"The launch of High Throughput Satellites (HTS) in both Ku-band and Ka-band is expected to be a game-changer for the in-flight connectivity market," Mr. Stern continued. "Total Ka-band HTS supply will increase threefold to reach 1,500 Gbps by 2018, while Ku-band HTS supply will increase fivefold to reach 285 Gbps in 2018. Beyond 2018, an even larger volume of capacity, targeting the in-flight connectivity market, is expected. HTS systems will not only tremendously increase data speeds to the plane compared to regular satellite systems, but will also significantly lower costs, thereby further driving the adoption of IFC services. With more airlines opting for cabin connectivity, companies that have not yet made a decision will be increasingly pressured to offer such services to match their competitors."

The number of connected commercial aircraft is expected to grow from 5,300 to 23,100 over the 2015-2025 period, accounting for 62% of the global fleet. The significant upward revision compared to our previous forecasts is mostly driven by the expected faster adoption of VSAT-based solutions (for both Ku and Ka-bands). In the business aviation market, the share of VSAT solutions is also seen increasing dramatically, as the largest service providers on the commercial aviation market, such as Panasonic and GEE, announced plans at the end of 2015 to address this market. Overall, Euroconsult estimates that VSAT bandwidth will grow from 2.0 Gbps in 2015 to 120 Gbps in 2025.

Beyond cabin connectivity, the smart plane concept is taking shape. Thanks to the growing implementation of connectivity on board aircraft and to technological innovations in various aspects of avionics, airlines today have a major opportunity not only to offer new services to passengers but also to optimize flight operations. Connected aircraft or smart planes are a new generation of aircraft that are considered to be nodes in a very wide network of interconnected systems. While currently in its infancy, the smart plane concept is expected to develop further in the near future, and this should create untapped new opportunities for a wide range of players.

Tremendous changes are expected in the service provider landscape. Six players currently offer cabin connectivity services for commercial airlines, namely Gogo, Panasonic, GEE, Thales, SITA OnAir, and ViaSat. However, competition is set to intensify with some equipment manufacturers and satellite operators moving down the value chain and new entrants set to penetrate the market by 2017. Service providers are currently facing high operational costs and are struggling to be profitable. Connectivity services require significant upfront commitment and investment in satellite capacity and ground infrastructure. Given this operating leverage, an increase in the installed base and a better utilization of satellite capacity commitment are crucial for service providers hoping to increase their gross margins.

In 2015, the average annual revenue per commercial aircraft (ARPA) ranged from $125,000 to $135,000 for both Gogo and GEE. Key industry players have already indicated that the ARPA could reach $250,000 to $300,000 in the next three to five years, mainly driven by higher take rates and increased bandwidth delivered to planes, enabling passengers to significantly increase their data consumption. When adding the potential stemming from operational services, the ARPA could even surpass $300,000.