Boeing may sell or shut down Connexion: reports

23 Jun 2006

(TelecomWeb News Break via NewsEdge) Boeing has decided to sell or shut down its Connexion satellite-based in-flight broadband service after six years of frustrated efforts to make a go of the business, according to reports.

So far, Boeing has only admitted to evaluating the future of the business, which has been having a tough go of it ever since virtually the entire US airline industry pulled out of the project because of the fallout over 9/11, including the string of airline bankruptcies.

Those dropping out of the project included United and Delta as well as ILEC Verizon. Boeing then decided to handle the business alone. While it had racked up a small number of international carriers and some maritime customers, US carriers had not come back into the fold.

The existing business apparently is not yielding enough return to justify both the ongoing cost of operating the service and the reported $1 billion Boeing already has plowed into it.

Airlines currently offering the service include Lufthansa, which was first with Connexion on board, SAS, Japan Airlines, ANA, Singapore Airlines, China Airlines, Korean Air, Asiana Airlines, El Al Israel Airlines, and Etihad Airways. Austrian Airlines and Air China have systems on order.

Boeing has yet to reveal what percentage of travelers on those airlines actually wind up using Connexion, whose prices range from $10 for just one hour to $27 for as many as 24 hours on one or more flights.

The initial rumor that Boeing is looking to sell the business was reported in The Wall Street Journal , which did not reveal its sources for the information.

As for the selling price, the paper quoted sources as saying that it would likely be a mere $150 million, adding that the unit would be shut down if Boeing could not find a buyer.

According to reports, SES Global SA has already sat down at the table, and Boeing has had preliminary contact with Inmarsat PLC and Loral Space and Communications Inc.

Boeing admitted in a statement that it was looking into Connexion's future.

"The company is evaluating Connexion to assess what's best for both the business and our customers," a Boeing spokesman was quoted as saying. "We know we have a useful product, but we're trying to determine how good a business we have."

A major hint that things were not going well at Connexion came when the company failed to take part in the Federal Communications Commission's recent bidding for 800 MHz licenses for new nationwide air-to-ground (ATG) services aboard commercial aircraft.

Boeing was expected to bid because those services would compete head-on with Connexion and would replace the current Verizon Airfone ATG service that travelers avoided in droves because of the cost.

Winners of that bidding, with total net bids of $38.3 million, were AirCell's AC BidCo and JetBlue Airways' LiveTV.

c 2006 Access Intelligence, LLC. All rights reserved

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