Boeing to axe onboard internet

Boeing will close its onboard internet service for airline passengers by the end of the year, in a move likely to anger carriers and damp hopes that in-flight mobile-phone services will soon be economically viable.

The aerospace group’s Connexion service was introduced on aircraft with much fanfare in 2004, but the offer of broadband service to premium passengers – allowing them to surf the web on long-haul flights – failed to attract enough interest.

Lufthansa, the largest customer, on Thursday maintained that the service was a crucial marketing tool and said it hoped to find an alternative partner.

But analysts said Boeing’s failure to find a partner or buyer for the unit after a two-month review suggested it remained unviable in its current form.

“Boeing might just have been ahead of its time,” said Mark Roberts, vice-president at SES Global, the satellite provider which looked at a potential deal with Connexion and continues to pursue the launch of onboard cellular access. “But we do believe that mobile broadband, particularly on aircraft, remains viable.”

Analysts estimate that Boeing invested about $1bn to develop Connexion, and the company said it will take a $320m charge in the second half to compensate customers and write down assets. It first announced a review of the business in June.

The company had signed up Lufthansa and eight other airlines, but said passenger use remained in the “low double-digit percentages” even though some carriers offered it free. Installation cost about $500,000 per aircraft, and any alternative system would need an expensive refit.

Boeing will also wind down the use of Connexion by some marine, corporate jet and government users, which include Air Force One.

It comes only two months after Verizon announced it would end its Airfone joint venture, which offered voice calls on some domestic US airlines.

The commercial airlines using Connexion – which included Singapore Airlines and Abu Dhabi-based Etihad – had hoped onboard internet access would help differentiate them from rivals in attracting profitable business-class passengers.

The loss of the service will force some marketing strategies to be rethought at a time when carriers are investing millions of dollars in onboard amenities in an effort to fend off competition from low-cost rivals.

It will also focus industry attention on two competing services that hope to offer onboard cellular access on some aircraft as early as next year.

Airbus, Boeing’s arch-rival, is working with Sita, a global telecoms provider, while Norway’s Telenor has linked up with US-based Arinc and others to develop the technology.