Number of Aircraft Offering IFC Reaches New Heights
According to our in-flight connectivity (IFC) quarterly 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-fueled retirements and lease returns. Since then, the pool of connected aircraft has continued to track upward, increasing by more than 1,100.
Almost 75 percent of the activations that have taken place in this window have been on narrow-body aircraft (Figure 1) 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 (Figure 2). 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 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 of 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 revolutionize 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 inflight 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. VS