Recovery in global air travel drove surging orders for in-flight internet connectivity in the first half, according to Inmarsat, although the UK satellite operator cautioned the rate of growth could slow in the near future as the sector normalised after two years of disruption from Covid-19.
“Aviation had a terrific quarter with in-flight connectivity growth of 59 per cent,” said Rajeev Suri, Inmarsat chief executive, as he reported a 9 per cent improvement in first-half earnings. “That pace may slow somewhat given that the post-pandemic recovery started in the second half of 2021, making future comparisons more challenging.”
Suri insisted the aviation sector still offered substantial potential for growth. “Consumer demand for connectivity when they fly is high,” he said. “Many new aircraft are coming on the market, and there are more unconnected planes than connected already in the air.”
In-flight connectivity drove a 48 per cent increase in revenues in the group’s wider aviation division, which accounted for 20.7 per cent of total sales. Maritime and government revenues each accounted for 35 per cent of revenue.
Meanwhile, Suri said the takeover by ViaSat remained on track despite a probe being launched in August by the UK competition authorities. He claimed the combination of his company and ViaSat was “highly complementary” and would result in Inmarsat investing more in the UK than it could have done alone.
ViaSat’s bid is the first sign that the highly fragmented satellite sector is at long last beginning to consolidate. Analysts from Barclays suggested the latter is a growing source of concern for providers of geostationary satellites (GEO) that are fixed in orbit, such as ViaSat and Inmarsat.
Suri said more consolidation would be needed to compete against the disruption of new rivals building constellations in low earth orbit, such as Elon Musk’s Starlink, or Jeff Bezos’s planned Project Kuiper. “You need more skilled players to be able to compete over the next 10 years,” he said.
Though the US Committee on Foreign Investment has given clearance to ViaSat to move forward with its acquisition of Inmarsat, a probe by the UK Competition and Markets Authority is unlikely to complete its first phase until October.
Suri is confident regulatory approval is just a few months away and he has ruled out further acquisitions in the near future.
When asked about the merger of UK government-backed OneWeb to French operator Eutelsat, the Inmarsat chief executive was bullish and argued an agreement with ministers to maintain a robust presence in the country through R&D spending and a headquarters in London means Inmarsat is the “clear UK national champion”.
Inmarsat recorded revenues up 5 per cent year-on-year to $363.4mn with earnings before interest, tax, depreciation and amortisation at $210mn.