Credit: Panasonic

While growing demand for Wi-Fi on planes is a significant growth opportunity for satellite capacity providers, the pandemic has held back its upward climb alongside a decline in air travel.

However, the inflight connectivity (IFC) market is preparing for some major lift as air traffic fast approaches pre-pandemic levels.

According to the International Air Transport Association (IATA), global air traffic — as measured in revenue per passenger kilometer — recently reached 96% of May 2019 levels.

The return of airline passengers comes as IFC providers are also overcoming the technical challenges, cost issues, and capacity shortages that have been dragging on the market and the speeds they can provide.

Wi-Fi on planes is now on the verge of speeds comparable on the ground, according to John Wade, vice president of inflight connectivity business at Panasonic Avionics.

One of the largest IFC providers serving airlines that cover most of the world’s flight routes, Panasonic Avionics announced plans in August to lease 50% more capacity from geostationary orbit (GEO) to boost its capabilities by the end of this year.

Next year, the company plans to bring in low-latency services in partnership with OneWeb’s low Earth orbit (LEO) network.

SpaceX’s Starlink, Viasat, Intelsat, Hughes Network Systems, SES, Telesat, Gogo, and Anuvu are also racing to meet demand for keeping people connected in the air. Most also operate their own satellites, contributing to a glut of capacity that is driving down its price.

John Wade, vice president for inflight connectivity at Panasonic Avionics.

The IFC market is a tremendous opportunity, but the number of players in it is unsustainable, says Wade, who previously worked at Intelsat and Gogo before joining Panasonic Avionics last year.

SpaceNews spoke with Wade to find out why Panasonic Avionics feels now is the time to go all-in with satellite capacity.

Has IFC growth returned to normality after taking a hit during the pandemic?

Yes, and more than normality. I’ve been around the IFC space for over 20 years, and I’ve always projected a future where we would walk onto an airplane and things would just connect, capacity would be abundant, and costs would come down. We are right at that tipping point.

I think it’s partly been triggered by COVID and changes in the space segment.

What COVID did was it created this virtual world for us. I’ve been at Panasonic for a year now, and there are still colleagues I have not met in person, but I feel like I know them because I’ve been part of this video world that we live in today.

While we don’t have video yet onboard, I think it’s only a matter of time before that becomes pervasive. What has become pervasive is the desire to stay connected at all times — we’re seeing usage going up relentlessly, month after month.

It has been a patchy, intermittent, sometimes frustrating, and generally expensive experience to get Wi-Fi on board an airplane, and that’s all starting to change.

We’ve previously seen airlines like JetBlue offering free internet, and they got take-up rates of 40%. Now you’ve got major airlines like Delta also offering free Wi-Fi. I’m not privy to Delta’s take-up rates, but I imagine they’re at least the same as JetBlue.

And usage is going up because the satellite capacity is there to make it a better experience. It’s also getting easier to connect.

With the introduction of new satellites bringing massive amounts of capacity, measurable terabytes, we’ve got the capacity at the cost point that really makes it viable. So I think we’re at the beginning of this huge hockey stick, which will keep going up relentlessly for the rest of this decade.

How do lower latency services from OneWeb’s LEO network fit into your plans?

Enterprise-level applications are all moving to the cloud, which means they chat back and forth more frequently, and latency becomes a bigger issue the more times you go backwards and forwards.

I’ve had the opportunity to experience LEO performance compared to GEO. If you have the links at the same speed, say 50 megabits per second, the difference is startling with LEO. It feels much more like a terrestrial experience than we’ve ever had in the satellite industry before. It’s going to be game-changing.

While we’re announcing this big expansion of our GEO network, the breakthrough moment actually happens late next year when we get the first of our LEO systems deployed onto aircraft.

This will lead to a massive acceleration of adoption because it will feel pretty close to what is on the ground today.

What is the average speed on planes now, versus what it will be like once you have all this extra GEO capacity onboard at the end of 2023 and then following OneWeb’s LEO capacity a year after?

