Inmarsat, Connexion Vie for Commercial Airline Market Share

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Inmarsat is refining its marketing pitch to airlines in an attempt to reduce the impact of competitor Connexion by Boeing’s two-year lead in installing high-speed data links for commercial airline passengers.

Seattle-based Connexion by Boeing, benefiting from the deep pockets of parent Boeing Co. of Chicago, has invested more than $1 billion in installing antennas and other hardware on customer aircraft, and leasing satellite capacity, for its service.

Commercial operations began in May 2004 with Lufthansa Airlines, and other European and Asian airlines have followed, adding Connexion for their trans-Atlantic and trans-Pacific long-haul fleets.

Inmarsat of London has been offering mainly a voice service aboard airlines for years through seat-back telephones, but the retail cost per minute and the caller-unfriendly noise conditions have prevented that business from taking off.

Inmarsat is now working with Telenor and Airinc on an aero-mobile data service, and its Swift 64 product — 64 kilobits per second of data transmissions — has been aimed mainly at the business-jet and general-aviation market.

In 2004, Inmarsat reported doing about $2 million in revenues from providing services — mainly telephony — to aircraft passengers. Swift 64 sales have increased so far in 2005, according to Inmarsat.

Boeing does not separate Connexion’s financial figures in its financial reporting.

To meet the Connexion by Boeing challenge, Inmarsat has teamed with Boeing arch-competitor Airbus, and airline services supplier Sita, to test a high-speed data service for commercial airlines based on the new Inmarsat 4 satellites.

Connexion by Boeing has upped the competitive ante by signing an initial agreement with a commercial shipping company — a core Inmarsat market — to provide data and voice services for ship crews via satellite.

In an interview, Connexion by Boeing President Laurette T. Koellner says her company’s service is much less expensive than Inmarsat’s, offers higher data rates, and has received positive reviews from customers on ease of use and reliability. Connexion provides 2 megabits per second of data transmissions to an aircraft or seagoing vessel, whereas Inmarsat’s service will be offering half a megabit.

Lufthansa has said it will continue adding Connexion gear to its aircraft and is reserving judgment on Inmarsat’s planned high-speed data service .

Inmarsat Chief Executive Andrew Sukawaty said an announcement of a service agreement with a customer for Inmarsat’s in-cabin broadband service could come as early as this year. But it will take between one and three years, he said, for airlines to fully evaluate the service.

Inmarsat is not waiting for airline trials to end to differentiate its service from Boeing’s.

“It is unclear to us whether those contracts [that Connexion has signed with airlines] are economic either for Boeing or for the airlines,” Sukawaty told financial analysts Aug. 24. “For the airlines, the installation cost for [Connexion] is considerable — a multiple of the cost for our own. Given the state of the airline business these days, we don’t see the airlines diving in, wanting to spend huge sums on speculative new services.”

Sukawaty said Inmarsat’s planned Broadband Global Area Network (BGAN) service uses an antenna system that is already designed into most long-haul aircraft, and that by combining two Inmarsat BGAN links, 1 megabit per second of transmissions could be delivered to the cabin.

Inmarsat nonetheless hopes Boeing succeeds in awakening the commercial airline market to the possibilities of satellite-delivered broadband.

“We hope Boeing gets some traction because we’d like to see the passenger connectivity market take off,” Sukawaty said. “We think we’ll get our share…. The price to the consumer will come down dramatically. If Boeing is out selling Connexion, we have Airbus out with OnAir, and you can see what those market-share figures look like.”