Northern Sky Research

Aeronautical Milsatcom: Up, Down or in the Middle?

Jul 9th, 2013 by Claude Rousseau   More from this Analyst | Profile

Recent news about military airborne programs that support intelligence, surveillance and reconnaissance (ISR) may provide hope that the doldrums due to budget reductions may not last as long as expected in the aeronautical milsatcom market.

The U.S. Navy’s P-8A Poseidon, which replaces the P-3C Orion turbo-prop, passed an important milestone in early July when it was declared ready to operate after three years of testing.  This customized version of the Boeing 737-800 is outfitted with commercial satellite equipment gear used towards reachback and crew connectivity applications, in particular with L-band solutions.   In the UK, a couple of Royal Air Force BAE-146s were recently upgraded with a satellite communications system as part of an improvement program for personnel and VIP transport.

In its recently-released Aeronautical Satcom Markets study, NSR pointed out that government and military segments should see narrow-body aircraft lead the installation rate of satcom units in the coming decade.  These will be as much new as old aircraft retrofitted with equipment to communicate on various missions involving more and more surveillance of large expanses of oceans where airborne reconnaissance is an integral part of maritime patrol missions and for troop and executive transport.

Even if these airplanes generate more revenues on average per unit, the current situation even for the U.S. Air Force has meant constrained short-term revenue expectations for vendors.  One would think that the withdrawal from Afghanistan would be a strong parameter on the market, but a close review of MSS operators earning (in particular Inmarsat) indicates that it was fairly small (a few $m for the London-based operator in Q1 2013).

The nine P-8A Poseidon delivered to date are part of the initial low rate production run that will see the U.S. Navy implement 117 new aircraft as part of its contract with Boeing, which has sold the P-8 to India as well, having set a target of another 60 aircraft sales to non-U.S. countries.   In particular, it is hoping to sell these aircraft to South Korea and Australia. 

Asia-Pacific countries have seen the increasing need for intelligence and the greater benefits from improved surveillance in longer air patrol flights, and South Korea has also stepped up its deployment of aircraft with a retrofit and upgrade of the successful Lockheed-Martin-built Orion P3.    

The addition by certain countries in their fleets of converted B737s, B757s and A-320s for government VIPs, Heads of States and transport planes will also feed more work for satellite communications hardware and service providers, and these are particularly well-suited for higher bandwidth requirements on a global scale. 

In the end, however, government and military aeronautical markets will experience a flat 2013, with a slow upward curve after 2014 with an unsteady equipment sales forecast, showing variation due to budget reductions and related delays in conversion programs.


Bottom Line

The shrinking budget expenditures of government and military organizations are having a negative impact on the aeronautical satcom market.  These customers usually generate higher revenues from in-service units on a monthly basis, and their growth is predicted to stagnate in the coming years as every single program is put to the budget cut meat grinder. Still, with programs such as the P-8 and demand for connectivity on converted commercial aircrafts for Heads of States and government executives, military cargo planes, and particularly manned ISR missions in the maritime domain, the aeronautical mil/gov satcom market upswing could be within sight.

Information for this article was extracted from NSR's report Aeronautical Satcom Markets.