Immediate $33 billion market share shift ‘on the table’ for airlines adapting to changing passenger behaviour

Gen Z hot on the heels of Millennials to become the largest group of airline flyers by 2028, bringing new expectations of technology and travel

450 million passengers not engaged with traditional airline loyalty schemes would switch for high quality Wi-Fi in the sky, according to London School of Economics and Political Science

9 September 2019: Airlines that have successfully installed connected cabins have an immediate opportunity to win $33 billion in market share from competitors. That is the conclusion of new economic modelling from the London School of Economics and Political Science (LSE) in association with Inmarsat, the world leader in global mobile satellite communications.

“Sky High Economics – Chapter Three: Capitalising on Changing Passenger Behaviour in a Connected World” examines the global shift underway in passenger demographics, behaviours and attitudes to loyalty.[1] It underscores an immediate need for airlines to innovate in order to stay relevant in a competitive industry landscape, identifying $33 billion  in share shift ‘up for grabs’ today for those developing the digital inflight experience that passengers are seeking. This opportunity equates to six per cent of the total annual commercial passenger aviation market.

Changing passenger demographics

Today, the airline industry is experiencing a period of exceptional change. Within the next decade, the first truly digitally native generation, Generation Z (born between 1997-2012) will become the largest group of air passengers, with 1.2 billion flying each year.

Paired with this demographic shift, digital disruption on the ground is driving expectations of inflight experience, and redefining attitudes to airline loyalty. According to the LSE research, Millennials (the largest passenger group today, born between 1981-1996) value loyalty less than any previous generation – a trend set to continue with younger generations.

The immediate opportunity for airlines

Sky High Economics identifies a market of close to 450 million passengers worldwide, currently uncommitted to any airline loyalty programme, who would switch their allegiance in favour of an airline offering high-quality inflight Wi-Fi.

This forecast is modelled using data from frequent flyer schemes, which reveal a market split into active, engaged frequent flyers (13%) and less engaged, brand-agnostic passengers (87%). Less engaged travellers – many of whom are younger flyers with new expectations of travel – present the largest opportunity for airlines to take market share.

Today, 12 per cent of less engaged passengers are willing to switch allegiance to an airline that offers reliable Wi-Fi, worth $33 billion in share shift for airlines already offering the service to take from competitors. This sum is predicted to grow to $45 billion in the next decade, by which time Generation Z is expected to be the airline industry’s largest customer base.

Driving loyalty in a connected world

Sky High Economics identifies several modern drivers of airline loyalty in a digital world, encompassing engaging inflight experiences from e-commerce to premium content, personalisation before, during and after the flight, and making the flight a more significant component of the wider customer journey.

Dr Alexander Grous (B. Ec, MBA, M.Com, MA, PhD.), Department of Media and Communications (LSE) and author of Sky High Economics, said: “The next decade presents both a huge opportunity and challenge for the global aviation industry. The technology and infrastructure are ready to meet the expectations of always-on travellers and it is up to airlines to seize this opportunity now, or risk falling behind their peers – to the tune of $33 billion today, and $45 billion by the end of the next decade.”

Philip Balaam, President, Inmarsat Aviation said: “The widespread and growing appetite for connectivity, coupled with the vastly changing demographic of passengers, has shown that demand for connected, personalised and value-added services in the cabin is accelerating at pace. To stay relevant in a competitive industry landscape, airlines must adapt to the behaviours and expectations of today’s and tomorrow’s passengers now.

He continued: “High-bandwidth Wi-Fi with consistent coverage is essential to meet the demands of data-hungry passengers – but adopting the technology is just the start. The real opportunity exists in making inflight Wi-Fi an enabler for tailored passenger experiences, enhancing loyalty while accessing new revenue streams.”

[1] The report utilises current IATA data and primary research including data from frequent flyer schemes, interviews with regulatory agencies, airlines and passengers


For further information

Jonathan Sinnatt
Director of Corporate Communications
+44 (0)20 7728 1935
jonathan.sinnatt@inmarsat.com
Robeel Haq
Head of Communications, Aviation
+44 (0)20 7728 1352
robeel.haq@inmarsat.com

Notes to Editors:

About Sky High Economics

Sky High Economics is a three-part research study from the London School of Economics and Political Science (LSE). It is the first of its kind to comprehensively model the socio-economic impact of connectivity on the aviation industry.

Chapter One, Quantifying the Commercial Opportunities of Passenger Connectivity for the Global Airline Industry quantified the global market value of inflight Wi-Fi. It forecast that broadband in the sky will create a market worth $130 billion by 2035, including $30 billion in digitally enabled ancillary revenues for airlines.

Chapter Two, Evaluating the Economic Benefits of Connected Airline Operations highlighted how secure, high-quality, enhanced connectivity services can deliver powerful commercial efficiencies for airline operations, to the tune of $15 billion in annual savings for the airline industry by 2035.

The third and final chapter, Capitalising on Changing Passenger Behaviour in a Connected World, highlights opportunities for airlines to adapt to changing consumer behaviour and expectations in order to enhance customer loyalty in the digital age. In addition to the ancillary revenue and cost saving opportunities already forecast, new economic modelling from the LSE has identified a $33 billion market share ‘up for grabs’ immediately for airlines embracing connectivity to take away from their competitors. This equates to six per cent of the total commercial passenger aviation market.

The full Sky High Economics Chapter Three report is available to download here: www.inmarsataviation.com/skyhigh3

About Inmarsat

Inmarsat is the world leader in global, mobile satellite communications. It owns and operates the world’s best global portfolio of satellite networks, specifically designed for customer mobility, and holds a multi-layered, global spectrum portfolio, covering L-band, Ka-band and S-band, enabling unparalleled breadth and diversity in the solutions it provides. Inmarsat’s long established global distribution network includes not only the world’s leading channel partners but also its own strong direct retail capabilities, enabling end to end customer service assurance. The company has an unrivalled track record of operating the world’s most reliable global mobile satellite networks, sustaining business and mission critical safety & operational applications for 40 years. It is also a major driving force behind technological innovation in mobile satellite communications, sustaining its leadership through a substantial investment and a powerful network of technology and manufacturing partners. Inmarsat operates across a diversified portfolio of sectors with the financial resources to fund its business strategy and holds leading positions in the Maritime, Government and Aviation satcoms markets, operating consistently as a trusted, responsive and high quality partner to its customers across the globe.

For further information, visit Inmarsat.com or follow us on LinkedIn or on Twitter @InmarsatGlobal..

About the London School of Economics and Political Science (LSE)

The London School of Economics and Political Science (LSE) is one of the foremost social science universities in the world. LSE is a specialist university with an international intake and a global reach. Its research and teaching span the full breadth of the social sciences, from economics, politics and law to sociology, anthropology, accounting and finance. Founded in 1895, the School has an outstanding reputation for academic excellence. 16 Nobel Prize winners have been LSE staff or alumni. The School has a cosmopolitan student body, with around 9,500 full time students from 140 countries. LSE has a staff of over 3,000, with about 46 per cent drawn from countries outside the UK.

This report has been commissioned via LSE Consulting.