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ARINC Challenges Boeing In-Flight

By | August 30, 2004

      Officials at Annapolis, Md.-based ARINC said they are preparing to rollout a comparatively low-cost, satellite-based broadband data service onboard commercial aircraft to challenge the Connexion by Boeing that inaugurated revenue-generating service in May. The exact timing of ARINC’s commercial launch of its Skylink service is undetermined, because it still is negotiating with prospective airline customers. However, the company is planning to demonstrate its service next month at the World Airline Entertainment Association (WAEA) conference in Seattle, Sept. 21-24.

      Skylink is intended to provide in-flight users a quality and capability of service similar to what one might use in an office. Passengers would be able to search for destination information, review news, browse the Internet, review corporate and personal e-mail, and conduct e-commerce.

      The service is being shopped to both domestic and foreign airline partners, and those partners would both brand the service and determine the price certain passengers would pay.

      ARINC has designed its in-flight broadband system to be extremely lightweight and high-speed, with an uplink of 5 megabits to the aircraft and a downlink of 256 kilobits.

      “While the speed makes us competitive with the Connexion offering, our system’s weight advantage and low-profile antenna, measuring less than six inches above the airframe, will make [our service] more economical to operate,” said Tom Mullan, senior director of ARINC’s Skylink program, during an exclusive interview with Satellite News Senior Editor and Senior Analyst Paul Dykewicz.

      Unlike the Connexion by Boeing approach of using a uniform pricing structure, ARINC’s airline partners would have the flexibility to decide for themselves whether to charge passengers for the service or to offer it for free as an incentive for high-value business travelers.

      For an airline looking to differentiate itself from its rivals, ARINC could be an intriguing source of broadband access. The price that two domestic airlines potentially may charge if they take the ARINC service range has yet to be set but it could range between $15 and $20 per passenger, industry sources said.

      Market Validation

      “We think ARINC’s plans validate that there is a market for broadband capability onboard aircraft,” said Stan Deal, Connexion by Boeing’s vice president of global network sales. His contact with the airline, business jet and government markets has convinced him that many passengers want to stay connected while in flight. Boeing learned from airline officials that passengers were most interested in the service’s affordability and throughput.

      “Airlines told Boeing cost was king,” Deal said.

      That consumer research led Connexion by Boeing to develop a flat-rate pricing regime as one option and a modified pay per-minute approach as an alternative, Deal said. On flights of more than six hours, the price for using the service is $29.95. Flights of three to six hours involve charges of $19.95, while journeys of fewer than three hours cost $14.95 for a passenger to connect. The second pricing model is to charge users $9.95 for the first 30 minutes, and then 25 cents a minute beyond that level of use.

      “People try the second model and typically gravitate for the flat rate model,” Deal said.

      Connexion by Boeing officials explain that their company’s uniform pricing strategy and service, regardless of the carrier, gives passengers a consistent experience that they can expect whenever they fly on an aircraft that offers the company’s package of broadband access and entertainment. ARINC, too, is considering an entertainment package later on.

      Lufthansa [DLAKY] became Boeing’s airline launch partner last May but definitive agreements also have been reached with Scandinavian Airlines System (SAS) [SAS], Japan Airlines [JASJF], All Nippon Airways [ALNPY] and Kingdom Holding Co. on their long-haul aircraft. In addition, Singapore Airlines [SIAL], China Airlines and Korean Air have announced their intent to install the Connexion by Boeing system on their long-range jets. Last week, Seoul, Korea-based Asiana Airlines became the latest carrier to announce that it would team up with Connexion by Boeing. Asiana Airlines is the fourth member of the Star Alliance to sign up to partner with Boeing for in-flight broadband capability.

      The Onboard Experience

      Because ARINC’s Skylink service would be optimized if no more than 40 users on a single aircraft tried to use it simultaneously, high-value passengers likely would be given priority to use the service. Because market studies suggest that people flying in economy class typically would not be the prime users of the service, especially when a fee is charged, limited onboard capacity for either service should not pose much of a problem.

      Boeing officials suggested that usage rates onboard an aircraft typically would not exceed 15 percent to 20 percent of the passengers, the reason being (according to Boeing) that broadband service is competing for a passenger’s time in the cabin, and many travelers prefer to sleep, read or listen to music.

      Security is a key concern for both Connexion by Boeing and ARINC, just as it is with virtually any network provider.

      “We try to keep pace and incorporate the latest features of security functionality,” Deal said. To that end, Boeing announced Aug. 23 that it had signed an agreement to provide secure Wi-Fi network access to customers of iPass, a provider of secure connectivity services for mobile users.

      “Most corporate users have VPN addressing to ensure nobody can access their data onboard,” Deal said. “Connexion provides a network that can handle the VPNs of most major corporations.”

      ARINC is testing the security of its system closely and intends to have safeguards in place before introducing commercial service. It will use VeriSign for security to protect all personal and account information. The company also will use a standard wireless security protocol.

      While Boeing is well known as one of the world’s two largest aircraft manufacturers, it is a relative newcomer to providing in-flight data services. ARINC has the advantage of offering air-to-ground data services that commercial airlines have used since the company’s creation 1972, Mullan said.

      ARINC already is providing two-way, high-speed broadband service on business jets built by Gulfstream Aerospace, a Savannah, Ga.-based wholly owned subsidiary of Falls Church, Va.’s General Dynamics [GD]. That business jet service is similar to what ARINC plans to offer to commercial airlines.

      Connexion by Boeing also is looking to tap the business jet market. The company already has introduced its service on aircraft used by top administration officials in the U.S. government.

      (Tom Mullan, ARINC, 410/266-4203; Cathy Rudolph, Connexion by Boeing, 206/655-5037)

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