Inmarsat Exec Explains Why Aerial Route Is So Appealing

[10-26-07 – Satellite News] Inmarsat’s launch of SwiftBroadband service, capable of supporting broadband IP data at speeds up to 432kbps, is a significant milestone for the company as it looks to crack the commercial airline market for data services. Inmarsat’s president Michael Butler believes the service takes its offering to the aeronautical sector to a new level. As well as boosting its offering to government and business jet users, the company also hopes the service will prove a hit with commercial airlines. Butler told Satellite News, “This is an extension of a tried and tested satellite network and capability. Many of the existing users who will perhaps step up to SwiftBroadband don’t have to start from scratch. If you already access Inmarsat aeronautical services through a suitable high-gain antenna, you can simply upgrade the avionics of the aircraft to take advantage of the higher bandwidth of SwiftBroadband. It is much less inconvenient when you need to fit an entire fleet. Secondly, it is much more cost effective. To install a SwiftBroadband terminal is probably about 40 percent of the cost of putting Swift 64 in for the first time on a new aircraft, because it is much lower cost equipment. It is even lower if you are upgrading. This is evolutionary for us, but for the customer, the applications and the support might be revolutionary.”

Significance

For Inmarsat, the launch of SwiftBroadband is the launch of another major service this year. Butler admits, "it has been a pretty busy year in terms of new service introductions.”In terms of the significance of the launch of SwiftBroadband, Butler said, "It is significant because it is the first launch we have had for the aeronautical sector for quite some time. It is also the first time we have extended the advanced capabilities of the Inmarsat-4 network and the functionality of BGAN technology beyond land-based users. With the Inmarsat-4s, we are moving towards a fully broadband portfolio over time. So, this is a pretty significant move for us. In terms of putting some numbers around it, the aeronautical sector over the last few years has been our fastest growing. At our half-year results it was up 45 percent from the previous year. That has been the trend for the last two years. Growth is being driven largely by our Swift 64 service where government and business jet users are actually installing multiple channels to get a faster throughput. This just shows the latent demand for SwiftBroadband.”

In terms of how the business will grow, Butler said, “We forecast that our aeronautical business will continue to grow because of this underlying demand. SwiftBroadband is important for another reason: this will be the service that will facilitate an expansion into the commercial airlines and aero-passenger connectivity. We haven’t given any specific forecasts on that, but if you look at AeroMobile or OnAir, both of whom use the Inmarsat network for their solutions, they have sized the market both for voice, SMS and email, and they have some pretty rich numbers in there. We will just take a percentage of that, but I think we are set for an even greater expansion in the aeronautical sector as these services get rolled out. The capability that is going to be rolled out is broadband IP and this is much more flexible, and cost-efficient, for the airlines.”

Commercial

The big question now with the commercial launch of the service is when the service will see the light of day on commercial airlines. On this issue, Butler said, “We have done a lot of testing of SwiftBroadband. In many cases, this is going to be an OEM [original equipment manufacturer] fit. We would expect Boeing and Airbus to fit them as part of cockpit communications. We could see commercial revenues being generated before the end of this month, as some of the beta test and trial terminals convert to being fully-functional terminals, but really introducing it this week is important for 2008. I would expect to be reporting revenues in our half-year results next year. At that time, there would have been some installations. Airlines like Ryanair, who announced a year ago that they were going to have a very high-profile fleet roll-out, will begin the installations on their aircraft in November. That will start to generate revenues early next year. This is not going to be a slow burn, but it will be difficult for us to quantify how much is going to be used. The revenue generating capability will be there from early next year.”

Issues

The enhanced service capabilities should also make it much attractive to airlines. Butler commented, “One of the biggest issues for a broadband aeronautical service is travelling between spot beams – so that when you have a connection, it is handed seamlessly between spot beams without dropping the connection or losing data speed. We have covered that from a technical perspective. I think the real challenge for us now is managing the usage of our network as we migrate towards IP. We have BGAN, we now have SwiftBroadband, and FleetBroadband is launched in less than a month’s time. As soon as we can get more of our traffic on IP, we can get much greater efficiency of the network.”

Butler believes the aeronautical market could prove a lucrative one for the operator. He said, “Gene Jilg, our CTO, has always maintained that we would not have an aeronautical business if we did not have maritime. We are able to do a lot for the aeronautical segment because we have this installed base of other services. Over the last six to seven years, aeronautical services contributed about three to four percent of our revenues. Today, it is at least six percent of our revenues, and I think SwiftBroadband could be the catalyst for that to expand. We know there is huge latent demand. We have a cost-effective communications tool, which will allow us to unlock, for the first time, the commercial airline market. This is a significant inflection point for us, and that is why we are excited about this launch this week.”