Commercial airlines have felt the effects of COVID-19 more sharply than almost any other sector. Demand for air travel went into freefall as travel restrictions were put in place to stem the global spread of the virus.
Airlines have been forced to ground the vast majority of their fleets and hunker down until flight bans are lifted and customers feel confident enough to return to the skies.
The aviation industry that emerges from this global health crisis will face a changed landscape and a long, steady climb back to the levels of demand for air travel seen in 2019, according to most analysts and airline associations. For instance, S&P Global Ratings forecast in a recent report that global air passenger numbers would drop by up to 55% in 2020 and stay below pre-pandemic levels through 2023.
As is the case with most other areas of our everyday lives, things are unlikely to immediately snap back into place when it comes to air travel.
The experience of traveling by plane is expected to be a little different to what we're all used to for some time to come – think face masks in the cabin, tighter restrictions on the amount of luggage passengers can bring on board, and longer waits at airports to allow for social distancing.
Blue skies ahead
Longer-term, however, the outlook is brighter. Data from a range of aviation industry bodies indicates the clouds will clear and those airlines that make it through the storm will see blue skies again within a handful of years. Viasat stands in solidarity with our airline partners during this period of extreme turbulence and will support them as they re-emerge.
Our diverse business portfolio places us in a strong position to continue serving our commercial aviation customers both now, and as they start to recover and ramp back up. In addition to in-flight connectivity, Viasat provides residential Wi-Fi services – an area of our business that has experienced surging demand over recent months as we have all switched to working and schooling from home.
Our Satellite Services division has achieved nine straight quarters of revenue growth. During the final quarter of FY2020, we saw a significant increase in fixed broadband demand as existing subscribers shifted to higher-value plans and our overall subscriber base expanded. This was largely due to the COVID-19 shelter-in-place orders. Viasat's Government Systems unit also delivered another record year, and underlying demand remains strong for FY2021.
We ended FY2020 with our in-flight connectivity system installed on 1,390 aircraft, including the addition of Boeing 787s operated by American Airlines and Aeromexico. While our IFC business – which currently accounts for less than 10% of our annual revenues – has been understandably quiet as airlines have focused all their efforts on surviving the global pandemic, we expect demand to return stronger than ever as the industry starts to recover.
Growing appetite for connected aircraft
We see no waning in passengers' appetite for in-flight connectivity. Going forward, in fact, we expect demand for airborne internet access in the post-pandemic era to be even stronger than it was before any of us had heard of COVID-19. Hygiene will be at the top of travelers' agendas, and the ability to access and stream online content on a personal device that nobody else has touched will be an attractive option.
The need to communicate in real time with family, friends and co-workers on the ground is also likely to be even more crucial after months of becoming accustomed to replacing face-to-face meetings with digital connections.
The only way is up
The last few months have been tougher on airlines than any other period in the history of aviation, but there are already early signs of a rebound. Data from the Transportation Security Administration (TSA) indicates that April 2020 likely was a floor for passenger traffic in the U.S. Meanwhile, the International Air Transport Association (IATA) said June 3 that demand for air services was beginning to recover after hitting rock bottom in April.
"April was a disaster for aviation as air travel almost entirely stopped. But April may also represent the nadir of the crisis," said IATA Director General Alexandre de Juniac, adding that business confidence was "showing improvement in key markets such as China, Germany, and the U.S."
Viasat will work with our airline partners at the pace that is right for them as they pick themselves up after what has been a devastating few months. For those in a position to move quickly to meet robust customer demand for in-flight Wi-Fi, our teams are here to help operators take advantage of the fact that much of their fleets are still grounded and use this time to equip aircraft without the inconvenience and expense of taking them out of service.
Exciting times lie ahead after a challenging start for all to 2020. We continue to target 2021 for the launch of the first satellite in our ViaSat-3 constellation, which, upon completion of the constellation, will take our award-winning service around the world. We look forward to expanding our already impressive family of airline partners, when the time is right.
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