Archive For The “Connectivity” Category

Gogo, American Airlines and Viasat

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In last week’s earnings call Gogo indicated that expected service revenue for its North America Commercial Aviation segment would be flat YoY in 2018. Considering the impending loss of some 400 American Airlines aircraft from its service fleet (~15%) that’s a tough position to hold. Digging into the revenue numbers a bit shows how it might play out.

In 3Q17 Gogo’s service flew on over 2800 commercial aircraft in North America. Some 250 of those had satellite service on board while the others carried the company’s terrestrial ATG kit. Looking at a breakdown of the total revenue numbers in the quarterly earnings report and in an investor briefing filed this week we deduced revenue per aircraft type in more detail than Gogo typically reports.  In the following table, we derived the $143 based on Gogo’s two data points, viz. $64 and $220.

Getting to a split by aircraft type is especially important when looking at the potential 2018 revenue as the American Airlines aircraft leaving will be mainline, while some will convert to 2Ku. For example, American’s RJs will remain on the Gogo ATG network.

Revenue numbers ticked up slightly in 4Q17 based on a slight increase in aircraft flying but mostly thanks to nearly 200 more planes fitted with the 2Ku system versus ATG. A mainline aircraft flying with 2Ku realizes approximately 50% higher revenue than an ATG plane, based mostly on higher “take rates”. With the significant increase in bandwidth, Gogo can support more users per flight. In this table, we derived the ARPA $165.

Of this revenue, based on fleet size and aircraft type mix, it appears that American Airlines contributed approximately $154m, or 35% of the CA-NA service revenue in 2017. The ARPA numbers in the table below are our estimates.

Projecting out into 2018 and taking Gogo’s word of flat ARPA growth at face value, delivers an interesting perspective. Some 400 American mainline aircraft will be removed from the Gogo system. Another 250-350 (North American-based) mainline planes will convert from ATG to 2Ku.  In the next table, all of the ARPA numbers are our estimates and the fleet numbers are our estimates based on Gogo’s statements.

Net growth to the North American fleet is expected to be minimal. This results in a net drop in total revenue based on these estimates, in part because of the way the company accounts for 2018 hardware sales (the company says, “CA-NA revenue of $445 million to $485 million, of which approximately 20% is equipment revenue”; that suggests $372m as a mid-point for service revenue).

For the airlines that set their own pricing – a position American converted to in January 2018 – the average revenue per aircraft (ARPA) is expected to dip initially. Gogo hopes that dip is short-lived, growing back as the take rate increases. In this scenario we hold it relatively steady for 2018, assuming any increase comes in 2019 which is in line with Gogo’s statements.

The other uncertainty in the revenue shift is based on how quickly aircraft are moved from one system to another. All 400 of the soon-to-be-Viasat aircraft will spend some time generating revenue for Gogo this year. The ATG-to-2Ku planes will also split their time on the two platforms. This model assumes an evenly paced rollout across the year. A 737 that is converting to Viasat service gets an ARPA at 50% of the full year number on average. That is not accurate on an individual aircraft basis – conversions happen more in Q1 and Q4 than over the summer – but on average it should be close.

The net result here is a $33m hit to Gogo’s revenue in 2018 from losing the American Airlines aircraft. Overall, Gogo’s mainline ATG revenue is nearly halved based on this estimate. At the same time, the 2Ku revenue component increases by some $75m. That gain is offset by an expected $30m increase in costs related to satellite capacity for 2018.

The hope for Gogo is that in 2019 the take rate continues to increase, along with revenue per session. ARPA and total revenue follow from there.

 Reported in partnership with

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United Airlines and Viasat Sign Contract to Bring High-Speed Connectivity to 737 MAX

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Viasat announced a new contract with United Airlines to bring it’s latest generation in-flight entertainment and connectivity system to more than 70 aircraft, including at least 58 of United’s new Boeing 737MAX aircraft.  This means Viasat will now be the direct in-flight internet service provider, deploying its most advanced IFEC system to provide United customers access to fast, reliable internet connections in-flight.

Viasat will serve as the direct in-flight ISP to United, deploying its most advanced IFEC system, in order to provide United customers access to fast, reliable internet connections from the air—for accessing websites to connecting with business applications such as a corporate VPN and secure email. Viasat’s IFEC system will also power United’s Private Screening entertainment option, which offers customers access to hundreds of entertainment titles from its onboard library direct to their own devices.

United will tap into Viasat’s advanced high-capacity Ka-band satellite system, which includes the ViaSat-1, ViaSat-2, and ViaSat-3 satellite platforms. These capacity-rich satellite platforms enable Viasat to deliver fast, high-quality in-flight internet service to each connected device on the aircraft. This technology allows United to deliver dependable internet connections gate-to-gate and perform over-the-air content uploads to its onboard entertainment system, ensuring its library has the most current content available.

