Will airplane Internet service take flight?

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Will airplane Internet service take flight?

SEATTLE (Reuters) =97 With a business model that combines air travel and=20
Internet service, Tenzing Communications has endured serious turbulence in=
=20
recent years. But fresh off a cash infusion from investors in December,=20
Seattle-based Tenzing has scaled back its airborne Internet service to=20
offer a simpler system to deliver the one thing it claims Web surfers=20
really want at 35,000 feet: e-mail. "Our surveys show 86% of people log on=
=20
to the Internet to use e-mail," said Tenzing Chief Executive Alan McGinnis.=
=20
"E-mail is the killer app." Stymied by a huge air travel slump that has=20
drastically weakened many airlines since the Sept. 11, 2001, attacks,=20
Tenzing slashed payroll and dropped plans to include real-time Web surfing=
=20
in its in-flight offering, now in trials at Cathay Pacific Airways and=20
Virgin Atlantic Airways. In an interview at Tenzing's offices, McGinnis=20
declined to say how much money Tenzing's board members and other investors=
=20
contributed in December, but the company is hiring again, planning to boost=
=20
its payroll by 25% from 65 now.

Tenzing was launched in 1999 and has since raised more than $50 million,=20
including major investments from aircraft maker Airbus SAS and Cathay=20
Pacific's Taikoo Aviation Technologies. Aviation electronics maker Rockwell=
=20
Collins last July invested $10 million in Tenzing and sent an executive,=20
Steve Piller, to act as Tenzing's chief operating officer. Tenzing's main=20
competitor, jetmaker Boeing's Connexion unit, offers a far more ambitious=20
and expensive, high-speed Web service. Tenzing claims it can often outfit=20
an airplane in a matter of hours with a single shoebox-sized computer=20
server that beams e-mail and short messaging service (SMS) to the ground=20
using the aircraft's existing antenna. Passengers can connect using their=20
own laptop or, as in the Virgin Atlantic trial, use seat-back video=20
screens. Tenzing has said from the start that Boeing's service will take=20
too long to install, deliver more than the customer really wants and cost=20
too much. Both companies say installation costs and revenue sharing with=20
airlines vary from deal to deal.

"The airlines want to make sure what little money they spend is not=20
wasted," McGinnis said. "Our overhead is lower and we can charge less=20
money." In fact, Tenzing's estimated cost of $15 to $20 per flight to the=20
passenger for e-mail, and its current trial price of $2.50 to send an SMS,=
=20
are well below Connexion's target of $25 to $35 per flight. To date,=20
Tenzing's service is available on 39 of Cathay's 69 jetliners and it plans=
=20
to outfit the entire fleet by the end of the year. At Virgin, the service=20
is available on a half dozen aircraft with 13 more slated to follow by=20
mid-summer. Another "seven to 10" airlines have shown serious interest in=20
Tenzing, McGinnis said, though that list does not include two former=20
Tenzing trial customers =97 Scandinavian SAS and Air Canada. SAS last year=
=20
signed with Connexion for a trial beginning in 2004, joining Deutsche=20
Lufthansa, British Airways and Japan Airlines in the Connexion fold. Air=20
Canada, which says it got positive feedback from the 500 passengers who=20
tried Tenzing in 2001, scrapped the service to keep its costs down and=20
focus on no-frills service.

Connexion also suffered when airlines went into survival mode, losing a=20
deal with the top three U.S. airlines to invest in the venture and install=
=20
the service on their aircraft and slashing staff. Unlike Connexion, which=20
claims business travelers as its primary market, Tenzing also sees its=20
e-mail offering selling well among leisure travelers. If all goes according=
=20
to plan, Tenzing expects to post a profit in two years or less, even if it=
=20
snares a tiny fraction of the hundreds of millions of airline passengers.=20
Ultimately Tenzing may offer instant messaging or wireless service, or even=
=20
match Connexion's high-speed product. The future of the Internet is hard to=
=20
predict, said McGinnis, a veteran of Microsoft's MSN network. "Ten years is=
=20
an eternity in this business," he said.


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