Taqnia Space is on the cusp of launching its UON service with Saudia. The kit will go live on a pair of A320s later this month according to Mustafa Murad, the company’s Aero Program Head. In a conversation at the Aviation Festival in London this afternoon Murad also detailed some of the unique propositions for the company’s offering, including a business model bound to look attractive to airlines.
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Getting the kit on planes and in the air is no small feat. Murad confirmed that the STC for the A320s was recently issued by EASA and that installations on at least the first of the type is complete. Two of the aircraft will enter service later in September and a 777 is in the queue, with STC expected shortly and service entry in October.
Getting certification and pushing the planes into service is impressive, but that’s not particularly unique in the industry. UON’s business model is vastly different from the rest of the market. And Murad is convinced that it will be able to win significant fleet installs as a result. Key to that proposition: It is free!
We don’t sell the product to airlines. It is a managed service. We cover all the costs.
The turnkey model of the past decade made the up front investment relatively low risk for airlines. The vendors financed the capital costs and paid off that kit through session purchases in flight. The airlines had a small exposure in terms of the cost to carry the hardware, but otherwise the risk was relatively low. UON aims to further reduce that risk by covering the full costs up front and owning the system long term as well. It is not a financing deal to the airlines. It is a completely dedicated UON system that happens to be carried by the airline.
Murad suggests that the up front costs to install the combination Ku/Ka antenna kit could reach as high as $1mm per aircraft but that’s a burden the company is willing to bear. When pressed for details on how that expense will be funded Murad assured PaxEx.Aero that the money will not be an issue. The unique business model is incredibly compelling to investors, he says, with banks “fighting to fund the project.”
UON is buying access to passengers and their connectivity data with the hardware installations. The company will own that part of the experience rather than letting the airline own it. The true value of that data remains unclear, particularly against the high costs of installing and maintaining the on-board kit and the cost of bandwidth. Even as an owner-operator of some of the satellites the costs are not insignificant. And for global coverage there are Ku-band transponder leasing costs involved as well.
On the plus side for UON the rest of the industry is moving away from even subsidizing or financing the up-front costs of the kit. That dramatically increases the CapEx for new contracts. UON takes control of the customer but also cuts all that cost. KLM recently suggested that it is willing to give up some of that customer data control to better communicate with passengers. This could play out similarly, giving the airline a return in the form of a satisfied traveler with minimal financial or data cost.
But with the extremely high up front costs there are many reasons to be skeptical of the model. Paid take rates remain low and paying off a million dollar up front investment per aircraft will not be easy. Even if the banks were fighting to finance the deal they are going to expect the loans to be repaid eventually.