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Telecommunications Boeing to shut down in-flight Internet service
Telecommunications Boeing to shut down in-flight Internet service | Boeing to shut down in-flight Internet service |
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| by Stuart Corner | |
| Friday, 18 August 2006 | |
  
Boeing announced plans for the service in April 2000 and the first commercial service was launched by Lufthansa in January 2003. although it is now available on almost a dozen airlines, not one is US-based, despite the prices making the service quite attractive: unlimited Internet access for the duration of a flight for $US26.95, $US17.95 for three hours; and $US9.95 for an hour. Boeing announce in mid 2001 that it had signed a letter of intent with Delta, United and American airlines "to pursue forming a new global business venture to provide broadband communications and data services to commercial aircraft." The three airlines were to equip 1,500 aircraft with the broadband communications technology. However 9/11 killed that project stone dead. The company says it will work with its customers to facilitate an orderly phase out of the service, but has given no indication of the timeframe. Boeing expects to suffer a pre-tax loss of up to $US320 million, or $US0.26 per share, in the second half of 2006, of which approximately $290 million will be taken in the third quarter and the balance in the fourth quarter as a result of asset writedowns, payments of early termination fees and other costs. It expects the majority of Connexion employees will find other jobs within the company. In the wake of the announcement, Telecom, Media and Finance Associates, Inc. (TMF Associates), a US specialist Mobile Satellite Services consulting firm, said that the market opportunity for in-flight communications would be much smaller than many analysts and consultants had been projecting. It had predicted the shut down of the Connexion service in a research note in June and said that backers of other systems would need to re-evaluate whether their business projections were simply too optimistic. However, it notes that "other consulting firms have continued to project that a multi-billion dollar market will be realised for in-flight passenger communications over the next five years. Tim Farrar, author of the note, comment: "It is all too easy to blame the failure of Connexion by Boeing on its high costs and large terminal equipment. However, set in the context of the expenditure by business travellers on other communications services, projections that in-flight communications can become a multi-billion dollar market over the next few years are completely unrealistic. "For example, in July 2006 Booz Allen forecast a EUR2 billion market for in-flight cellphone use in Europe alone by 2010. This compares to a total pan-European cellular roaming market of EUR8 billion in 2005, when by our estimate business travellers are on an airplane for at most three percent of their trip. While the in-flight communications market opportunity within the US remains significant, and may grow to around $US300 million in annual revenues over the next ten years, the opportunity on both long-haul and intra-European flights is far smaller. Inmarsat-based services will provide an appropriate solution for cellphone-based connectivity, but given the modest size of the overall market it is hard to see affordable in-flight Internet services for laptop users being widely deployed outside North America." |
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