First-hand reporting on the SAS/Connexion by Boeing deal: To report this short brief in today's New York Times, I spoke to Connexion, SAS, and Telia about Scandinavian Airline's decision to install Connexion by Boeing broadband service on its 11 long-haul planes flying to Asia and North America starting in February with all planes equipped by 2005.
SAS's Jens Willumsen, a senior vice president, said that more than three quarters of the passengers on their Copenhagen to New York flight, for instance, carry a laptop, and most of them use it on board for at least some of the flight.
Their surveys and research show that half of these passengers will use the service during the flight, which is where they and Boeing obtained the estimate that one third of passengers on a given flight will use the Connexion service.
Terrance Scott of Connexion by Boeing said, "On an average international flight, you’ll see about a third of the passengers using the service about a third of the time." On a 7-hour flight, that might be two hours of email, intermittently, with sleeping, eating, takeoff and landing, and entertainment occupying the rest of the time.
Scott said, "This is one of the reasons why people have told us in the research they prefer a flat rate, because it takes the time clock out the equation." That's a not-too-subtle dig at Tenzing/Verizon AirFone's JetConnect pricing.
The price for SAS will be $30 to $35 per flight. SAS's 2002 annual report states they flew 1.4 million passengers outside of Europe and Scandinavia, and most of these routes would be covered under the long-haul flights.
With a maximum of 188 to 261 passengers seated in their three long-haul plane models, at $30 per flight and 85 percent occupancy rate noted in their report, that equates to $1,580 to $2,200 in revenue per flight with one-third of passengers using the service, or $13.86 million per year based on 2002 numbers. SAS said in their annual report they expect an increase in passengers on these routes.
Willumsen said, "The main driver for this initiative is that we have strategically decided since our customers are very IT [information technology] alert, they do take on new technology very quickly to support the way they do their business, especially frequent travelers."
SAS introduced paperless, document-free travel systems last year to cover security, check-in, Internet booking, and other aspects, and 50 percent of their Scandinavian customers never use a document. This shows the high adoption rate of Internet use and the sophistication of business travelers.
SAS has had Telia HomeRun Wi-Fi service in its worldwide lounges starting in 1999. They originally partnered with Telia and Tenzing to bring high-speed Internet to their planes, but after the dotcom crash and September 11, Tenzing retooled and SAS retrenched. (Telia itself is in the middle of several-month-long reorganization right now.)
A Telia executive and SAS said that although they were aware of the Boeing arrangement that SAS and Telia both expect Connexion to drive any integration between Telia and the in-flight service. The potential is for a passenger to have seamless, single login, one transaction access from arrival, through a flight, through baggage claim.
Boeing's Scott noted that SAS "will be the first commercial airline in the world who will offer complete wireless connectivity solution." The initial Lufthansa trials only allowed a specific single card, but late in that process "we did receive permission to operate any wireless device on board."
Connexion uses a phased-array antenna pointed at a satellite to deliver up to 1 megabit per second (Mbps) of upload speed and up to 5 Mbps download. The service has the potential to offer four separate 5 Mbps channels on a single plane, for a total of 20 Mbps. "If everyone on board wanted to sign on they could," Scott said.
Connexion differs from the Tenzing offering in providing real-time high-speed Internet access as opposed to proxy service in which an intermediary has to rely and cache data. Tenzing's email service has been variably reported as using existing email clients or requiring a special Web-based client they offer -- even their site has various descriptions -- but it's clear that you cannot directly connect, but rather use an email proxy to send and receive email.
Tenzing's partner Verizon AirFone has United committed to offering JetConnect on all of its planes, a substantial investment, and charge $15.95 per flight to receive and send unlimited emails of up to 2 kilobytes per message. Additional kilobytes are 10 cents each. Average email tends to be longer, and HTML-formatted email substantially longer.
The Tenzing service cannot allow virtual private network connections. Connexion, in contrast, tested VPN software and connections, and is confident that they will be reliable and accessible. Boeing's Scott said, "VPN clients that are installed at various corporations, their networks and their firewalls, they continually ping you: are you there, are you still there….if you’re working off a narrowband service that does periodic updates" the VPN connection cannot be maintained or established.
Lufthansa had committed in May to installing Connexion on 80 long-haul planes--its whole fleet--starting in 2004. Lufthansa is a StarAlliance member along with SAS and several other airlines, including United. SAS relied on the Lufthansa and British Airways tests instead of running them themselves, because Lufthansa uses identical planes and has a similar clientele.
SAS's Willumsen expected other StarAlliance members to follow, as the service would become even more valuable when available among codeshared and connecting flights across several airlines. "We believe that more StarAlliance partners will sign up for this service in the next 6 to 12 months, so you will probably see StarAlliance" as the first alliance with the largest portion of this service, he said. "I’m quite sure this is going to move passengers" from other airlines to those equipped with Connexion.
Willumsen said choosing the service was a matter of deciding what passengers wanted and then providing it, a basic customer service and marketing reality. "In this case, we have chosen technology instead of caviar."