Viasat is on something of a tear here. They won an order from American Airlines for its 737 MAX fleet. This may develop into something even bigger if the airline decides to switch away from Gogo‘s service. Then JetBlue also confirmed that it is upgrading its aircraft to utilize the ViaSat-2 satellite.

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Innovative Aerospace Technologies Go Mainstream in 2018

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As we look over the technology landscape, several innovative technologies are moving from concept into production as new aircraft and engine programs reach the market.  Let’s take a look at those that will soon explode in volume and provide intriguing opportunities as they move from R&D to mainstream.

Big Data and Analytics
Virtually every new aircraft and engine program features “health management systems” that enable monitoring of a number of parameters and to predict when maintenance action might be required before an in-service failure.  The benefits of these programs are promising, but require the OEMs to store and analyze petabytes of data to implement these predictive benefits.

This will require massive data storage facilities, new analytical software, and communications capabilities to alert operators around the world to potential problems.  Almost every OEM has a control center with multiple computer monitors tracking their customers and equipment in service in real-time around the world.  These are complex systems, with the massive investment required, to generate the benefits of data for their customers by reducing catastrophic maintenance events and minimizing schedule disruptions.

In the narrow-body world, the C Series and E2 Jets are farther advanced than the A320neo and 737 MAX families in this regard, while the 787 and A350 lead the charge in wide-body aircraft.  In the engine side, GE’s Digital Twin concepts go beyond traditional health management and may be the most advanced application in its class.

Additive Manufacturing goes Mainstream
The new Advanced Turboprop Engine from GE has about 35% of its parts produced using additive manufacturing.  The benefits of additive include the ability to create designs and shapes that would be difficult using conventional techniques, and lighter weight components.  In the ATP, 855 individual parts are replaced with 12, reducing complexity and maintenance cost while providing improved performance.

At the same time, research and development into additive manufacturing technologies will result in faster processing to enable more rapid completion of complex parts, which are relatively slow to build today.  Our projection is for a doubling of speed in 2018 and a redoubling of speeds in 2019 as refinements are made in these technologies.

Innovative technologies using titanium have resulted in Norsk Titanium building a specialized facility in upstate New York to produce additively manufactured components from titanium in a unique, hybrid process.  Their 787 parts can be ordered one day and shipped overnight the next to a customer, perhaps a precursor to the next generation MRO facility that will have high-speed 3D printing capabilities instead of racks of parts inventories.

We’re seeing additive manufactured parts on engines from the GTF and LEAP, with large-scale applications on the ATP.  Additive has arrived.

Out of Autoclave Composite Materials Streamline Manufacturing
The composite materials utilized for most aircraft today are thermoset pre-pregs that require “baking” in a pressurized autoclave to “set” the polymers to form strong but lightweight structures.  Today, the second generation of composites is emerging, with materials that can be produced “out of autoclave” and do not need a pressurized high-temperature manufacturing process.  Speeding the manufacturing process, at lower energy costs, is viewed favorably by aircraft OEMs, who are looking closely at alternative materials  We see the industry gradually moving away from traditional thermoset materials to thermoplastic materials that include PEEK and PEKK materials, and to lower cost thermoset pre-preg materials.   While this transition will not be complete until the next generation of aircraft is introduced, those new materials are being tested and evaluated today for future programs.

Ceramic-Matrix Composites
CMCs are a unique set of composite materials that are formulated with silicon chemistries and have unique high-temperature applications in aircraft engines.  GE is utilizing CMCs in the LEAP engine, which requires a massive ramp-up of CMC production for the first high volume civil application.  With the same weight and strength benefits of composites over metal, plus an additional 400 degrees in temperature resistance, these components will prove valuable as future aircraft engines increase pressure ratios and operating temperatures.

Advanced Avionics for Autonomous Aircraft Operations
While we aren’t quite ready to eliminate pilots from aircraft, the aviation industry has the capability today to take off, navigate, and land aircraft without a pilot.  The drone industry is growing substantially, and the ability to remotely control an aircraft provides the potential for safety improvements.

The aviation industry pioneered autonomous operations and remains well ahead of the auto industry in this leading-edge technology.  Autopilots and flight management systems are complex avionics systems that are becoming more and more sophisticated, and could soon provide the fail-safes that will enable single-pilot plus computer/ground backup operations.  The technology is ready, although passenger and union (not to mention regulatory) acceptance remain in the future.

The Bottom Line
Technology integration into commercial aerospace is accelerating, with a focus on materials, manufacturing process, control systems and IT.  The next generation, currently in R&D, will provide even more advances as nanotechnology and quantum computing bring new possibilities.  We are entering an exciting time of change for our industry.

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Panasonic Avionics Unveils Third Generation Satellite Communications Network

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At the Las Vegas CES, Panasonic Avionics Corporation introduced a “major evolution of its satellite connectivity service” with the introduction of its third generation communications network.

