Riding out rough air in inflight connectivity | Connecting the Dots

Forecasts for a weakening global economy this year are a drag for an in-flight entertainment and connectivity (IFEC) market that many satellite operators are relying on to expand their businesses.

Global growth is set to drop from an estimated 3.4% in 2022 to 2.9% this year, the International Monetary Fund (IMF) said in a January update on the world’s economic prospects, before rebounding to 3.1% in 2024.

That’s slightly less bleak than IMF’s October forecast for just 2.7% growth in 2023, but still far short of the 6% rise recorded for 2021, and the 3.8% historical average from 2000 to 2019.

Air travel is one of the more sensitive industries to macroeconomic declines and has still not returned to normalcy following the pandemic, especially long-haul flights.

According to the latest stats from the International Air Transport Association (IATA), published Jan. 12, global international traffic remained around 30% short of 2019 levels in November.

It’s grim reading for the likes of Intelsat, SES, Eutelsat, Viasat, and other operators with big bets on satellites looking to meet demand for connecting passengers in the air.

However, while the pandemic “starkly reduced activities,” it is proving to be a double-sided coin for IFEC, Euroconsult principal advisor Miguel Ouellette says.

It has helped increase passenger expectations for connectivity, pushing more airlines to find ways to improve IFEC experiences to remain competitive.

About 1,500 aircraft were contracted for IFEC in 2021, according to Euroconsult, even as the industry was still grappling with the early effects of COVID-19.

“Many airlines used downtime to accelerate IFEC installations,” Ouellette says.

“In 2023, we expect to see some more contracts … and many aircraft getting IFEC equipment installed.”

United Airlines announced an order for at least 100 wide-body aircraft from Boeing through 2032 in December. Alaska Airlines also recently unveiled plans to equip regional jets with a new Wi-Fi system from Intelsat, and Viasat said Jan. 10 it secured approval in China for getting its equipment on domestic planes in the country.

These “and other announcements all point that even in a downturn there are opportunities,” says Analysys Mason research director Brad Grady.

But being “right-sized” for seizing these opportunities will be key in a difficult economy, and for the crowded inflight connectivity market he expects that will mean consolidation.

Turning off the fasten seatbelt sign

Despite commercial aviation’s sluggish recovery from COVID-19, analysts don’t expect it will be long before the industry returns healthy and growing.

“It is true that the pandemic showed much work can be conducted remotely and that this saves money,” BryceTech senior space analyst Phil Smith says, but “people also like and need to travel [and] this happens efficiently and at a competitive price using aircraft.”

Passengers “have come to expect fast, reliable telecom services,” he says, “and this will be a constant pressure for airlines” and third-party service providers.

The airline industry has also weathered many setbacks in the past, Euroconsult’s Ouellette adds, “and surprisingly, the industry has shown significant resiliency during this unprecedented period.”

Euroconsult sees an almost complete return of air passenger traffic this year in certain regions, including North America and Europe — bar any major pandemic surges, of course.

The return of passenger traffic will most likely compensate for cash burnt by airlines that weren’t propped up by governments amid travel restrictions to limit the pandemic’s spread, Ouellette says.

And, in a major boost for satellite operators, this return to normalcy is coming with a need for connectivity that he believes airlines will eventually need to address by making all their IFEC services free to the end-user.

After talking about providing free Wi-Fi for years, Delta Air Lines set out its strategy Jan. 5 for getting all of its planes equipped with inflight connectivity for a free service in the coming years.

“We have seen a shift towards free-for-all services, and we expect this trend will continue in 2023,” Ouellette says.

Jason Rainbow’s Connecting the Dot column runs in each issue of SpaceNews magazine. This column first appeared in the February 2023 issue.

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