1. Major Changes for Satcom-Based Connectivity

Connectivity onboard aircraft is growing at 30 percent annually, due to huge passenger demand driven by social media, video streaming and internet access. The satellite value chain that offers the bandwidth to match this insatiable demand is seeing consolidation as the business is still not profitable, and major changes to the make-up of the industry are expected in part through consolidation. As three times more satellites over next 10 years are expected to launch with a 10-fold increase in capacity (about 17 Tbps by 2026), satellite networks will add new architectures and integrate more capacity from not only GEO but also MEO and LEO.

2. Capacity Prices Continue to Drop

The range of prices for Ku-band and High Throughput Satellites (HTS) continue to drop, with mean index prices seeing a decrease of more than 60 percent in the past two years. Bulk capacity contracts that service providers signed for mobility deals, in particular for In-Flight Connectivity (IFC) contracts, have had a major impact on this price and on the broader satcom market.

3. HTS Constellations Are Challenged

From finances to airborne terminals, through to manufacturing and competitive forces, the “next great big thing” for the satellite industry, the HTS constellations, have several major hurdles to overcome before they’re ready to deliver Gbps to airlines passengers. And the promise of flat-panel antennas to close the business case of these new systems still has to meet stringent network, Radio Frequency (RF), physical and efficiency attributes before it can become commonplace on commercial passenger aircraft.

4. The SLAs Matter

In the delivery of IFC service and the associated passenger experience, airlines are more and more aware that the quality of connectivity is no longer a “nice to have” for passengers. As a result, they want better visibility on the network delivery and expect more transparency from service providers to monitor overall performance indicators down to the end-user device.

5. Airlines Still Looking for the Right Business Model

Airlines are still pondering the right model to deliver IFC. With NSR estimating $37 billion in cumulative revenue by 2027, IFC is a huge growth engine for satcom. However, only 25 percent of International Air Transport Association (IATA)-registered airlines signed up for IFC at the end of 2017, it is still very much in its early years. Service providers have been in control so far as the retail model is most popular (50 percent of airlines are using it). But this model often means service providers take a hit in terms of cost of equipment and installations. As take rates improve, in large part due to the advent of HTS systems on their fleet, airlines will shift away from this model and want more control, especially at the interface with passengers. And to further lower costs to both airlines and passengers, third-party sponsorship can ease IFC prices going forward.

6. “What’s the R in ROI for IFC?”

Airlines and BizJet operators are still unsure how to measure the “return” on IFC investments. With an increasing reliance on “softer metrics,” such as quality of experience, proving the investment case for large spending on IFC programs is a tricky proposition. Just as the value/investment case for seat-back and/or in-flight entertainment is increasingly viewed as a “must-have” to remain competitive, so too are airlines looking at having to check the box for IFC in order to remain a competitive player in the market. VS