Inmarsat has signed what it describes as a major 10-year agreement with Panasonic Avionics to provide in-flight broadband and entertainment for commercial airlines.
The pair say the partnership would enable them to combine their “highly complementary” services to offer broadband in-flight connectivity (IFC), paired with high-value solutions and services to customers in the commercial aviation industry worldwide. The agreement would permit airlines, aircraft builders and passengers to benefit from the combined experience of both parties.
While not the full step closer to industry consolidation that some observers have expected, the deal brings together two former competitors with a unified service. Some industry insiders had expected Panasonic to exit the sector and sell its Avionics division.
The deal sees Inmarsat becoming Panasonic’s exclusive provider of Ka-band capacity for in-flight connectivity.
Panasonic would now be able to offer Inmarsat’s high-speed broadband connectivity service, ‘GX Aviation’ powered by Inmarsat’s Global Xpress, which it said was the world’s first global Ka-band satellite network, owned and managed by a single operator.
Inmarsat CEO Rupert Pearce says: “IFC is a substantial and fast-emerging sector where the quality of customer experience is paramount. Reliable, high-quality IFC is no longer a luxury for passengers, but an expectation, and will play a vital role in securing an airline’s competitive position in a market.”
Equity analysts at Exane/BNPP say: “This announcement reinforces Inmarsat’s strong position in IFC. Inflight Connectivity is one of the fastest growing segments in the satellite industry. Panasonic is a key distributor of satellite capacity to the airline industry alongside Gogo, GEE and Thales.”
“This agreement is positive for Inmarsat. As SES and Eutelsat have Ka-band assets intended for IFC (KASAT, Konnect VHTS for Eutelsat, SES 12 for SES), we see this announcement has mildly negative for both competitors. However, we note that other large IFC service providers have not (for now) announced similar agreements. Thales is an anchor customer on the upcoming SES 17. We also believe that market demand remains strong and likely to drive growth for both SES and Eutelsat.”
Berenberg Bank expresses similar thoughts, saying: “A pat on the back for Ka-band: We have often debated whether the commercial aviation industry will shift to Ka-band for its IFC. The Panasonic deal lends credence to the view that Ka-band is the future and that Inmarsat is backing the right technology. Clearly competitors can and will adapt, but investors should be comforted that for commercial aviation Inmarsat is not putting all its eggs into the wrong basket.”
Berenberg continues: “Industry overcapacity a risk worth highlighting: Outside of North America, the vast majority of the airline industry that has IFC is using Ku-band. Should Inmarsat be correct in its assumption that both Panasonic’s customers (in the long term) and the rest of the industry will migrate to Ka-band, this could leave a lot of spare Ku-band capacity in the medium term. The risk to Inmarsat is that: a) competitors are forced to cut price materially to compete in aviation, forcing a price war in this segment; or b) competitors use this spare capacity to compete across Inmarsat’s other maritime and government segments. Note that the demise of Ku-band fixed data and the overcapacity it has brought to the industry has already resulted in a phenomenon similar to point “b” above. Competitors have been left with huge amounts of excess capacity, which they have dumped on the government sector, contributing to pricing pressure in that segment.”