Article at http://www.nytimes.com/2006/08/17/business/17cnd-net.html.
August 17, 2006
Boeing to End In-Flight Internet Service
By THOMAS CRAMPTON International Herald Tribune
PARIS, Aug. 17 — Boeing said today that it was giving up on a six-year project to build a business out of in-flight Internet service, saying that there was not enough demand for the service to make it profitable.
The service, called Connexion, was in use on some flights operated by a number of international airlines, most notably Lufthansa, as well as on corporate jets and some ships and offshore oil rigs. But only 146 aircraft had so far been equipped to offer the service, a tiny fraction of the 5,000 Boeing had originally hoped to have equipped by now.
The service seemed to be popular with travelers who were able to use it on Lufthansa flights.
“I will be extremely sad if this service ends,” said Marcel Reichart, a managing director for strategy at Hubert Burda Media, based in Munich. Mr. Reichart said he used Connexion nearly a dozen times on trans-Atlantic flights “There is a stable connection that allows me to get a full day of work done while speaking over Skype, sending e-mails and everything,” he said.
On the plane, the service resembles that offered in an Internet café, with passengers gaining access through a high-speed wireless network. Communications between the local network on the aircraft and the rest of the Internet is handled by a satellite link.
Connecting to Connexion cost $9.95 an hour or a flat $26.95 for an entire flight, with the revenue split between Boeing and the airline. Boeing declined to say how much it cost to operate the service. As many as 40 users could be connected at one time on a long-haul flight, according to Lufthansa.
Boeing published a marketing survey of 3,200 airline passengers in April that seemed to indicate that such a service would soar in popularity. The company reported that the chance to use the Internet on the plane would influence the travel plans of 5 out of 6 travelers in its survey, and that of those who has actually used Connexion, 92 percent would recommend it to others.
But the company said today that only a handful of people — in the “low single digits” — on each Connexion-equipped flight were actually using it.
“Given the usage level, we just didn’t see the kind of numbers that add up to a business,” said John Dern, a Boeing spokesman. “You could say it flew well technically, but it didn’t fly so well as a business.”
Mr. Dern said that the decision to abandon the service was entirely unrelated to the airport security alert in Britain last week, which led officials there to ban all carry-on baggage for a few days, including laptop computers. Still, he said, the difficulties faced by airlines since the terror attacks of Sept. 11, 2001, have not helped.
Ken Dulaney of Gartner, the San Jose, Calif., based research firm, predicted that in-flight Internet service would be attempted again. “It seems clear to me there is a business there, just not the way Boeing built it,” Mr. Dulaney said. “There will be a fire sale of Boeing’s investments, and then someone will take over this niche market.”
Mr. Dulaney compared Connexion to the Iridium global satellite-based telephone system. That business collapsed shortly after it was completed, but was taken over by new owners and is still in operation.
“The service was really badly marketed, so that is something the new operators can improve,” Mr. Dulaney said of Connexion. “The biggest problem right now is that airlines can barely afford a new tire, much less a service like this.”
Airbus, Boeing’s biggest rival in commercial aviation, seems to agree with Mr. Dulaney that in-flight online service has a future.
“We are full speed ahead with deploying wireless Internet on board our aircraft,” said Justin Dubon, an Airbus spokesman. “We see Internet as much more than just surfing the Web.”
Airbus plans to introduce its own version of in-flight Internet service with the delivery of the first of its giant A380 aircraft to Singapore Airlines later this year, Mr. Dubon said. The service, OnAir, is a joint venture between Airbus and SITA, a Swiss company that manages communications systems for the airline industry.
For Lufthansa, which had installed Connexion on several of its Airbus aircraft as well as some Boeing planes, the imminent shutdown of the system poses a daunting problem.
“We really want to continue offering this service, but right now we just don’t know how we will,” said Michael Lamberty, a spokesman for the airline. “Fortunately, Boeing said the service will continue for several months, so perhaps we can find a solution.”