Airbus takes 30% stake in US in-flight internet group

Airbus industrie will today unveil its first corporate deal since converting to a fully commercial company in February. The European aircraft manufacturer is buying a 30 per cent stake in Tenzing Communications, a Seattle-based technology company specialising in in-flight email and internet access, for around $50m (£36m).

The move follows yesterday's announcement that Boeing has teamed up with three major US airlines to develop its rival in-flight communications system Connexion.

In-flight communications systems are set to become the next big development in the airline industry. Tenzing has so far signed up three airlines ­ Virgin Atlantic, Singapore Airlines and Cathay Pacific ­ and its system will enter service on the first commercial aircraft this autumn.

Under the deal announced by Boeing, American Airlines, United Airlines and Delta Airlines have each agreed to take minority stakes in Connexion and install the system on 1,500 jets, starting in the second half of next year. The Tenzing system is simpler and much cheaper to install. It costs $50,000 per aircraft compared with Boeing's much more ambitious broadband system which could cost up to $1m an aircraft. Although the Boeing system will offer higher access speeds and more capacity, allowing passengers to download live television and other entertainment as well as surfing the web, it is likely to be twice as expensive. Scott Carson, president of Connexion said the charge per passenger would be $20 an hour compared with a suggested charge of $10 for the Tenzing system.

Airbus, which switched to its new commercial status last December, is 80 per cent owned by EADS, the European Aeronautic Defence and Space company. The remaining 20 per cent is owned by BAE Systems.

Tenzing is privately owned and was founded in 1999 with headquarters in Boeing's home city of Seattle. It has received $45m in funding to develop the system including $10m from its first customer, Cathay Pacific. Tenzing landed its second customer in March when Sir Richard Branson's Virgin Atlantic ordered the system for its fleet of Boeing 747 jumbos and Airbus A340s. The system is also being installed on a fleet of stretched A340s on order to Virgin. Scandinavian Airlines System and Air Canada are also testing the system. Tenzing says its system is compatible with PCs, Apple Macs and personal digital assistants. John Leahy, executive vice-president of commercial affairs at Airbus, is in London today to announce the deal, which will provide Tenzing with the funds needed to continue development work.