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Internet service is not connecting with fliers

Boeing is ending its in-flight offering. Price and availability are factors in its demise. But two other firms plan to enter the market.

October 28, 2006|James Gilden | Special to The Times

The Cardinals were leading the Tigers 5-1 in the sixth inning of the first game of the World Series when I received an e-mail last Saturday night.

"I'm hoping to be able to catch the rest of the game online," wrote Matt Coviello of Newport Beach.

I met Coviello just six hours before, while he was waiting to check in for a Lufthansa flight from Los Angeles International to Frankfurt, Germany, on his way to Rome for a conference.

Keeping tabs on the World Series online may seem unremarkable, but he was doing so on the only Internet broadband service available in flight -- called Connexion by Boeing.

Although he had made the trip twice previously, it was his first time using the service. "It's a Saturday, so not much work to be done this time of the week," he said, "but it's pretty fun to be online at 33,000" feet. Whether for fun or for work, the option to use Connexion is due to expire at the end of the year.

Boeing Co. is pulling the plug on the unprofitable business after about two years of active service. Only 10 airlines -- all international carriers -- had installed it. The Chicago-based aerospace company is expecting a $320-million pretax charge in the second half of 2006 to shut it down.

"Over the last six years, we have invested substantial time, resources and technology in Connexion," Boeing Chief Executive James McNerney said. "Regrettably, the market for this service has not materialized as had been expected."

I chatted about it with travelers last Saturday at Tom Bradley International Terminal at LAX.

Every laptop-toting traveler I spoke with had heard of the service but had never tried it and had no plans to do so.

"I know about the service but won't pay for it," said Razmik Abnous of San Francisco.

For the passengers I talked to, the main competition for in-flight Internet was reading or sleeping on the long flight.

Connexion's price of about $30 for an entire flight was also a factor.

The good news is that until the end of the year Boeing is offering the service free. The bad news is it is available only on a smattering of international flights from the U.S.

That no domestic airlines installed the service, which costs nearly $1 million per plane, was another factor in its demise. Of the 10 airlines that did install it, Lufthansa has the most, with 63 of its 80 long-haul aircraft Internet-enabled.

"For us, this was a significant investment," Lufthansa spokeswoman Jennifer Urbaniak said. "We are actively looking for an alternative solution and are hoping to continue discussions with Connexion by Boeing for a more reasonable timing for the phaseout."

She said the service was popular with passengers, attracting as many as 50 users a flight. Two other companies are working to offer in-flight Internet solutions, but neither could immediately step in and pick up where Boeing left off.

In June, Louisville, Colo.-based AirCell Inc., bid on and won the exclusive in-flight broadband license in a Federal Communications Commission frequency auction. The company makes and supports airborne telecommunication systems for business and general aviation, government and air transport markets.

AirCell is developing a ground-to-air broadband system for North America that travelers should start seeing on planes in early 2008.

The economics of that system make it a more viable business model than Boeing's satellite-to-air system, said Jack W. Blumenstein, AirCell's CEO.

The system, which will cost about $100,000 per airplane, is more economical to install and weighs much less than the Boeing system. That means greater fuel economy.

"We are far into the planning with a number of airlines," said Blumenstein, though he declined to name any.

Unlike Connexion, AirCell's system will work only when airplanes are flying over land or within a couple of hundred miles of the coast.

As a result, most transatlantic routes are out. It is feasible, however, that a land-based system could keep passengers connected on a Los Angeles-to-Europe flight using the polar route for all but a couple of hours, Blumenstein said.

Business travelers have different travel habits on a domestic versus a long overnight flight. Sleep is not something that will compete with broadband access on shorter flights. Flights of 1 1/2 hours and longer, Blumenstein said, are the "sweet spots" for the Internet service.

"It's a very different usage pattern," he said, suggesting that passengers will power up to check e-mail or send a PowerPoint presentation so they can relax on arrival.

Pricing will be competitive with what it costs to use a wireless connection at a Starbucks, Blumenstein said, with initial pricing expected to be about $10 per flight.

In Europe, competition is coming from OnAir, a satellite-based system offered by European airplane manufacturer Airbus and its partner SITA Inc., an air transportation telecommunications and technology company.

The joint venture is confident that its business model for providing in-flight Internet access will succeed where Boeing failed. OnAir is adopting a phased approach. It will begin offering services for mobile devices, such as BlackBerrys, in 2007. It is also working on offering chat and e-mail through in-seat entertainment systems. It expects to have full Internet functionality beginning in 2008.

OnAir does not have plans to enter the transatlantic or North American market, a spokesman said.

"OnAir's proposition is different from Connexion by Boeing's," said George Cooper, CEO of OnAir. "The two companies have taken a fundamentally different approach to developing passenger communication services."

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