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. This was revealed by the first-of-its-kind research study, ‘Sky High Economics: Quantifying the commercial opportunities of passenger connectivity for the global airline industry’, carried out by London School of Economics and Political Science (LSE) in association with Inmarsat (LSE: ISAT.L), the world’s leading provider of global, mobile satellite communications.
Market potential
Based on current IATA data and industry sources, Sky High Economics has developed an independent forecasting model. It predicts broadband 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. On the back of strong passenger demand, inflight internet 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. Broadband enabled connected ancillary revenues will add an extra $4 by 2035.
Drivers for growth
Full service carriers look set to claim the lion’s share of airline revenues (63 per cent), 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 SkyHigh Economics study predicts low cost carriers will generate $11 billion by 2035, the bulk of which will come from selling connectivity to passengers.
Regional differences
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).