Summary

The Inflight Entertainment and Connectivity Market was valued at USD 2.25 billion in 2020 and is expected to reach USD 3.6 billion by 2026, registering a CAGR of 6.45% during the forecast period (2021-2026).

The ongoing COVID-19 pandemic resulted in a full-scale crisis with the imposition of travel restrictions and suspension of flights in a global effort to contain the spread of the virus. The aviation industry is in survival mode, crippled by the loss of traffic and revenues. According to the latest updates from IATA, ICAO, the Airports Council International (ACI), the UN World Tourism Organization (UNWTO), the World Trade Organization (WTO), and the International Monetary Fund (IMF), the international air passenger traffic in 2020 is expected to experience a drop of about 50-55% compared to 2020 baseline.

The increasing demand for streaming services led to passengers expecting both high-definition content and uninterrupted connectivity at their fingertips. Additionally, the widespread use of electronic devices, such as smartphones, tablets, and laptops, led to a new trend of inflight connectivity and airlines offering Wi-Fi connectivity to passengers to access inflight and other entertainment content on their personal devices. This is a positive step for both the airlines and their customers. However, the imposition of lockdown and restrictive COVID-19 prevention methods drove down the demand for retrofitting old aircraft with new inflight entertainment and connectivity (IFEC) technologies due to the slower than the anticipated recovery rate of passenger traffic.

Europe and Asia-Pacific are expected to be the worst hit in terms of international passenger traffic and revenues. Thus, airlines are deferring or canceling their order book, limiting the scope of growth of the market. Airlines resorted to premature fleet retirement to reduce operational costs. For instance, even after receiving USD 10.6 billion in government relief in April 2020, American Airlines still reported pandemic-related losses of about USD 70 million daily, resulting in the airline planning to retire its A330-300, B757, B767, and E190 aircraft. Some airlines are also deferring or canceling their order book to sustain liquidity, reducing the potential for both linefit and retrofit aspects of the market during the forecast period.

Key Market Trends

Connectivity Segment to Witness Rapid Growth During the Forecast Period

Inflight connectivity includes services like internet browsing, text messaging, cell phone usage (where permitted), and emailing. Most of the airlines, these days, started offering inflight Wi-Fi for passengers on select flights, based on the class they choose. Airlines that have onboard Wi-Fi are now putting efforts to make it better, faster, and cheaper. Inflight Wi-Fi has become a prominent means for inflight entertainment delivery. The growth in the content segment is also attributed to the increase of new IFEC equipment on the aircraft. Thus, the demand for the software has increased. Many android and proprietary software have emerged in the recent past, giving the airlines a plethora of options to choose from. However, as most software comes preinstalled with the hardware, hardware reliability plays a major role in the sales of the software. There is a growth in the adoption of wireless inflight entertainment (W-IFE) systems among the airlines, as W-IFE has almost the same onboard architecture as inflight connectivity, excluding the terminals required for a live connection. The wireless kit is fully embedded and requires supplemental type certification (STC). Due to the natural advantage of their expertise in wireless connectivity, IFC providers entered the W-IFE industry. The growth in W-IFE is also increasing the market for the IFC providers. Moreover, the growth in inflight entertainment generates demand for streaming data, driving the market for inflight connectivity.

Asia-Pacific to Witness the Highest Growth During the Forecast Period

Asia-Pacific’s commercial aviation sector made great strides in the past five years (before the outbreak of COVID-19), and further improvements are expected in the coming period. However, the COVID-19 pandemic sharply curtailed the industry growth prospects, with major aviation hubs reeling from substantial losses because of the imposed lockdown that crippled the industry temporarily.

Intending to offer advanced and sophisticated in-flight services to air passengers, airlines are focusing on integrating advanced and more sophisticated technologies in their aircraft fleet. The rising demand for IFEC systems is driving airlines to collaborate with IFEC system manufacturers to develop systems that promote the airline’s brand image. In September 2018, Hong Kong Airlines initiated the commercial operation of the first A350 equipped with the AVANT IFE system. The system features the Avii Touch Passenger Media Unit that provides intuitive navigation, offers a full android smartphone experience, and acts as a second entertainment screen. Since August 2019, Singapore Airlines Ltd (Singapore Airlines) is providing free Wi-Fi on its aircraft fleet of A350, A380, B777-300ER, and B787-10. The airline partnered with two Wi-Fi service providers, Panasonic and SITA OnAir, and it uses Inmarsat PLC’s (Inmarsat) GX network, which uses wireless routers to establish internet connectivity.

Regional governments are also formulating new regulations defining the scope of mobile device usage on an aircraft. In September 2019, Gogo and APT Mobile Satcom Limited signed an agreement to provide inflight connectivity (IFC) service for Chinese airlines with Gogo's industry-leading satellite connectivity solution, 2Ku. The partnership is expected to enable state-of-the-art network management services through APSATCOM's Network Operating Center (NOC) and data center in China, in tandem with Gogo's global Ku satellite network outside China. Such investments are expected to provide a positive outlook for the inflight entertainment and connectivity market in Asia-Pacific during the forecast period.

Competitive Landscape

The major players in the commercial aircraft inflight entertainment and connectivity market are Panasonic Corporation, Global Eagle Entertainment Inc., Gogo LLC, and Thales Group that accounted for nearly half of the market share. The revenues of the market players are also cyclic, as they are dependent on aircraft sales and airline retrofit programs. Gogo LLC increased its installed aircraft base in 2018 and successfully entered the Chinese commercial aviation IFEC market. As of mid-2019, Gogo’s IFEC systems were installed on over 3000 aircraft globally. The company’s growing consumer base is attributed to the improving connectivity services it offers to clients.

The IFEC system manufacturers invest in developing advanced associated systems to be integrated into modern aircraft to complement or enhance their characteristics, including safety and aesthetics. Such investments result in the companies being exposed to certain risks associated with design responsibility, new production tool development, increased capital and funding commitments, delivery schedules, and unique contractual requirements. Moreover, new aircraft programs may be prone to cost-overrun, delay, or termination, depending on the market conditions, which may affect the market prospects of the players during the forecast period.

Additional Benefits:

The market estimate (ME) sheet in Excel format
3 months of analyst support

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