• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

U.S. Airlines Shun in-Flight Net Other Countries' Carriers Take Lead in Adding Boeing System

Posted on: Wednesday, 5 October 2005, 12:01 CDT

By Alexei Barrionuevo

On planes flying nonstop from Copenhagen to Seattle, as many as 50 passengers are using their laptops to check e-mail, surf the Internet, even send pictures all at 35,000 feet.

The planes, with 275 seats, belong to Scandinavian Airlines, one of several non-American carriers using an in-flight high-speed Internet service called Connexion, developed by Boeing for its own commercial jetliners. The high usage is somewhat unusual because these flights tend to be filled with technology-savvy Microsoft employees, who even carry special noise-canceling headsets onto the planes to use Boeing's satellite-based system to make free voice- over-Internet phone calls.

But Scandinavian Airlines' experience highlights a stark reality for U.S. business travelers: to be able to have an "office in the sky" these days, you have to fly a non-American airline. After five years of intense marketing, Boeing is still struggling to bring the Internet to domestic airlines, whose financial troubles and concerns about added weight on planes are making them reluctant to invest in hot spots in the sky. For Boeing, which once appeared poised to make its satellite-based Internet system a big business, time is running out to win over American carriers. It decided recently to cut 100 positions at Connexion, or about 15 percent of its work force, by early next year.

While American carriers continue to be hesitant, European, Asian and even Middle Eastern airlines are taking the plunge in increasing numbers. Boeing has signed up 13 foreign airlines since 2003, and 9 are offering the service to customers on 84 planes, soon to be 100. Boeing has also signed 630 corporate agreements to make it easier for companies' employees to use the service.

"The U.S. carriers are feeling a lot of competitive pressures from our customers," said Laurette Koellner, president of the Connexion division at Boeing.

But so far, U.S. and other carriers have viewed the potential for Internet service much differently. While American carriers, with their much greater concentration of leisure travelers, have focused on cutting costs on domestic routes, "a lot of foreign carriers see this as a way of increasing the appeal of their premium international service," said Richard Aboulafia, an analyst with Teal Group. For Boeing, the hesitancy in its home market has hindered the growth of Connexion, once central to Boeing's push to diversify from its near-total dependence on commercial jets and military systems. The number of planes that foreign carriers are willing to outfit with Connexion, which costs an estimated $500,000 to $600,000 a plane, is small compared with what Boeing expected in 2001, when it landed commitments from three American carriers to outfit a total of 1,500 planes.

Even with its recent progress, Koellner acknowledged that Boeing's current commitments, officially published at around 250, were "nowhere near" what was envisioned in 2001. The business has yet to turn a profit for Boeing and probably will not until at least 2008, she said.

If American carriers cannot be won over, Koellner said Connexion believed that it could still succeed by focusing on more of the 2,200 long-haul planes based outside the United States. Boeing is hedging its bets further by trying to bring high-speed Internet service to ships as well. Teekay Shipping, which transports more than 10 percent of the world's seagoing oil, began using the Connexion service in June.

The tanker industry, with some 40,000 ships crisscrossing the globe, could make up as much as one-third of Connexion's business in the future, Koellner said.

Four years ago, oceangoing vessels were the last thing on Connexion planners' minds. Steered by Scott Carson, who leads Boeing's resurgent commercial division, Connexion signed up United, Delta and American Airlines in June 2001. They agreed to outfit 500 planes each a total of 1,500 planes, or 11 percent of the world's fleet and take small equity stakes in the business. Airbus, Boeing's European rival, quickly countered by buying a 30 percent stake in Tenzing, a Seattle-based maker of in-flight Internet systems, thinking that it would enable it to provide onboard e-mail in 500 planes by 2003.

The terrorist attacks of Sept. 11, 2001, severely hurt the domestic airline industry and ended lofty plans for Internet use in the sky. That November, the U.S. partners all withdrew from Connexion, citing cost concerns. Boeing announced plans to cut Connexion's work force by a third; Tenzing said a month earlier that it would lay off nearly half its staff.

Source: International Herald Tribune

More News in this Category