The closure, which was widely expected, marks an expensive retreat for Boeing's six-year project to put satellite-based Internet connections on its commercial jets.
Most airlines, especially in the United States, held off buying the service in the hope that cheaper, cellular network-based Internet services will end up dominating the market.
In June, a unit of U.S. low-cost carrier JetBlue Airways Corp. (JBLU) was one of two companies that won licenses to supply wireless airborne communications services.
Boeing said it will take a pretax charge of about $290 million in the third quarter and the balance in the fourth quarter, as it writes down assets of the unit and pays termination fees to customers.
Germany's Lufthansa, Scandinavian carrier SAS, All Nippon Airways, Japan Airlines and Singapore Airlines were the only major carriers offering the service on flights.
Last month, Boeing warned that the Connexion unit might take a charge of up to $350 million this year. In June, it said it was considering the sale of the unit.
"Over the last six years, we have invested substantial time, resources and technology in Connexion by Boeing," said Boeing Chairman and Chief Executive Jim McNerney. "Regrettably, the market for this service has not materialized as had been expected."
Connexion employs about 560 people. The company expects to find other positions within Boeing for the majority of these people, but some layoffs are possible, Boeing spokesman John Dern said.
Boeing said total charges for shutting down the unit could knock 26 cents per share off earnings for the second half of this year, but said the closure and halting of investment in the Connexion unit would improve earnings by about 15 cents a share starting in 2007.
The company said it would update its financial forecasts when it reports third quarter results on October 25.
Boeing shares were up 39 cents, or 0.5 percent, at $79.22 in early morning trading on the New York Stock Exchange.