Boeing departs in-flight broadband market

Failure to take off as scheduled

Boeing is ditching its in-flight broadband service, Connexion by Boeing, after failing to interest enough airlines in the scheme.

The firm makes no mention of the recent ban on carry-on laptops on flights prompted by this month's arrest of liquid-explosive terror suspects in the UK. But this policy would surely have hit the prospects of turning a profit on critical trans-Atlantic routes over the short to medium term.

In a statement, Boeing said it expected to take a charge of $320m on earnings in the second half of 2006 as a result of discontinuing the service. The likelihood of the charge was disclosed when the aircraft manufacturer announced Q2 earnings on 26 July.

Boeing expresses the hope the 560 affected staff will find work elsewhere in the company. Dropping the service will boost its earnings by $185m starting next year, Boeing predicts.

The decision to exit the in-flight broadband market comes after a review of its Connexion business that began in June. Hopes to sell the business, which is based on satellite technology, failed to materialise. Boeing said it would work with customers to achieve an "orderly phase out" of the service. Carriers stand to recoup some of their own investment through early termination fees.

"Over the last six years, we have invested substantial time, resources and technology in Connexion by Boeing," Boeing chairman, president and chief exec Jim McNerney said. "Regrettably, the market for this service has not materialised as had been expected. We believe this decision best balances the long-term interests of all parties with a stake in Connexion by Boeing."

Industry watchers estimate Boeing spent as much as $1bn developing the service.

Although carriers such as Lufthansa, Japan Airlines, Korean Air, and Singapore Airlines took up the service, major US carriers, and development partners with Boeing while the technology was been developed, bailed after the 9/11 terrorist attacks.

The high costs of the service ($10 for the first hour or $27 for 24 hours) also stymied its appeal, Unstrung reports.

Any thoughts that the Boeing exit from the market signals the death knell for in-flight broadband could be premature. Unstrung notes that ground-to-air wireless services might still succeed where Connexion, which is based on more expensive satellite technology, failed. ®

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