Six-Year Venture Never Took Off Domestically
Following a detailed business and market analysis of its
Connexion by Boeing high-speed broadband communications businees,
the aerospace manufacturer announced Thursday it will exit that
"Over the last six years, we have invested substantial time,
resources and technology in Connexion by Boeing," said Boeing
Chairman, President and CEO Jim McNerney. "Regrettably, the market
for this service has not materialized as had been expected. We
believe this decision best balances the long-term interests of all
parties with a stake in Connexion by Boeing."
The move was, perhaps, inevitable, following Boeing's announcement in June
that -- due to sluggish sales of its service -- it was
taking steps to explore the sale, or outright closure, of the
Boeing says it will
work with its existing customers to phase out Connexion, which is
currently used by 11 overseas carriers including Lufthansa, All
Nippon Airways and El Al.
Although domestic carriers United, American and Delta has once
expressed interest in the idea -- even supporting the program early
on -- all three pulled that support following the events of
As initially disclosed in the company's second-quarter 2006
financial results on July 26, Boeing now expects to recognize a
pre-tax charge of up to $320 million -- or $0.26 per share -- in
the second half of 2006, of which approximately $290 million will
be taken in the third quarter and the balance in the fourth
The company also expects a benefit to earnings of approximately
$0.15 per share starting in 2007 without further investment in
Connexion. The company will update its financial guidance when it
releases third quarter results on October 25.
Boeing says the charge relates to writing down certain assets,
payments of early termination fees and other costs related to
shutting down the service.
Boeing expects the majority of Connexion employees will find
other jobs within the company.