In-flight Web Surfing Takes A Step Back

[Midnight Mike]

August 20, 2006
The prospects of surfing the Internet and receiving email at 35,000 feet took a knock on Thursday as Boeing said it will wind down its service for offering Internet access on board planes.

Although the market may get a boost with newcomers LiveTV and AirCell developing offerings, cost pressures on airlines make it unlikely that on-board Internet access will be widely available soon.

"We've been looking for ways to connect the cabin, but it has to make sense financially," said Billy Sanez, a spokesman for American Airlines. "It's going to be a bit until we see something feasible."

Upgrading a plane for Internet service is a complex task, and with fuel prices high, airlines are more focused on keeping costs down rather than offering new, expensive perks.

"It's kind of like rewiring your office," said airline consultant Robert Mann. "It creates a lot of downtime and it's very expensive."

The least disruptive option is to have the technology for providing Internet access built into new planes, but "very few of the large US carriers are in a position to be buying new airplanes," he said.

After six years, Boeing said on Thursday it would shut down its loss-making Connexion unit, which allowed airlines to provide high-speed Internet service to passengers. The satellite-based service, for which Boeing failed to find a buyer, was too costly, and few airlines signed on.

The company said it would take charges of up to USD$320 million to wind down the service, which analysts estimate attracted just over 1,000 users a day and cost as much as USD$150 million a year to run.

Boeing becomes the second large company to withdraw from the in-flight communications market in recent months. In June, Verizon Communications said it was canceling its on-board phone service by the end of the year.

Hoping to revive the market, AirCell and LiveTV, a unit of low-cost carrier JetBlue Airways, are planning new in-flight Internet offerings after winning licenses to operate US air-to-ground communications services in June.

AirCell, which paid USD$31.3 million for one of the network licenses, plans to launch its service by the end of 2007, Chief Executive Jack Blumenstein said on Thursday.

AirCell's service, which would turn planes into flying "hotspots", is based on cellular technology, giving it an advantage over satellite-based Connexion because the equipment is cheaper and lighter, Blumenstein said.

For example, AirCell's cellular antenna is about the size of a deck of cards and weighs less than half a pound (0.2 kg), while Connexion equipment was bulkier and weighed hundreds of pounds, he said. This makes it possible to offer the service for under USD$10 per flight.

LiveTV, which paid USD$7 million for a smaller-capacity network, is working on a business plan on how to use the acquired frequency, JetBlue spokesman Bryan Baldwin said.

The airline is not committed to taking its unit's service, if and when it does get up and running.

"Just because LiveTV would come out with a product doesn't automatically mean that JetBlue would get it," Baldwin said.

Stronger demand for such services appears to be from overseas airlines. British carrier Virgin Atlantic Airways said this month it planned to offer an in-flight text service, which will respond to passenger questions.

Lufthansa, one of Connexion's staunchest backers, said it was on the lookout for a new partner.

"Lufthansa remains hopeful that new providers will emerge in the coming months to provide this valuable service to our customers," the German airline said in a statement.

Since May 2004, Lufthansa has been offering FlyNet, an in-flight Internet service provided by Connexion, free of charge for its long-haul business class customers.

[Matt Molnar]

I don't understand why this is so expensive to do. As far as "wiring" the plane for wifi...a couple of simple wireless routers should be able to accomodate the whole plane, which would require very little wiring inside the aircraft. The hard part obviously is connecting the plane via satellite or the ground...but with the current portable technology available this wouldn't seem to be such a big deal to me.

[Nonstop2AUH]

Yet another example of something that's good for passengers but doesn't make money, or enough money, for the airline, so out it goes. More proof that every decision in the business today has to be a cost/benefit analysis and not about doing something innovative or nice for the customer. Then again, the traveling public would happily fly without a seatbelt (or maybe even without a seat) if it saved them 10% on the fare, so effectively, the lack of services and innovation in the airline business is itself customer driven.

[moose135]

More proof that every decision in the business today has to be a cost/benefit analysis and not about doing something innovative or nice for the customer.

You think this is a new concept in business? I can be really nice to customers if it doesn't cost me anything, but when the costs outweight the benefit (measured in bottom line revenue), out the door it goes - if not, you end up with nothing but fond memories of a company with good customer service, but no business sense.

[Nonstop2AUH]

Didn't say that cost/benefit was a new concept, but it is only in recent years that it has become the only concept in the airline business. Aviation is interesting to many people precisely because its early history was based on innovation and taking risks, doing things that had benefits to the customer like reducing travel times, making passengers more comfortable, etc - not on doing whatever the beancounters or stockholders demanded. One need only look at airline advertising from the 1950s to the 1970s to see what I mean. In-flight internet service is one of the very few passenger innovations in recent years, and it's sad to see a good technology go away just because someone's not making enough money on it.

[USAF Pilot 07]

Didn't say that cost/benefit was a new concept, but it is only in recent years that it has become the only concept in the airline business.

Because flying isn't what it once was.

There isn't a so-called "legacy" monopoly anymore. People are flying more and more, and the "luxury" of flying no longer exists. People just want to get from Point A to Point B, usually the quickest and/or cheapest way possible. The advent of the LCCs has really changed the airline industry, IMO in a favorable way. It's actually made the airlines have to start operating as businesses, and not as a "consolidation" of monopolies.

On that note, something tells me that even with this decision, we'll still be seeing wireless internet access on planes in the future. It's a product that people will want, and will pay extra for, and someone will capitalize on it...

[Nonstop2AUH]

Well, we have to distinguish between market sectors here. Nobody ever suggested something like onboard internet access would be a good idea for shorthaul LCCs. The Lufthansa longhaul premium passenger who has paid several thousand dollars for a ticket (or more likely, whose employer has paid several thousand for a ticket) is much more likely to want, use, and be willing to pay for a service like this than the Southwest "wow I saved $25" customer.

Sure, both types of people are airline passengers, but what they want and are willing to pay for are highly different, as different as someone who is in the market for a BMW vs. someone in the market for a Hyundai. For the considerable sum paid, the longhaul premium passenger wants the best of everything, gourmet food, a nice sleeper seat, state of the art IFE (which, in my opinion, should include internet access), etc. These amenities are not trivial when you consider the amount of money being spent by the customer, and people obsess over these things in forums like the Skytrax. Also, this market is very profitable to the industry which is why you see DL and AA (among others) investing in upgrading their longhaul premium cabin products, particularly to Europe, although even with the upgraded amenities they won't be winning any awards over their foreign competitors.

[Matt Molnar]

I think the LiveTV offering might do well, but even if it proves it can be profitable for carriers, do you think some airlines will steer away from it just to avoid helping jetBlue?

[mirrodie]

I can't say I will miss it. it seems that the only time I get a moment to read or write for pleassure is usually when we fly.

Its nice and serene. No phone...no internet, no movies. Just insert earplugs into ears and relax.

[USAF Pilot 07]

Well, we have to distinguish between market sectors here. Nobody ever suggested something like onboard internet access would be a good idea for shorthaul LCCs.


Yes, but looking at most LCCs, there are no such things as a short-haul LCC anymore. Plane are rotated around the entire system, so it's very likely that every plane would get the service. (with the exception of maybe regional jets).

I wouldn't expect an airline like Southwest to offer the service because it goes against their business model, and will increase costs. But, with every airline looking for an edge over the next, it's not unreasonable to expect airlines like JetBlue, Frontier, Airtran, maybe even some of the majors to install the service on their planes.