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Prediction 9

Fasten your seatbelts: in-flight connectivity takes off

“We expect that demand for in-flight connectivity among UK consumers will soar – the majority of people relish being connected, and will happily pay to connect as one of the paying in-flight options offered to air travellers.”

The key trends that we predict for in-flight connectivity:

  • In 2018, one billion passenger journeys on planes (about a quarter of the total) will be on aircraft equipped with in-flight connectivity (IFC), a 20 percent year-on-year increase.  
  • IFC revenue for airlines should be close to $1 billion, with most generated by airtime sales to about a tenth of passengers who purchase access. 
  • At the start of 2018, one third of commercial planes will be equipped with IFC. We expect an additional 1,600 to 2,000 airplanes to be equipped with IFC in 2018 and upgrades to planes already equipped with prior-generation IFC equipment. 

While IFC has been available for many years in mature markets such as North America, it should be more popular and lucrative than ever in 2018, thanks to the rising number of routes covered, higher connection speeds and greater data capacity per flight. 

This trend implies that within a few years, the airplane may no longer be one of the last remaining connectivity-free zones – in any part of the world. 

How does in-flight connectivity work and why will it take off in 2018?

Planes are connected via satellites or air to ground (ATG) base stations: in 2018 and beyond, the business case for IFC should become more compelling due to technological advances in both forms of connectivity. IFC is likely to enjoy better speeds per user and greater capacity, enabling both improved experience and lower prices. In Europe, initiatives such as the European Aviation Network (EAN) and the deployment of over 300 on-ground base stations specifically designed for IFC should aid the European deployment. International Airlines Group (IAG), the parent company of Aer Lingus, British Airways, Iberia and Vueling, aims to have 90 percent of its short-haul fleet equipped by early 2019.  

How is in-flight connectivity technology evolving?

The principal upgrade from satellite providers is the move to high-throughput satellite (HTS), which employs frequency reuse and multiple spot beams to raise throughput. HTS should increase capacity and data speeds substantially and lower costs significantly. HTS increases peak speed to the aircraft to over 100 Mbit/s, significantly higher than the speeds previously achieved. 

In 2018, Air-To-Ground (ATG) providers will be able to deliver peak speeds to the aircraft of up to 100 Mbps using solutions based on LTE technology and, in some cases, unlicensed spectrum. 

What is driving the investment in in-flight connectivity?

Airlines’ motivations for deploying IFC are likely to be to meet customer demand, attract and retain customers, and generate revenue. Revenue could come directly, from the sale of airtime, or indirectly, when IFC is offered free, as a way to acquire new customers or improve loyalty. If it proves a revenue generator, IFC will allow airlines to augment the already booming ancillary services market, which has increased more than 13 times between 2007 and 2016. 

What does this mean for airlines?

Airlines will need to decide which parts of the IFC service they want to manage on their own. For example, with certain solutions, the vendor supports the costs of installing the connectivity in the planes and can manage the service; the airline receives a share of the revenue but doesn’t need to do anything else. Other airlines are taking on the installation of IFC and the development and delivery of digital services.

Airlines will need to determine the role that IFC plays in their entertainment program. Some airlines may choose to allow customers to use their own devices to stream content from an on-board library, even at no additional cost. Others may choose to continue to provide seatback entertainment, but mostly on long-haul routes.

What does this mean for consumers?

For three-quarters of air travellers at present, being on a plane means disconnection from the world, whether or not they want that. In coming years, it may not be an option. As connectivity improves and becomes cheaper, IFC is likely to become standard. The plane, too, will be connected – and the majority of passengers will be delighted by this and will express their happiness on social networks from 35,000 feet up.