Commercial aviation is poised for robust growth, with passenger demand projected to grow by approximately 4% annually through 2030. This steady expansion is supported by several key factors, including:
- A positive macroeconomic outlook and an expanding middle class in developing countries, driving stronger consumer spending and broadening the base of future air travellers
- Increasing market penetration of low-cost carriers (LCCs), making air travel more accessible and affordable, and thereby increasing the adoption and frequency of air travel among broader population segments
LCCs have long positioned themselves as disruptors by stripping out frills and focusing on price. However, the sector is undergoing a clear strategic evolution. As LCCs pivot towards hybrid models — combining ultra-low-cost efficiency with selective premiumisation — the demands on onboard experience are shifting significantly. Connectivity is central to this transformation.
For full-service carriers (FSCs), ancillaries are also becoming an increasingly important part of the revenue model, as well as seeking improvements in customer experience and engagement. All of which can be enhanced by connectivity.
Three forces underpin this trend. First, ancillary revenue growth remains critical. With unbundling strategies now mature, carriers are leveraging digital platforms to offer targeted retail, dynamic pricing and subscription products.
Second, passenger mix is diversifying. Beyond budget millennials, LCCs are serving more corporate flyers and FSCs are increasingly serving premium leisure travellers, while both are facing digitally savvy new generations. Each segment carries distinct service expectations, from seamless digital transactions to premium seating.
Third, competitive differentiation is increasingly tied to customer experience rather than fares alone. Premium seating, entertainment bundles and digital schemes are expanding. Onboard Wi-Fi and app-enabled engagement will be essential to deliver these higher-margin offerings.
In recent years, onboard spend opportunities have become a critical area; however, progress has been constrained by limited in-flight connectivity. The imminent arrival of high-speed, low-cost satellite connectivity represents a paradigm shift for commercial aviation, unlocking a new wave of opportunities.
Airlines will increasingly expect connectivity providers not only to supply bandwidth, but to enable holistic digital platforms that generate onboard ancillary revenue (i.e. in-flight retail and entertainment, e-commerce, etc.) and capture value from operational benefits (i.e. crew productivity, real-time routing planning).
For investors and providers alike, the question has shifted from whether connectivity will become universal to who will best positioned to capture the value it unlocks.
A market at an inflection point
Historically, onboard Wi-Fi was constrained by geostationary satellite technology: costly, heavy and slow. This kept adoption limited to premium cabins or long-haul fleets.
Today, the increasing number of low-Earth-orbit (LEO) satellites and new antenna developments are changing the economics and the onboard experience (see Figure 1):
- Latency is significantly reduced, enabling high-speed onboard connectivity
- Onboard antenna costs have fallen to c.€250k per aircraft (versus €0.5–1m historically)
- Retrofit times have been cut from a week to less than 24 hours, minimising downtime
- Lightweight designs (30–60 kg) now make connectivity feasible for narrowbody fleets, the backbone of global aviation
As demand for broadband services increases, satellite companies are serving airlines with data packages with high-cap or unlimited data. For example, Starlink, now one of the most significant players, already offers unlimited in-flight broadband for a $10k monthly fee supported by a network of ~8,000 LEO satellites.
As a result, connectivity is shifting from a long-haul premium feature to a mainstream requirement across short- and medium-haul flights.
Connectivity as a strategic enabler for airlines
Uptake of broadband connectivity should be understood as both a revenue enabler and a cost-saver, creating value across four critical dimensions: passenger experience, ancillary revenue, operational efficiency and crew productivity.
