SINGAPORE — Asia Pacific’s in-flight broadband market is set to be worth $52 billion by 2035, with demand being driven by the region’s growing affluent middle class, who are willing to pay for an enhanced onboard experience, according to a report by the London School of Economics and Political Science.
In terms of overall numbers, passenger growth in Asia Pacific is expected to be the highest globally, with China displacing the U.S. as the largest market by 2024, the report said. India is also set to become the third largest global market around 2025. The surge in passengers also means the region’s airlines stand to benefit from a $10.3 billion boost in revenue from non-ticket sources, which include broadband access charges and premium media content.
The report is the first of a three-part research study by the Economist Intelligence Unit to examine the commercial opportunities of passenger connectivity for the global airline industry. It is based on structured interviews with approximately 10,000 airline passengers worldwide and also on primary and secondary market research data on the airline industry found in the public domain. Data from the International Air Transport Association (IATA) were also used to benchmark global forecasts for passenger and aircraft growth to 2035. The second and third parts of the research will be released in 2018.
The report noted that Asia Pacific would become “the largest single market for broadband enabled services globally in 20 years’ time.” Alexander Grous, lecturer in the London School of Economics’ department of media and communications and director of research for LSE Enterprise, told the Nikkei Asian Review that the continued growth of the middle class in the Asia Pacific region was something that “will drive more aggressive growth.”
“The growing middle class combined with strong adoption of technology”, Grous noted, “is creating a culture of onboard connectivity expectation.” He added that political and economic stability in the region were also “is spurring business confidence and demand.” “So we expect more consumers now to be demanding more for connectivity.”
The study found that Asia Pacific passengers placed connectivity as their top priority, followed by e-commerce and premium content, including TV and movies. This was in sharp contrast to European and U.S. passengers, who placed a higher demand on premium content.
Asia Pacific passengers were also more willing to spend more on e-commerce versus Europe and American passengers, especially if there were good deals beyond in-flight catalogs, such as special discounts or home delivery services.
“We found that Asia Pacific passengers have a higher spend level compared to other countries when it comes to e-commerce,” Grous said, especially when it came to deals. Interestingly, unlike European or American passengers, Asia Pacific passengers who were interviewed for the study were also “interested in onboard gambling as an airline feature.”
Low-cost carriers in the region are jumping on the opportunity to provide more connectivity for passengers. “LCCs are generally shorter haul and don’t have the luxury of a 10-hour flight to do everything with a passenger,” Grous said, so they are “more aggressive and more willing to adapt by offering broadband, e-commerce and some premium content. “
The study estimates that by 2035, LCCs in the region could hold almost half of the market share for in-flight connectivity at 45%, with traditional carriers having about 55%. If LCCs start adding more long-haul routes, they can “definitely extract more revenue from in-flight connectivity,” he said.
But ultimately, success would be “dependent on a partnership; the relationship between airlines, retail and content partners and technology providers.”