Inflight broadband has the potential to create a $130 billion global market within the next 20 years, resulting in $30 billion of additional revenue for airlines by 2035.
That is the conclusion of the ‘Sky High Economics: Quantifying the commercial opportunities of passenger connectivity for the global airline industry’ study, carried out by the London School of Economics and Political Science (LSE) in association with Inmarsat.
Based on current IATA data and industry sources, Sky High Economics has developed an independent forecasting model.
It predicts inflight connectivity enabled ancillary revenues for airlines will come from four main revenue streams:
- Broadband access charges – providing connectivity to passengers inflight
- E-commerce and destination shopping – making purchases on-board aircraft with expanded product ranges and real-time offers
- Advertising – pay-per-click, impressions, sponsorship deals with advertisers
- Premium content – providing live content, on demand video and bundled W-IFEC access.
At present, only some 53 out of an estimated 5,000 airlines worldwide offer inflight broadband connectivity.
But on the back of strong passenger demand, Inmarsat says inflight connectivity will be ubiquitous on commercial aircraft by 2035.
Currently, airlines receive an additional $17 per passenger from ‘traditional’ ancillary services such as duty free purchases and inflight retail, food and drink sales.
The survey suggests ancillary revenues enabled by inflight connectivity will add an extra $4 by 2035.
Full service carriers look set to claim the lion’s share of airline revenues (63%), generating $19 billion by 2035. Capitalising on longer flight times, additional revenue will come from the ability to maximise e-commerce platforms and striking deals with content providers to offer premium packages.
The Sky High Economics study predicts low-cost carriers will generate $11 billion by 2035, the bulk of which will come from selling inflight connectivity to passengers.
The research also identified that regionally, the greatest opportunity for broadband-enabled ancillary services is in Asia Pacific. Driven by passenger growth and availability of services, airlines in Asia Pacific will benefit from $10.3 billion of ancillary revenues by 2035, followed by Europe ($8.2 billion) and North America ($7.6 billion).
Inflight connectivity revenues
Dr Alexander Grous, Department of Media and Communications, LSE and author of Sky High Economics said: “The opportunity available to airlines is enormous.
“The Sky High Economics study predicts the creation of a $130 billion market within the next two decades. Globally, if airlines can provide a reliable broadband connection, it will be the catalyst for rolling out more creative advertising, content and e-commerce packages.
“We will see innovative deals struck, partnerships formed and business models fundamentally changed for new players to lay claim to the $100 billion opportunity away from airlines.
“Broadband-enabled ancillary revenue has the potential to shape a whole new market and it’s something airlines need to be planning for right now,” he said.
Frederik van Essen, Senior Vice President Strategy and Business Development, Inmarsat Aviation, said: “As airlines start to act more like retailers, they will realise the benefits of closing the inflight connectivity gap.
“Doing so will lead to unlocking $15 billion per year in additional ancillary revenues within the next decade, one of the biggest sources of growth. The key to this potential and getting to the eventual $30 billion revenues, is fast, high quality inflight internet that can be relied upon without drop-outs.”
Inmarsat’s passenger solutions are complemented by its industry-standard certified safety and operations services – SwiftBroadband-Safety.
Its Ka-band GX Aviation service also allows airline passengers to browse the internet, stream videos, check social media and more during flights, with an on-board connectivity experience on par with mobile broadband services available on the ground.
Sky High Economics is the first research project to comprehensively model the socio-economic impact that the connectivity revolution in the air is set to have.
The research model created for Sky High Economics by the LSE, will be used to deliver a series of events hosted by Inmarsat around the world outlining the economic benefits to each region.
Airlines are being invited to use the model to receive bespoke consultancy around what broadband connectivity can do for them.
Update: This is the first module. Further modules looking at “Operations and Safety Efficiencies” and “Passenger Behaviour and Loyalty” will be rolled out in coming months. You can also download a 12-page summary and order a full copy of the report at https://www.inmarsat.com/news/34067/