Speed is a hard thing to quantify because latency comes into play. To give you a range of the size of the network we have today, it’s in the tens of gigabits per second. And when we add LEO, it probably goes up close to an order of magnitude.

In terms of speed to the aircraft, that actually doesn’t change a great deal. Today, we can offer speeds up to 200 megabits per second to a plane. We don’t do that very often, but we can. The LEO systems will introduce about the same speed. That is more than adequate for what passenger demand is today, and we don’t really see an issue with those sorts of speeds, at least for the next few years.

How I’d characterize is that we were starting to congest in terms of capacity issues in very popular areas. What we’re doing by having this capacity is bringing relief to that congestion. But with any network, you’re never really done. What is more than adequate today will not be more than adequate in a few years, so you’re constantly under capacity.

How much capacity are you specifically bringing to meet this demand?

We don’t disclose how much capacity we have on network, but what I can say is it’s dedicated to aviation, whereas several of our competitors who have what they would argue are bigger networks share their capacity between multiple markets.

What other LEO operators are you working with?

We’re only working with OneWeb. We would be open to working with other non-geostationary satellites in due course.

What about the regulatory permission needed to provide OneWeb’s LEO services globally?

There’s a variety of different regulatory approvals you have to get. We have it pretty much globally for GEO because we’ve been operating the GEO network for over 10 years.

We’re working very closely with OneWeb to get the approvals that we need for global service. It won’t quite be global, but that’s all due to geopolitical issues than anything else. OneWeb won’t be able to secure landing rights in China or Russia, which is one of the reasons that we will continue our GEO network, because we do have overfly rights for both China and Russia.

How is the market responding to Viasat’s Inmarsat acquisition? Both were already big IFC players — do you lease capacity from Viasat?

No, we don’t get capacity from Viasat at all. They use Ka-band spectrum, and we, today at least, are in Ku-band.

The marriage of those two companies obviously creates a very large satellite entity [though] what everyone suspects will be a total loss of Viasat-3 raises challenges for them. Viasat has talked about looking into repositioning capacity or perhaps acquiring capacity from elsewhere [following the satellite’s recent antenna failure]. It’s going to cause them some delay in their IFC plans and overall growth plan.

The bit that we differ from them on is that they don’t have a non-geostationary orbit (NGSO) solution. They’re very focused on GEO as being the way to go.

They’d argue that their capacity is what matters. We’d argue differently. I recently met with a senior executive from a major global airline who had just experienced a LEO system. He said before that experience, he also thought it was all about capacity, and after, it was all about latency.

So, the world is waking up to the fact that latency is important and will be increasingly important. While Viasat has a formidable network in GEO, I think over time we’ll start to see LEO become predominant. I have to question, candidly, whether they embarked on the right strategy.

Did issues on ViaSat-3 influence your capacity expansion?

It was already underway and we had planned this for a while.

SpaceX also sees an opportunity to gain market share with Starlink in LEO. How are you responding to growing competition from them as they ramp up contracts with airlines?

I think the adoption of LEO by various airlines is an endorsement of the fact that that is the right strategy. We don’t have our system in production yet so it’s harder for us to win deals. But as soon as we get closer to production, I think we will have a very competitive solution.

Panasonic has incredible experience in the aviation market. We understand airlines, and we’ve also got a very formidable position in the IFE [inflight entertainment] space. Airlines like that combination of one company that can do everything to do with IFE and IFC.

Panasonic Avionics is buying more satellite capacity to give passengers the same Wi-Fi experience in the air as they get on the ground.

OneWeb is also partnering with other IFC providers keen to capture the LEO opportunity. Analysts were already saying the market was too crowded before Starlink came in. Is this all sustainable?

The market won’t support all those players. You have to have momentum and critical mass to be viable. Aviation is hard and it is not for the faint of heart. It is difficult to put big things onto airplanes. When you put a large radome onto an airplane, you change the way that fuselage flexes. You literally change the way the airplane operates.

