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Honeywell Signs Plane Wi-Fi Deal

Honeywell Signs Plane Wi-Fi Deal

In a bid to capitalize on the growing market for fast Internet access on airliners,Honeywell International Inc. HON -0.34% has signed a deal with satellite-operatorInmarsat ISAT.LN -0.95% to provide equipment for airborne broadband connections.

The 20-year agreement, expected to be announced Wednesday, will bring faster speeds and more seamless Wi-Fi services to global flights, raising the prospect that fliers could stream video on thousands of jetliners, business jets and government planes.

Honeywell estimates it will get $2.8 billion in new revenue from the sale of antennae and other onboard gear that will connect with a new generation of Inmarsat satellites. Inmarsat, which is investing $1.2 billion to build out the system, will launch the first of a trio of new satellites next year, with services beginning for customers by 2014.

More than 1,800 U.S. planes already offer passengers the option of using some type of Wi-Fi broadband services, and thousands of additional planes are slated to add such capabilities over the next few years. Honeywell hopes the partnership with Inmarsat will give it an edge in the fast-growing arena.

The use of in-flight Internet services is expected to increase rapidly over the next five years, with 6,100 planes having in-flight Wi-Fi by 2015, when revenue from such services will reach $1.5 billion, according to In-Stat, a research and consulting firm. In-Stat estimates about 8% of passengers use the service now, up from 4% at the end of 2010, and it expects the percentage to rise to 10% by the end of this year.

By 2016, Honeywell expects there will be 10 billion mobile devices in the world, with nearly three-quarters of all mobile traffic involving watching videos. Earlier efforts to enable satellite connectivity on airplanes failed because of high capital and operating costs and lukewarm support from passengers. Boeing Co. BA -0.51% abandoned an offering marketed as Connexion in 2006 after investing at least $1 billion over almost six years.

Experts say advances in technology, including smaller, lighter antennae, make the latest concept more financially inviting for service providers, equipment makers and airlines. Still, Honeywell is bound to face intense competition, with international giants like Panasonic Corp. 6752.TO -0.31% pursuing rival systems.

Much of the current onboard connectivity in the U.S. is supplied by Gogo Inc., which estimates it has 87% of the Internet-enabled North American commercial aircraft, according to its filing with regulators for an initial public offering. Gogo uses a ground-based system, with Wi-Fi hot spots in jets communicating with one of 135 antennae on the ground in North America.

Some experts believe a satellite-based system makes more sense. “The communication from the ground to airplane has to deal with weather” as well as “signal from one antenna to another,” said Jimmy Shaeffler, an analyst at the consulting firm Carmel Group,

Internet download speeds peak at 3.1 megabits a second on airlines that get Wi-Fi service from Gogo. Inmarsat’s satellite service expects to offer speeds of up to 50 megabits a second. Gogo has signed an agreement with Inmarsat to be one of two Internet service providers on the new high-speed network.

“For future generations of travelers who are very entertainment focused, Wi-Fi can be one of the factors that gets a traveler to consider an airline,” said Henry Harteveldt, co-founder of the consulting group Atmosphere Research Group. “The key point is the price has to be right for the consumer.”

The latest plans will also face intense price competition. Currently Gogo, which provides service for Delta, American and Virgin America, charges based on use, from $1.95 for 15 minutes to $399.95 for an annual unlimited pass.

The deal with Inmarsat came after arch rival Rockwell Collins Inc. COL +0.19% failed to secure an agreement. In August, Rockwell announced a deal in principle to be the exclusive supplier, but those talks unwound earlier this year. A spokeswoman for Rockwell Collins wouldn’t say why the talks fell apart.

The company “is evaluating alternative broadband solutions as part of its continued commitment to provide comprehensive connectivity offerings,” according to an emailed statement.

In addition to passenger connections, the proposed system is designed to stream substantially more maintenance and safety-related data from planes than current options permit.

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