Viasat is making a lot of money, even though it cannot add new users to its core satellite offering today. But the company is not shying away from growth in the aero segment.
That should be good news for the company’s balance sheet, and hopefully just the first step to even bigger numbers as the ViaSat-3 constellation takes flight next year (launch is still anticipated in Q2 ’22, with EIS 2-4 months later).
Key to the aero market growth is the commitment from Delta Air Lines to move the bulk of its single-aisle fleet to Viasat’s services in the coming years. Viasat reported 25+ aircraft fitted at the end of June and more than 80 now carrying the kit as of the earnings call last week. The pace of installations is expected to accelerate as the carrier looks to have 300ish planes carrying the hardware by the end of 2022. Delta eventually intends to have the Viasat hardware on more than 500 aircraft.
The Delta order is a massive part of the Viasat backlog, but not the only aircrafts joining the fleet. The growing Icelandair 737 MAX fleet carries Viasat’s gear. United Airlines also chose Viasat for its MAX 8 deliveries, part of the new Signature Interior configuration.
It is also worth noting that the majority of Viasat IFC-equipped aircraft grounded owing to COVID are back in the air. The company says 1,400 of the 1,550 installs returned to service.
Looking to LEO
Viasat remains focused on its GEO satellite roots, even while considering the options available in low earth orbit (LEO). For its core, high volume businesses, however, the company remains unconvinced that LEO can truly deliver on the demand.
For one thing, CEO Rick Baldridge cited Cisco and other studies suggesting that low latency – the key differentiator for LEO – is less critical for users than LEO operators suggest. Baldridge sees that as “not a very big fraction of the total” demand in the market. Without that as a compelling factor, the economics of the LEO constellations become more challenging.
The company even took a dig at the Gogo ATG network as being lower latency but unable to deliver the quality airlines demanded, based on limited available capacity. For its part, Gogo knew it was a problem and is much happier now without all those commercial jets using its scarce spectrum.
Baldridge also suggests that the LEO global coverage footprint is not as thorough as vendors suggest, especially in the aero and mobility markets. In response to claims from LEO operators that they’re going to take over the aero market by the end of the decade, he offered up the observation that “it is not super surprising that a vendor who only has LEO would say 90% of the market will go to LEO operators.” Baldridge continued:
[G]lobal coverage might mean I can be anywhere, but I can’t be everywhere. Especially when you think about some of the problems that are around how at airports we have large numbers of airplanes that disperse in all directions or lots of different directions. Those are really hard problems for satellite with very small beams, unless you have a very, very large numbers of satellites.
Starlink plans an exceptionally high number of satellites, but how its anticipated mobility offering truly plays out remains to be seen. Among other factors, it has revised the proposed antenna/terminal offering to an updated version still in development, and which still requires FCC approval. Fewer than 500 mobile earth stations (i.e. planes, trucks, or ships) will be fitted with the DISHY antenna under the revised filings.
Build or Buy?
Baldridge’s comments should also be taken in the context of a company which, for now, cannot deploy a LEO constellation. While its application to move its Ka-band, nongeosynchronous orbit constellation from MEO to LEO remains pending with the FCC others are building, launching, and even operating satellites in that plane. And maybe Viasat will simply contract out for that capacity.
We’re going to continue to evolve our plans. We also want to work with other NGSO partners to the extent that we can, that LEO is an area where we may rather work with others rather than just own everything ourselves. That would allow us to deliver the services that we want through this hybrid [LEO/GEO] model, which we think ultimately is still the way things are going to turn out.
Considering Viasat’s general focus on owner-economics, the idea of partnering rather than owning raises an eyebrow, for sure. But with the GEO satellites the company also feels its technology development skills bring increased productivity to the spacecraft, not just lower build costs.
At the end of the day, however, Baldridge notes that the LEO operations are not yet ready for Viasat to make a move, “A lot of it will depend on when somebody can bring these things to market at scale and we get firm pricing on them. That will have an influence on whether or not we invest capital in it.” Besides, OneWeb is now fully funded, and Eutelsat made a move there before Viasat did. Given their history, future cooperation between the two seems unlikely.
Co-founder and Chairman Mark Dankberg also chimed in on the topic, noting that Viasat still lacks confidence in which potential LEO partner will be in business with a functional, and profitable, constellation when the time comes to activate it for Viasat customers.
More on the evolving LEO mobility market:
- Inmarsat to grow connectivity with multi-channel Orchestra platform
- OneWeb now fully funded with additional $500 million from Bharti
- Eutelsat makes major LEO commitment with OneWeb investment
- De-risking IFC with OneWeb’s new JetTalk terminal
- The low-down on LEO IFC options
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