Wouldn’t this become less of an issue in the future as antennas get smaller?

Antennas represent the hardest engineering issue to solve for, but regardless, putting hardware on an aircraft is difficult. It needs skills in aviation, an understanding of the regulatory environment, and logistical know-how and capabilities to support a global aviation operation.

Some people see the potential size of the IFC market and find it very appealing because it looks like it’s an underserved market right now.

I’ve seen companies the size of AT&T come in and leave. They tried to get into this market a few years ago and backed out when they realized quite how difficult it was.

There’s been much talk about the need for consolidation for years, so why hasn’t it happened?

And I think it’s right. It’s about consolidation on multiple strata:

You’ve got potential consolidation in the inflight entertainment and connectivity space, and you’re right that hasn’t happened. We’ve just seen some people floundering around as opposed to necessarily being successful.

And then you look at the satellite space where the new entrants really are shaking up the traditional players. There were confirmed rumors about Intelsat and SES also trying to merge, although that fell apart. In the satellite space, I think consolidation of the local players is probably an inevitability. I just don’t see how they survive because their market is shifting so much.

I think the NGSO players will be successful despite people’s criticism of their cashflow needs. I think Starlink is showing that you can create a billion-dollar business and replenish satellites in a sustainable way.

In the inflight entertainment and connectivity space, consolidation is less likely because the assets out there are less attractive in terms of their potential profitability. I can say that from experience, having looked at some of these companies. When doing an M&A [merger or acquisition] transaction, you’re either buying a distressed asset or buying something you see is accretive to your growth goals. I haven’t seen opportunities that have been compelling enough to want to act on them.

There was no consolidation deal for Anuvu [formerly Global Eagle Entertainment] after it fell into bankruptcy. Lenders rescued it in 2021, and they then ordered their own satellites to avoid relying solely on leased capacity. Could Panasonic also change its strategy here?

I don’t know if it will ever change. A good friend gave me an analogy a few years ago, which I think is quite relevant for space. He’d always historically bought a car, and a few years ago, he leased a car for the first time. When I asked him why, he said it’s because we’re only a few years away from autonomous vehicles, and so the value of his car is going to massively depreciate when that next iteration happens.

While I was at Gogo, we were often approached about acquiring our own satellite, and we always declined because if you look at the projected cost curves and the way they’re meant to decline over the upcoming years, by the time you got that thing on orbit, the next generation was already going to be there and drive the costs down and down.

I see the same thing in just about every orbit you look at. Why acquire an asset that is not going to have the right cost point by the time it gets into orbit?

I think you’re always better in a period of high change to lease rather than own, because you can move so quickly onto the next generation. We’re seeing that in our GEO costs. GEO costs continue to go down because the capacity costs are coming down.

Is there too much capacity out there?

I don’t think there is yet. It’s coming… I can certainly see how we can consume the current planned capacity. If all the LEOs get up there — and I see Telesat just solved their funding issue so they would be the fourth of the LEOs to get up there [after Starlink, OneWeb, and Amazon’s Project Kuiper], then we have tens of terabits at that point.

Is that going to be enough? My crystal ball looking that far out gets hazy if not cracked, so I can’t tell at what point capacity exceeds demand. But for somebody like us, frankly, that’s great news. If there’s excess capacity, people sell it cheaply, so that plays into our future strategy.

COVID has created this increased demand, and we are responding by acquiring more capacity, and we’ll continue to add more capacity. Probably in the future more on the LEO side of things than GEO.

But there is becoming sufficient capacity out there to deliver the experience that passengers want at the price they are willing to pay. And that is the game-changing moment for this industry.

This interview has been edited for clarity and length.

This article originally appeared in the October 2023 issue of SpaceNews magazine.

Jason Rainbow writes about satellite telecom, space finance and commercial markets for SpaceNews. He has spent more than a decade covering the global space industry as a business journalist. Previously, he was Group Editor-in-Chief for Finance Information...