- Passenger experience
Surveys show 75% of passengers are more likely to rebook with an airline offering high-quality Wi-Fi - Ancillary revenue
Digital advertising, real-time e-commerce (i.e. F&B, streaming of entertainment, ticketing of destination services, etc.) and in-flight seat upgrades all rely on live connectivity - Operational benefits
Enhanced connectivity drives operational cost savings but also contributes to ESG objectives- Fuel and maintenance savings
- Real-time weather routing optimises flights, reducing fuel consumption and emissions
- Real-time maintenance indicators help to prevent unplanned disruptions, extend aircraft lifespan and reduce the cost associated with unscheduled repairs
- Supply chain and turnaround efficiencies
- Faster restocking and data-driven inventory management streamline logistics, reduce waste and minimise turnaround times, improving operational performance
- Crew productivity
- Live transaction processing reduces the risk of fraud and errors in onboard sales
- Uptake in crew connectivity simplifies tasks, allowing crew to spend more time engaging with passengers, improving overall customer experience
- Fuel and maintenance savings
In short, connectivity transforms the aircraft from a transport vessel into a digital commerce platform and operations hub.
The current market situation
Early movers have focused on in-flight retail (IFR) and in-flight entertainment (IFE), prioritising these among a range of possible digital initiatives.
Adopters of onboard digital solutions are already seeing strong positive outcomes. For example, Iberia Express has reported significant improvements in onboard order volumes, transaction value and spend per passenger as a result of these initiatives (see Figure 2).
However, industry adoption across initiatives remains at relatively early stages, particularly on in-flight retail services.
According to L.E.K. discussions with decision-makers at major airlines, penetration of digital solutions is expected to accelerate, driving incremental market growth and enhancing the attractiveness of this opportunity for technology providers.
Particularly, LCCs are leading adoption, driven by their relentless focus on ancillary revenue and operational efficiency. In our study, LCCs stated to be focused on addressing the following pain points at this stage:
- Monetising onboard activity
- Improving customer experience and passenger understanding
- Reducing inventory waste and improving stock management
- Mitigating crew inefficiencies and boosting on-board productivity
These efforts are poised to drive broader industry adoption as digital capabilities become increasingly critical for both commercial and operational performance.
New market participants are emerging as onboard technology partners for airlines
Delivering these solutions requires strategic partners capable of aligning seamlessly with airline operations, simplifying integration with multiple stakeholders and ensuring scalable technology platforms.
A good example is the typical IFR solution focused on food & beverage and duty-free sales, which connects caterers, airlines, crew and passengers across the value chain to deliver a cohesive and efficient onboard experience (see Figure 3).
Moreover, there is growing complexity in aligning the full onboard customer experience with a broader digital strategy that extends beyond retail services (see Figure 4).
The current provider landscape is highly fragmented, formed by a small number of relevant providers, a long list of small players, several specialised in standalone solutions, and others with a specific regional focus or complementary end-markets (i.e. maritime, financial services, hospitality).
This fragmentation creates a significant consolidation opportunity for first movers with integrated, end-to-end platforms.
The opportunity goes beyond commercial aviation
While the near-term focus for connectivity providers will be commercial aviation, the implications of high-speed, low-latency satellite connectivity extend much further.
Airlines are only the first segment of a broader industry ecosystem that is rapidly digitising.
- Ferries and cruises
Cruise lines and ferry operators are under similar pressure to transform the passenger experience and monetise onboard activities. Reliable broadband at sea can support digital retail platforms, entertainment streaming and even destination services, mirroring the value proposition in aviation. - Rail
High-speed rail networks are increasingly competing with airlines on short-haul routes. Connectivity-enabled digital retail and entertainment services can be transplanted directly from aviation to rail, enhancing passenger experience and ancillary revenue potential.
In addition, technology partners with robust digital platforms (e.g. e-commerce, retail) are increasingly well-positioned to expand into adjacent opportunities, connect multiple stakeholders and facilitate real-time service delivery — a growing need across multiple sectors.
- Hospitality and sports venues
Hotels, resorts and stadiums are seeking ways to deepen guest engagement and unlock new digital commerce channels. For instance, with real-time ordering of food and merchandise, and dynamic advertising opportunities during events. - Events and leisure
The same platforms that integrate payments, content and personalised services onboard an aircraft can be adapted to arenas, conference centres and theme parks, anywhere operators seek to monetise the customer journey.
In this sense, aviation is the proving ground, but the real prize is much larger, lying in cross-sector expansion. Companies that succeed in building modular, scalable connectivity solutions for airlines will be uniquely positioned to extend those capabilities and expand into adjacent opportunities.
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