The company’s PR states that its third generation network is built to meet the growing connectivity demands of airlines and their passengers. Throughout the first quarter of 2018, aircraft from a number of airlines will be transitioned to Panasonic’s new network. In addition, Panasonic subsidiary, ITC Global, will leverage Panasonic’s new broadband network to deliver connectivity to its energy, maritime and enterprise customers.

Hideo Nakano, Panasonic Avionics Corporation CEO, says: “Our new satellite communications network is more than just greater bandwidth – it represents a major evolution in our approach to partnering with customers to deliver the highest standards of service and to ensure that their passengers enjoy an unmatched, connected experience inflight.”

The new communications network is built on Panasonic’s high throughput satellite service, which today covers all dense mobility traffic areas around the globe with high throughput spot beams and wide overlay beams that support Panasonic’s global in-flight television service. When combined with the rollout of the company’s new satellite modem, developed in conjunction with Newtec, Panasonic now offers bandwidth up to twenty times greater than previously available. This supports the provision of services such as a fast internet, video streaming, VoIP applications, improved TV picture quality and a broader channel choice, the capability to offer 3G phone services, and greater bandwidth for crew applications.

The network is backed by a range of new measures Panasonic has launched to provide higher levels of support to its customers. These initiatives are channeled through Panasonic’s new Customer Performance Center, which drives enhanced network performance, reduced outage times, and faster response and resolution times for all customer inquiries.  The Customer Performance Center offers a range of value-added services including traffic shaping tools, live monitoring and management of the user experience, and Panasonic’s ZeroTouch service, which enables real-time content loading, validation, and management.

Currently, over 1,800 aircraft around the world use Panasonic’s global high-speed in-flight connectivity service. The company expects more than 10,000 aircraft to be connected to its world-class global high-speed communications network by 2025.

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Major Changes in EFB Applications

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The FAA has made a 180-degree turn in its attitude towards the display of own-ship position on electronic flight bags.  Advisory Circular AC120-76D eliminated the prohibition from using geo-referencing or own-ship position displays while using moving map features on an EFB in the air.  Using geo-referencing on the ground has always been acceptable.

This applied to operators under Part 91, 91K, 121, 125, and 135.  Operators from parts 91K to 135 require FAA approval of their EFB programs, but Part 91 operators can use EFBs as they wish, without formal approvals.

This will enable many general aviation pilots operating under Part 91 to gain the benefits of moving map technology on their iPads without having to replace their steam-gauge panels with glass cockpits.  As the sophistication of EFB applications from companies like Jeppesen (Boeing) and ForeFlight has increased and the ability to demonstrate the accuracy of positioning information, the FAA became more comfortable with the use of position-information in flight.

EFB classification has also been eliminated, and the former Classes 1, 2, and 3 are now history.  The new definition of an EFB is “a device displaying EFB applications.”  That could, in the near future, turn out to be a smartphone as well as an iPad.

In other changes, operators can make changes to their EFB programs without contacting their FAA principal inspector.  The approval and updating process for EFB applications has gotten easier.

The Bottom Line:
EFBs are here to stay and have proven themselves.  While for hire operations still require FAA approved EFB programs, the regulatory process has been streamlined, reflecting the reliability and sophistication of many EFB apps.  The FAA is keeping up with technology, and recognizing the capabilities of an EFB.

This should result in the industry-leading applications that are approved by the FAA expanding their productivity and utility in the cockpit.

Now if we could only get ADSB into an EFB…..

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The World’s Best Selling Business Jet Improves

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The Embraer Phenom 300 is the world’s best selling business jet, and a new model, the 300E was introduced at NBAA this year. The 300E, with the E standing for “Enhanced” sports an elegant redesigned cabin and a new cabin management and in-flight entertainment system from Lufthansa Technik.

First delivered in 2009, the Phenom 300 has been the best selling business jet since 2013, with more than 400 aircraft delivered in 40 countries. The new 300E version will begin deliveries in early 2018.

“We are very excited to introduce the Phenom 300E which sets a new standard in value and customer experience. The Phenom 300E reflects our commitment to fascinate our customers,” said Michael Amalfitano, President & CEO, Embraer Executive Jets. “With a passion for excellence, our team has been working closely with customers to bring to market yet another beautifully designed and brilliantly engineered marvel of aviation.”

The following video highlights the recent changes to the 300E.

Embraer designs and manufactures its own seats, and the new interior offers a number of advances in comfort and personalization. The seat profile includes a built in headrest, retractable armrest, new table, side ledge, side walls and valance designs. The seats also include extendable leg rests, and seat bolsters provide improved ergonomics, as shown in the photo below.

Performance of the 300E ranks among the best it its class, with a high speed cruise of 453 knots, an a range with six occupants of 1,971 nautical miles. The aircraft, powered by two Pratt & Whitney Canada PW535E engines, is capable of flying at 45,000 ft.

Bottom Line: The best selling business jet in its class continues to improve – on time and on-budget.

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