Doing the math on Connexion

During its short life Connexion by Boeing proved to be a great technological success. Airlines – and passengers – loved the Ku-band satellite-based service. And it still holds a sort of revered place in the world of IFE&C.

Connexion antenna.jpgIndeed some people – though certainly not all - still believe there is no other product that did, does or will do in the near-term what Connexion achieved many years ago.

To wit, while Connexion’s commercial life is long over, it continues to fly on a variety of government aircraft, including Air Force One. That contract, I’m told, was recently renewed for another five years by the US government.

As we all know, it wasn’t Connexion’s technological prowess that ultimately led to its demise. It was its inability to turn an awesome product into an economic success.

Using Connexion’s former king marketer David Friedman’s own figures, one fair reader cooks up a financial estimate for us. Do you agree with this assessment?

  • $500k per airplane said Friedman x 200 aircraft = $100M installation cost assuming no downtime, fuel cost to lift the gear, etc.
  • 500,000 passengers in two years equates to $200 per passenger, at zero inflation, just to have them try it once. Yes, there were repeat users, but dollars per aircraft per year is the metric we don’t have.
  • Now add in the cost of spares, maintenance people, customer care call centres, credit card charging, huge marketing activities like advertisements, billboards, airport kiosks, etc. including overseas travel and hotel/etc. for the many remote field service representatives and flights worldwide meeting with the airlines and regulatory agencies in multiple countries.
  • Most importantly add in the cost of building and supporting multiple satellite ground stations (US, Europe, Asia, Russia) and the big ticket item – satellite time.  How many Ku satellites did it take to go to overseas coverage, how many beams, how many $M per year per beam?  What is the recurring cost to light up enough beams for the ‘first’ user to get connected?
  • Now do the math even at zero time value of money and it’s clear that the business case could not possibly close unless some airline bought an airplane solely because it was Connexion equipped….which never happened to anybody’s recollection.
  • The question is: How many dollars/minute was the full cost per user?  It had to be astronomical. How many dollars revenue per aircraft per year? A pittance in comparison.

Ever the optimist, I’m very hopeful that Connexion’s would-be replacements have managed to make Ku-band-based connectivity viable because, from a passenger’s perspective, this would rock!

Photo above can be found on Boeing’s web site at www.boeing.com/news/frontiers/archive/2002/june/i_cbb.html

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