IMS Co. in Brea has landed a deal with Deutsche Lufthansa AG to install and operate its in-flight entertainment systems for the largest airline in Germany.
The 10-year contract is valued at about $100 million or more, according to sources with knowledge of the terms.
The pact could ultimately shake up an industry dominated by Panasonic Avionics Corp. in Lake Forest and Irvine-based Thales Avionics Inc.
“This deal begins to change the landscape in the [in-flight entertainment] world,” IMS founder and Chief Executive Joe Renton said.
IMS will deploy its portable entertainment systems in at least 80 wide-body planes—including A330s, A340s and 747s—flown by Lufthansa.
The contract will lead to more hiring and expansion, according to Renton.
“This is an enabler,” he said.
IMS saw about $45 million in revenue in 2011.
Cementing the contract wasn’t easy for IMS, a much smaller player compared Panasonic Avionics and Thales, which have the lion’s share of a $2 billion in-flight entertainment industry that’s largely centered in Orange County.
Bigger Competitors
Panasonic, a unit of Secaucus, N.J.-based Panasonic Corp. of North America, is the market leader in in-flight entertainment systems, with annual sales of more than $1 billion and an estimated 70% share of the market. The company—ultimately part of Osaka, Japan-based Panasonic Corp.—employs about 1,300 people at its six-building campus on Enterprise Way in engineering, programming, testing, assembly and other operations.
Thales is part of French electronics company Thales Group, which sees about $18 billion in annual revenue.
Lufthansa, the world’s fourth-largest airline carrier, approved the deal in mid-May after 14 months of negotiations, tests and specification tweaks. Trial flights began in December, marking the first time an airliner has run in-flight tests on IMS’ embedded units.
“For them to go forward with a company like IMS—a company that’s not Panasonic and Thales—they needed to fly it on the airplane,” Renton said.
IMS shifted its focus about a decade ago from software and system development to building products. The move to manufacture portable media units, seat mounts and content loading is paying off.
IMS basically turned a single-seat media unit into a removable docking piece, so it can easily be replaced during flight. It also eliminated perennial industry problems of quality, reliability and cost.
Historically, all the content and data storage from IFE systems lived in servers on the belly of the plane. IMS changed that model, and airliners and its passengers seem to welcome the change.
The systems won over Lufthansa customers with its sleek screen display and easy navigation, while presenting an “attractive operating cost structure in comparison to classical IFE systems,” said Christian Koerfgen, Lufthansa’s vice president of product management and innovations.
“It’s really about reliability,” Renton said.
IMS has more than 160 airplanes on backlog.
It has 10 customers including Air Berlin, Air Transat, SriLankan Airlines, and Brussels Airlines, which is partially owned by Lufthansa Group.
IMS is the third-largest player in the industry and also competes against Lumexis Corp. in Irvine and Cedar Rapids, Iowa-based Rockwell Collins Inc.’s media unit in Tustin, which packages music, movies and TV programming for airlines and has some local hardware-manufacturing operations.
Growth
In-flight entertainment sales have been buoyed in the past decade by domestic carriers’ fleet upgrades, foreign airliners’ new-plane purchases and gains in international air travel. Most recently it has been bolstered by a push to produce lighter planes and equipment to offset rising fuel costs.
IMS added about 85 people last year and employs about 180 workers in Brea and Bellevue, Wash.
IMS designs its systems and products system software. It outsources hardware manufacturing to contractors in China.
Its engineering services unit was spun off this year and was renamed Base2 Solutions, with headquarters in Bellevue.
