Download Boeing`s Connexion - Faculty Washington

Team 2
Cheryl Lee
Marisol Cadiz
Diana Lee-Akalin
Sangtae Lee
1
Agenda
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Introduction
Company & Product Overview
Core Competencies
Customers & Competition
Critical Issues & Financials
Critical Recommendations
Question?
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Introduction
• Boeing intends to be a leader in the new mobile
economy - -and that means helping our airline
customers and their passengers stay globally
connected at all times. The airplane will begin to
look like your home or office and the experience
of travel will change
- Phil Condit, Boeing chairman and CEO
3
Air Travel Today
• Few choice
– Book
– Magazine
– Several movies
• New market emerging
– 3 million people board 42,300 flight a day
– 48% of air travelers in USA are business travelers
– 70% of business traveler carry a laptop on board
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Connexion by Boeing
• New broadband telecommunication
service in flight
• Real time, high speed, two-way
connectivity
• Real time Internet and Live TV
• Service to begin in 2002
Market size: $70 billion over the next 10 years
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The Capability of Connexion
Expedia/
Airlines
Destination
Information
Surf the Web
E-mail (80%)
Stock trades (49%)
Book reservations
Plan itinerary
Check weather (75%)
Reservations (45%)
CNN/CNBC
News & Information
News(63%)
Business
Money
CNN
AOL/Yahoo
Internet
Live TV
Entertainment (41%)
News reports
Weather
Sports events
Indiv Co
Airline
E-Commerce
Shopping
Duty-free
Company Intranet
E-mail (80%)
Reports
Company news
Airline
Carrier Information
Airshow
Flight Facts
Travel planning (46%)
Travel support
Frequent flier mileage
Airport maps
Flight maps
Gate information
% :Air traveler’s preference
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Core Competencies
Technology
In Depth Knowledge
- High Speed
-Deploying large scale
- Two way
- Broadband
-Communication sys.
Financial &
Human capital
- $45 Billion company
- 200,000 Employee
Global Relationship
Strategic Alliance
- Airline industry
- Industry leader &
- Government
Content Provider
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Alliances
-Live Sports
Network
-Satellite and
Transponder
-Asia
coverage
Contents
Provider
-Satellite and
Transponder
-Market News
-Europe
coverage
- Stock
Hardware
-Airport
-Weather
- City Guide
MASC
MATSUSHITA AVI.
-In Flight SYSTEMS CORP.
Entertainment
Sys.
-Satellite and
Transponder
-North
America
coverage
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Customers
Advertising Agencies
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Competition
Connexion
In Flight
Network
Tenzing
Comm
Existing IFE
Prov.
Deployment
2002
Testing
2001
Testing
2001
Testing
“Emport”
High Speed
Real Time
Y
N
N
N
Range of
Services
Extensive
Basic
Email
Movies
Basic
Email &
Web
Basic
Internet
Movies
Infrastructure
Reqmt
Extensive
Minimal
Minimal
Minimal
$$$$$
$$
$$
$
Cost
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Competition (cont.)
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Competition (cont.)
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Issues: Cost
• Up Front Investment: $100M - $200M
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–
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Development
Integration of communication, platform
Hardware & Software Installation
Content Development
• Est. $17/hour for email and net access
– Customers willing to pay
• Operating Cost
– Satellite communication: $20 per call
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Issues: Technology
• Frequency sharing needs regulation
authorities approval
• Development limits to existing technology
& infrastructure
• Technology - what’s next?
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Other Issues
• Consumer Acceptance
-What do they use & how much are they willing to pay?
•Target Markets & Content Offerings
-Who are they & what do they want?
• Airlines, Partnership & Alliance
- They control what to provide & when to implement
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Rough Financials
Analysis
Assumptions:
Revenue
Sharing
20%
30%
ROI
5-Years
5-Years
-
Annual
Rev.(m)
$4,600
$8,200
$3,000
Market
Share
29%
52%
-
# of Paid
Users
(m)
108
192
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• Revenue sources
– Service fees: 50%
– Advertising: 30%
– Co-Branding: 20%
• Expenses:
– Service: $20/call
– Revenue sharing
– Standard stuff
Boeing’s
Estimati
on
Revenue
Sharing
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Recommendation:
$$$ models
• Service Fees
– Offer Basic
– Corporate Accounts
– Prepaid Service
Premium Service
• Advertising
– Charge fees and use the proceeds to reel in Basic
service users
• Co-Branding
– Charge Airlines and Content Providers
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Recommendation:
dis-integration
• SBU with tracking stock
– Heavy promises require speed, flexibility,
and focus
– Boeing is a dinosaur
– …but Connexion still needs Boeing’s
• technological expertise
• government and regulatory contacts
• customer relationships
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Recommendation:
Focus on Value
Stop comparing yourselves to cellular phones
Value Proposition
Core Benefit
Selection/Service
Price (relative)
Business Travelers
Efficiency/save time
Fast, real-time, little to
no advertising, email,
reservations, full
spectrum of business
services (virtual office)
Highest – In most cases
the company pays for it,
not the traveler.
Company is willing to
pay because “time is
money”.
Customer Segment
Airlines
Customer loyalty
Co-branded (seamless), full
spectrum of the airline’s
travel services/ forms of
revenue beyond the ticket
you purchased
Med. to High –
differentiation through
service is extremely
important. Additional
revenues can be generated
by attracting volumes
Leisure Travelers
Convenience/entertainment
Travel planning, reservations,
weather, email, movies, TV,
news, games, very recent but
may not need real –time
Low - People will be willing
to pay only to the extent that
current needs are not
satisfactorily met by means
such as books, magazines, and
IFE systems.
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Questions?
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