What Is the Future of Airline Connectivity Post-Connexion?

The untimely but not unexpected announcement in mid-August that Boeing's broadband offering will be scrapped late this year has given pause to the emerging connectivity suitors.


New Entrants Though the sector is arguably unsteady in the wake ofthe failures, OnAir and AeroMobile, a joint venture between ARINC and Telenor, are gearing up to launch mobile phone and PDA connectivityservices in the same timeframe. In late August, Ryanair said it would install the OnAir system across its entire fleet beginning in mid-2007, subject to regulatory approval. Meanwhile, trials in which threeother carriers are participating are set to begin early next year. Separately, Qantas intends to evaluate AeroMobile's solution on a 767 in 2007.

Panasonic says differences in its technologies and applications should help it succeed where Connexion did not, even though both are based principally on using Ku-band satellites for relaying information.

While Connexion's Ku-band links can supply more bandwidth than L-band satellites like Inmarsat--on which AeroMobile and OnAir services will be based--the higher data rate comes at the price of a larger, heavier antenna and higher costs for installation. In addition, there is extra fuel burn from the drag of the external antenna, which Farrar says is "equivalent to as many as five additional passengers." Airlines also pay a penalty in payload; the system weighs more than 600 lb., according to media reports. Boeing has been mum on the particulars of weight and drag.

The high cost of Ku-band service was considered by many to be the Achilles' heel of Connexion. Bob Thompson, senior director-satellite services at ARINC, explains how the process works: "You go to a satellite owner, like PanAmSat or Intelsat, and look for satellites available in areas you wish to cover." The next step is negotiating a transponder lease, which he says is typically multiyear and nominally costs $1.8 million per year. "You own the whole pipe for a year. You're not buying minutes, like with Inmarsat."

ARINC operates the equivalent of Connexion in the corporate jet world. Called SKYLink, the Ku-band system was installed in 28 aircraft as of late August and had been operational for 15 months. ARINC has orders for 22 more systems. Thompson says it leases a single transponder for the continental US, which covers one-third of Mexico and some parts of Canada. It also leases a transponder to cover "about 20 countries" in Europe. "If [Connexion] was providing near-global coverage,it had to have a large number of transponders," he notes. Farrar estimates Boeing was paying $50 million a year for transponders, which by Thompson's per-lease cost means it was leasing roughly 28 units.

ARINC is taking a more metered approach with the business aviationcommunity. "We follow the customers," Thompson says. "When we have enough customers to justify setting up a new region, we'll do so." Thecompany in 2004 announced it would offer a SKYLink-type service to startup carriers; it since has abandoned those plans in lieu of a morefocused approach.

Volume Panasonic is well aware of the pitfalls. "The premise for Boeing was very high demand," Bruner says. "We're trying to ensure we have enough customer base to launch." Though it has "a large enough group in terms of people who have said they're interested" in the service, "formal commitments" from airlines are needed. "Everyone who hasgone before us has pretty much failed," he notes, "so we're taking cautious steps forward.... We don't want to do anything that would harm our IFE reputation."

The firm is speaking with 20 carriers, he says, among them all thecurrent Connexion customers including Lufthansa, the airline with the largest CBB-equipped fleet, numbering 62 aircraft. He says Panasonic is "looking for ways to take advantage of some of the CBB equipmentand possibly upgrade it."

A spokesperson for Lufthansa says LH is beginning the process of "searching for a partner to take this on." She says feedback from those who used Connexion was good; "We knew it was working well for us, but it wasn't a solid-based model for Boeing."

When Connexion originally launched in 2001, it had commitments from three US carriers to equip 1,500 aircraft, well above the 700 Farrar predicted it would need to become profitable. After the 9/11 attacks, however, the deals crumbled. On the 156 aircraft that ultimately were outfitted, usage was low. "Penetration was in the low single digits for any one flight--and that was after a couple of years of havingit out there," says the Connexion spokesperson.

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