Having a quiet time at 30,000 feet will be history for millions of airline passengers in the not so distant future as Inmarsat PLC (ISA.L) aims to deploy systems for onboard Internet and phone use on thousands of planes over the next decade.
Chief Executive Rupert Pearce told Reuters in an interview on Tuesday he saw a global market of around 5,000 planes that could be fitted with the system to allow passengers to connect through smartphones and tablet computers.
"Increasingly we are beginning to move to a world where people are discriminating. Does your plane have connectivity? If it doesn't I will fly with another carrier," Pearce said.
He said the satellite communications company has seen plenty of evidence that passengers prefer to be on planes having connectivity, particularly in North America, even on short haul flights.
There are mow about 160 planes, out of a global fleet of nearly 19,500, that have the system installed by Inmarsat. Emirates Airline, Etihad Airways and Qantas Airways Ltd (QAN.AX) are among its 35 airline customers.
But Pearce's company is not alone. Canada's Telesat and Intelsat Ltd are competing in the same space among other rivals.
In 18 months, Inmarsat will introduce the next generation broadband network, called Global Xpress, that will provide speeds of up to 50 megabytes per second or 100 times faster than the current offering.
The new product is expected to speed up the adoption of the technology, which will bring down installation and operating costs significantly compared with the existing platform.
"You can bury (the cost) in the ticket and not get burnt," Pearce said.
OPPORTUNITIES IN THE FUTURE
Onboard connectivity contributed only a small fraction of Inmarsat's $1.4 billion (876 million pounds) in annual revenue. The bulk still comes from maritime, government and military services.
"Right now, aero passenger connectivity is worth roughly around $2 million a year. It is a very small business," said Pearce, who became CEO this year of the company with a market capitalisation of $3.4 billion.
"Some commentators see it as a huge opportunity but it is for tomorrow. Somewhere out there in the next five-plus years is the prospect of rapid expansion in air passenger connectivity."
Although the technology has been around for some time, he said, the main challenge for airlines is to create a business model and determine the way of charging for such services.
Carriers can choose a pay-per-use scheme or simply include the cost in the airfares.
Whichever models the airlines choose, some analysts said they would not invest aggressively in such technology while their profits were being squeezed by high jet fuel prices and weak travel demand over the last 12 months.
"This was a low investment priority for airlines in a recessionary environment where passenger traffic slowed considerably," Citigroup, which recently downgraded Inmarsat to sell from neutral, said in a recent report.
(Reporting by Harry Suhartono; Editing by John O'Callaghan)
Reuters
