Consolidate this
LEO’s strong pull leads to mergers and acquisitions in the connectivity space, reports Fayaz Hussain
THE AIRCRAFT connectivity space is buzzing with activity. Everything from mergers and acquisitions to bankruptcies have been in news in the last six months. And like everything else, it has a lot to do with Elon Musk. The billionaire has disrupted the industry with the launch of Starlink Aviation, prompting incumbent players to either team up or undercut prices to compete.
Recently, US-based SmartSky ceased operations amid cash flow challenges. French satellite operator Eutelsat announced it is exploring partnerships in the face of challenges from Musk’s Starlink. And Gogo has announced its intention to acquire Satcom Direct for $375m plus stocks.
In 2023, the California-based Viasat acquired Inmarsat in a transaction valued at $7.3bn and French satellite giant Eutelsat merged with British LEO specialist OneWeb.
Earlier this year, Luxembourg-based SES acquired Intelsat for nearly $3bn. Although each of the transactions can be pinned to factors unique to each of the companies, the overall trend hints at an industry going through a maturity cycle where consolidation seems to the best option to counter competition from billionaires with deep pockets.
“Starlink is driving a lot of the consolidation activity in the business aviation connectivity market,” Summer Staninski, research analyst at Valour Consultancy tells us.
“One way this is happening is via partnerships where connectivity providers are teaming up to provide a multi-orbit offering without the need for making further capital expenditures.
“Many players are realising that they need NGSO [non-geostationary satellite orbit] capabilities to compete in the market with newer players.”
Economic sense
In the 12th edition of the Prospects for In-Flight Connectivity report, Vishal Patil of author Novaspace says non-GEO solutions are “rapidly gaining traction”.
The report also highlights the growing trend toward multi-orbit solutions, which combine GEO, MEO, LEO networks to improve service reliability and coverage. “Mergers and collaborations, such as the SES-Intelsat merger and the OneWeb partnership between Intelsat and Eutelsat, are expected to help reshape the future of in-flight connectivity by offering multi-orbit capabilities,” adds Patil.
This also works to mitigate risks associated with relying on a single type of network. “Partnering with existing players to expand their service orbits also makes economic sense because they can offer these capabilities without having to build their constellation from scratch which require massive investments and longer timeline,” says Staninski.
SmartSky learned this lesson the hard way. After only launching the service at the start of 2022, the company announced on August 17th it would cease operations. SmartSky burnt through millions of dollars in the decade prior to its launch to set up its air-to-ground (ATG) airborne connectivity network to compete with existing players such as Gogo.
“Much of what plagued SmartSky can be pinned to the delays it faced in launching its services. The company’s initial timeline was to launch its services in 2016,” says Staninski. “But it faced myriad problems including lawsuits, funding crunch and equipment shortages due to Covid-19. So by the time SmartSky was beginning to start being competitive and getting contracts, it was a little too late. And then shortly after SmartSky’s launch, Starlink entered the market, and its solution was being installed on small aircraft such as the King Air.”
Downward pressure
Staninski thinks the consolidation trend will continue. “I think that there will be further consolidation. Going forward, GEO-only players will need to at least partner with an NGSO network operator and be able to offer multi-orbit connectivity.”
Things are only going to get more difficult for operators from here onwards. With Musk’s deep pockets, pricing is where the war for market share will be fought. “Prices are unlikely to go up from what they are now. I think probably there will be continued downward pressure going forwards, mostly due to how competitively priced the new entrants are in the space,” says Staninski.
“In the business segment, there’s obviously room for more premium products. Customers in the larger jet segments will likely utilise a multi-orbit offering and be willing to pay for the best. However, going forward, prices will more likely fall across the board as it seems that a LEO-only solution works for a majority of smaller bizjets and these are priced very competitively.”
While the industry navigates the Musk effect, another billionaire has already announced plans to enter the LEO orbit. Jeff Bezos, the Amazon founder, is set to begin commercial roll out of his Project Kuiper in 2025 which will put nearly 3,200 satellites in low Earth orbit. According to some industry estimates, Bezos is investing nearly $20bn to get this project up and running. With its launch, aircraft operators will have a range of LEO options to choose from when deciding on their connectivity solution. Although existing players like Iridium, Gogo, Viasat and Intelsat/SES currently hold the majority share in the bizjet connectivity market, competing with Musk and Bezos will be a major challenge.
Musk’s Starlink has already onboarded nearly 1,000 aircraft. But that’s only one of the revenue streams for Starlink. The company has amassed nearly 3m subscribers and is expected to close 2024 with a positive cash flow.
A diverse user base, coupled with deep pockets, allows it to undercut competition in the business aviation sector for years to come.
We can expect a similar positioning strategy from Amazon Kuiper which, despite being a late entrant in this space, has the bank and brand to make major inroads into the aircraft connectivity market.
“Going forward, GEO-only players will need to at least partner with an NGSO network operator…”
But incumbents are also making moves to counter this threat. Gogo has teamed up with OneWeb to harness its LEO satellite network. And how does it plan to differentiate? By highlighting their exclusivity in offering services through an enterprise-grade network that does not share bandwidth with other users such as those on Starlink’s platform.
These are the number of jets using each of the top four systems:
• Iridium – about 10,000 jets
• Gogo – 7,031
• Viasat – over 5,000 jets
• Intelsat/SES – FlexExec and LuxStream on over 100 aircraft each so total over 200
“Starlink is also particularly disruptive and committed to over 1,000 aircraft in July 2024, some of which are commercial but some of which are bizjets. Based on publicly announced deals with commercial airlines and their fleet sizes, I would estimate roughly 350-500 are committed bizjet tails that will be equipped over the next several years.” - Valour Consultancy.
These are the number of jets using each of the top four systems:
• Iridium – about 10,000 jets
• Gogo – 7,031
• Viasat – over 5,000 jets
• Intelsat/SES – FlexExec and LuxStream on over 100 aircraft each so total over 200
“Starlink is also particularly disruptive and committed to over 1,000 aircraft in July 2024, some of which are commercial but some of which are bizjets. Based on publicly announced deals with commercial airlines and their fleet sizes, I would estimate roughly 350-500 are committed bizjet tails that will be equipped over the next several years.” - Valour Consultancy.
