The Boeing Co. said Thursday it would end its in-flight Internet service, Connexion, saying the market for it hadn’t progressed fast enough.
The Chicago-based aerospace and aircraft maker also said it would take a $320 million charge for shutdown costs. The division’s closure also could result in some Puget Sound-area layoffs.
“Regrettably, the market for this service has not materialized as had been expected,” Boeing Chairman and Chief Executive Jim McNerney said in a statement. “We believe this decision best balances the long-term interests of all parties with a stake in Connexion by Boeing.”
Boeing said in late June it was considering selling or shutting down Connexion but held off on a decision until it met with its customers.
Many carriers flying over the Pacific Ocean used the service, including long-haul flights from Tokyo, Singapore and Seoul to Los Angeles, San Francisco, Chicago and New York.
Deutsche Lufthansa AG offered the service on about 50 flights. Scandinavian Airlines System, Japan Airlines Corp., Korean Air Co., All-Nippon Airways, Singapore Airlines Ltd. and China Airlines Ltd. also offered Connexion.
Connexion charged $26.95 for an entire long-haul flight or $9.95 for an hour. Boeing also offered the service for commercial ships, initially charging $2,800 a vessel.
Boeing planned to make the service available on business jets in conjunction with Rockwell Collins Inc.
The $320 million charge for the shutdown amounts to 26 cents a share before tax for the rest of 2006, the majority of which will come in the third quarter. Earlier, Boeing said it could take up to a $350 million charge, or about 31 cents a share.
Boeing said ending the service, which began May 17, 2004, would lift 2007 earnings by about 15 cents a share.
Shares of Boeing closed down 24 cents, or 0.3 percent, at $78.59 Thursday on the New York Stock Exchange.
Boeing spokesman John Dern said the Connexion by Boeing business employs about 560 people, including approximately 400 in the Seattle area. Most of those should be able to transfer to other jobs.
“We will place as many people as possible in other positions at Boeing,” Dern said, though he added that some people may also be laid off. However, he couldn’t provide any specific numbers.
The shutdown also is a disappointment to ViaSat Inc., the exclusive provider of equipment for the Connexion project, according to a recent research note from Morgan Joseph. Other analysts estimated the project accounted for $10 million in annual revenue for ViaSat. The Carlsbad, Calif., company had $434 million in revenue in the fiscal year that ended in March.
Talk to us
> Give us your news tips.
> Send us a letter to the editor.
> More Herald contact information.
