals for OneWeb's global aviation high-speed broadband service. Hickox says Collins is still "working with OneWeb" and that "across our wider organization, we continue to work on antenna technology" for LEO satellites.
Honeywell, which uses its Jetwave hardware to connect airlines to Inmarsat's Global Xpress Ka-band service, GX Aviation, is also investing in hardware specifically to work with the MEO and LEO constellations when they’re ready to launch, says Peterson. However, he adds that two problems first need to be overcome on LEOs. The first is that antenna technology must improve so aircraft traveling at 500 miles an hour can seamlessly switch between multiple satellites, and the second is to determine the cost per gigabyte delivered to the aircraft.
"When you look at the life cycle of a LEO satellite versus a MEO versus a GEO, yes, they'll have high speeds and lower latency, but what is the cost per gigabyte going to look like, and how does that transform into what a passenger pays on an aircraft, or what an airline pays?" says Peterson. "We really don't know what that overall cost is going to look like."
Intelsat is "keeping a close eye" on LEO developments, says van Essen, although he cautions that this technology might not be "the panacea solution for everything, as it is sometimes purported to be.” Fellow GEO operator Viasat sees LEO technology as potentially complementing existing IFC services in the future.
"Multi-orbit is important as these constellations come up. The big thing is to make it seamless to the end user and the passenger," says Buchman. He adds: "If there's a way to integrate and take advantage as these constellations get built and become economically viable, then taking advantage of what's in orbit will always be what we do."
Intelsat's $400 million acquisition of Gogo's Commercial Aviation business in December 2020 was a significant consolidation move within the In-Flight Connectivity (IFC) market, and it is not expected to be the last. IFC providers largely agree that further merger and acquisition activity will occur, as companies seek to become more vertically integrated and better-positioned to compete for business from airlines.
"We all knew consolidation needed to happen because the marketplace only has 27,000 airplanes. For a business case to work, you have to have a certain economy of scale to deliver an effective service," says Honeywell’s Peterson. "Nine or 10 players in a market of 27,000 airplanes really wasn't going to bring the economy of scale that was needed."
Peterson believes that "more consolidation will need to happen" within the IFC market because, he says, "the economics of the business can't afford too many players."
Hickox of Collins Aerospace, says it is becoming increasingly difficult for vendors to differentiate themselves. She adds: "I think we will see more vertical integration happening, and a continued consolidation of the mix of players within this space."
This verticalization is being driven by growing demand from airlines for a "one-stop shop" to meet all of their connectivity requirements, according to Taillardat of SITA For Aircraft.
Intelsat's acquisition of Gogo's Commercial Aviation business – which occurred while the satellite operator remained under Chapter 11 bankruptcy protection – puts it in an "incredibly powerful" position to serve existing and future airline customers, says van Essen.
"We're now able, from an end-to-end perspective, to design solutions that are fit for the various customers, for the various airlines, for the various passengers. If you break that out in a traditional model, it's much harder to do," he adds.
Van Essen says he is "seeing a lot of energy and excitement" in the IFC market, and "would be surprised" if there weren't further consolidation activity. VS
Kerry Reals is a freelance journalist based in the United Kingdom, with extensive experience covering all aspects of the aerospace and aviation industry, with a focus on sustainable transport.