A new study estimates that inflight connectivity will be a market worth $130 billion by 2035. The study by the London School of Economics in collaboration with Inmarsat Aviation investigated the potential economic value of inflight passenger connectivity from now until 2035.
‘Sky High Economics: Quantifying the commercial opportunities of passenger connectivity for the global airline industry’, found that airlines stand to make an additional $30 billion through inflight connectivity by 2035 and this will help stimulate an overall market worth $130 billion (including premium content, technology providers and advertisers). In real terms, on average passengers will become $4 more valuable to airlines through ancillary revenues (an increase of nearly a quarter on current ancillary revenues which are worth $17 per passenger).
Based on current IATA data and industry sources, the study 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. The Study believes that on the back of strong passenger demand, inflight internet will be widespread 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.
| Forecasted airline share of the $30 billion broadband enabled ancillary revenue opportunity | |||||
| Broadband access | E-commerce | Advertising | Premium content | Total | |
| 2018 | $822 million | $36 million | $26 million | $39 million | $ 1 billion |
| 2028 | $9 billion | $3 billion | $2.9 billion | $731 million | $15 billion |
| 2035 | $15.9 billion | $6.8 billion | $6 billion | $1.4 billion | $30 billion |
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 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).
Dr Alexander Grous of the 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.”
Frederik van Essen, Senior Vice President Strategy & Business Development, Inmarsat Aviation, commented: “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.”
