Thales, SES to Offer Broadband for Air Passengers
September 11 2016 - 09:30PM
Dow Jones News
Europe's largest satellite-services provider and the region's
leading aircraft-electronics maker are teaming up to offer enhanced
broadband-via-satellite connections to airline passengers.
After months of negotiations and decisions to scale back their
initial plans, France's Thales SA and Luxembourg-based SES SA, with
a global fleet of more than 50 satellites, on Monday will announce
they are jointly entering the already crowded field of companies
marketing such high-bandwith links.
By 2020, the partners hope to leapfrog competitors with a
powerful new satellite designed specifically for efficient and
low-cost cabin connectivity to airliners flying across the U.S.,
Latin America and busy trans-Atlantic routes. For passengers, the
service aims to be "the equivalent of what you have at home with
fiber connectivity," Thales Chief Executive Patrice Caine said in
an interview. That would include streaming movies in high
definition, videogames and live television.
But two entrenched rivals, London-based Inmarsat PLC and ViaSat
Inc. of Carlsbad, Calif., already have or soon will have
significant capacity in orbit to serve the same fast-growing
segment—and both can build on longstanding relationships with
certain carriers. Current competitors also rely on capable
satellites designed for global connectivity. Thales and SES likely
won't be able to match such coverage until at least the middle of
the next decade, even if they opt to invest in additional
satellites.
The move comes as airlines, satellite operators and equipment
makers are scrambling to shape a new market for airborne
connectivity. Despite escalating passenger expectations for faster
connections, many airlines world-wide are still struggling to
figure out how to make money from such cabin features.
For years carriers around the globe have been offering in-flight
connections to passengers for a fee, or in some cases for free.
But the connection speeds often have been limited, frustrating
some passengers eager to do more than send text messages or emails.
As a result, overall usage rates have been depressed, making a
number of carriers ambivalent about investing in new satellite
services and upgraded equipment on board.
But now, more powerful satellites, advanced antennas and other
hardware are promising to change that dynamic, with airline
managements increasingly viewing upgraded cabin connectivity as an
important way to attract and retain customers.
Paris-based advisory firm Euroconsult estimates that the number
of commercial aircraft with in-flight connecting will grow to
23,100 by 2025 from 5,300 last year. Sales from passenger
connectivity would see a 23% annual growth rate over the
period.
Yet "airlines don't know how their ultimate business models will
work out," according to Tim Farrar, a Northern California satellite
consultant. Faster speeds are expected to lure more customers.
Industry leaders, however, "still can't agree what the best
technology will be or ultimately how they can make back their
investment," Mr. Farrar said.
Thales already serves the segment through its FlytLive broadband
unit, as well as its Avant in-flight entertainment equipment
installed on Boeing Co. and Airbus Group SE jetliners. Thales will
begin offering its new connectivity for the Americas starting next
year using two existing SES satellites. The service will be
bolstered with the addition of the planned SES-17 aircraft three
years later.
The new offerings are intended for planes coming off the
assembly lines, as well as retrofits of existing fleets.
Inmarsat has launched three of its Global Xpress satellites to
beam signals globally, with the first airlines including Deutsche
Lufthansa AG already signed on. The system is due to go live
soon.
ViaSat also is launching new, powerful satellites to service
airlines. It counts American Airlines Group Inc., the U.S. biggest
airline by traffic, among its customers.
But SES CEO Karim Sabbagh said the SES-17 spacecraft, to be
built by Thales Alenia Space, a Franco-Italian joint venture
majority owned by Thales, will have an advantage because it will be
designed to optimally serve flight routes. It is part of a growing
trend with satellites becoming ever more tailored for particular
applications, he said. The satellite, which can provide bandwidth
through almost 200 separate beams, will be designed to deliver more
capacity where air traffic is particularly dense to avoid service
disruptions.
The latest partnership also marks a departure from typical
industry arrangements. For SES, the deal provides certainty because
Thales has signed up to take almost all the available bandwidth on
the spacecraft under a long-term contract effectively covering
upfront costs. Thales will try to resell the capacity to airlines.
SES will market extra capacity on the spacecraft not intended for
airline use.
The companies didn't disclose the size of their investment. The
cost to deploy a satellite and related ground infrastructure
typically can be as much as $400 million. Those costs appear
largely covered by long-term satellite use agreements.
Write to Robert Wall at robert.wall@wsj.com and Andy Pasztor at
andy.pasztor@wsj.com
(END) Dow Jones Newswires
September 11, 2016 21:15 ET (01:15 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
American Airlines (NASDAQ:AAL)
Historical Stock Chart
From Feb 2024 to Mar 2024
American Airlines (NASDAQ:AAL)
Historical Stock Chart
From Mar 2023 to Mar 2024