Boeing (NYSE:BA) is finally seeing a long-planned venture take flight. It may take some time before investors start seeing stratospheric profits from the offering, but its long-term prospects look solid.
Boeing announced Wednesday that Siemens AG (NYSE:SI) has signed on as the first global customer for Connexion, the aerospace company's high-speed in-flight Internet service. Through the pact, Siemens employees will be able to connect to the Web on select Lufthansa aircraft that are equipped with the technology.
It's a small beginning to be sure, especially since Boeing first tried to make Connexion fly in a joint venture with AMR's (NYSE:AMR) American Airlines, Delta Air Lines (NYSE:DAL), and UAL's United Airlines before September 11 put the plans in limbo. At the moment, just 10 Lufthansa aircraft offer Connexion, although the German carrier does plan to deploy it on all long-haul planes. Several others, including Japan Airlines, All Nippon Airways, China Airlines, Singapore Airlines, and Scandinavian Airlines, plan to go live with the system by the end of this year.
Boeing, which shares some revenue from Connexion with airline partners, is offering connectivity to individual passengers for anywhere from $15 to $30 per flight. However, the real profit potential clearly lies in corporatewide deals, and as coverage spreads, Boeing's chances of clinching more of these improves. While some might question whether business travelers need always-on surfing capability, it's notable that Connexion also enables voice over Internet protocol (VoIP) connections, providing a cheap substitute to expensive phone service offered on airplanes. In addition to allowing for calls through a laptop, Connexion may eventually add a capability permitting passengers to use VoIP via cell phones.
Connexion's eventual impact on Boeing remains unclear. However, the company already projects that the new service will be profitable by 2007 or 2008. As Connexion continues to roll out, investors should keep a close eye on the virtual skies.
Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.
