According to a new report, inflight broadband could create an estimated $130bn global market within the next 20 years, resulting in $30bn of additional revenue for airlines.
A new report estimates that inflight broadband could create a $130bn global market within the next 20 years, resulting in $30bn of additional revenue for airlines by 2035.
This is the conclusion of a 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.
Based on current International Air Transport Association (IATA) data and industry sources, Sky High Economics has developed an independent forecasting model. It predicts that the estimated $30bn in broadband-enabled ancillary revenues for airlines in 2035 will come from four main revenue streams:
- broadband access charges – providing connectivity to passengers inflight ($15.9bn),
- e-commerce and destination shopping – making purchases on-board aircraft with expanded product ranges and real-time offers ($6.8bn),
- advertising – pay-per-click, impressions, sponsorship deals with advertisers ($6bn),
- premium content – providing live content, on demand video and bundled W-IFEC access ($1.4bn).
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. The report notes that only 53 out of an estimated 5,000 airlines worldwide offer inflight broadband connectivity today, whereas inflight internet will probably be ubiquitous on commercial aircraft by 2035.
Full service carriers look set to claim the lion’s share of airline revenues (63%), generating $19bn 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 report states.
The Sky High Economics study predicts low cost carriers will generate $11bn by 2035, the bulk of which will come from selling connectivity to passengers.
The research sees the greatest opportunity for broadband-enabled ancillary services in the Asia-Pacific region. Driven by passenger growth and availability of services, airlines in Asia Pacific are expected to benefit from $10.3bn of ancillary revenues by 2035, followed by Europe ($8.2bn) and North America ($7.6bn).