by NASA’s announcement Saturday that it will not use Boeing’s troubled capsule to return two stranded astronauts to Earth is yet another setback for the struggling company, though the financial damage is likely to be less than the reputational damage.
Once a symbol of American engineering and technological prowess, Boeing’s reputation has suffered since two 737 Max airliners crashed in 2018 and 2019, killing 346 people. The safety of its products has come under renewed scrutiny after a Max panel leaked during a flight last January.
And now NASA has decided that it is safer to keep the astronauts in space until February rather than risk removing them from the Boeing Starliner capsule that will deliver them to the international space station. The capsule is plagued by problems with its propulsion system.
NASA administrator, Bill Nelson, said that the decision to send the Boeing capsule back to the empty Earth “is the result of a commitment to safety.” Boeing insisted that Starliner was safe based on recent tests of thrusters in space and on the ground.
The space capsule program accounts for a small fraction of Boeing’s revenue, but transporting astronauts is a high-profile job – similar to Boeing’s work building Air Force One’s presidential jets.
“The whole thing is another black eye” for Boeing, said aerospace analyst Richard Aboulafia. “He’s going to struggle a little longer, but nothing they haven’t dealt with before.”
Boeing has lost more than $25 billion since 2018 as its aircraft manufacturing business has suffered after those crashes. For a while, the company’s defense and space side provided some cushion, posting strong profits and steady revenue through 2021.
As of 2022, however, Boeing’s defense and space division has also fallen, losing $6 billion — slightly more than the company’s airplane side in the same period.
A number of fixed-price contracts for NASA and the Pentagon have dragged down the results, including a deal to build Air Force One’s new presidential jets. Boeing is in trouble because the costs of these projects have increased much higher than the company’s estimates.
The company recorded a $1 billion loss from fixed-price government contracts in the second quarter alone, but the problem is not new.
“We have a couple of fixed-price development programs that we need to complete and not do again,” then-CEO David Calhoun said last year. “Don’t repeat them.”
In 2014, NASA awarded a $4.2 billion fixed-price contract to Boeing to build a vehicle to transport astronauts to the International Space Station after the retirement of the space shuttle, along with a $2.6 billion contract to SpaceX.
Boeing, with more than a century of building airplanes and years as a NASA contractor, was seen as the favorite. But Starliner suffered technical difficulties that canceled several test launches, fell behind schedule and over budget. SpaceX won the race to bring astronauts to the ISS, which it achieved in 2020.
Boeing was finally ready to carry astronauts this year, and Butch Wilmore and Suni Williams launched aboard Starliner in early June for an 8-day stay in space. But due to thruster failures and helium leaks NASA parked the vehicle at the space station while engineers debated how to return them to Earth.
The company said in a regulatory filing that Starliner’s most recent peak resulted in a $125 million loss through June 30, leaving the program with more than $1.5 billion in cumulative costs. “The risk remains that we may record additional losses in future periods,” Boeing said.
Aboulafia said the Starliner will have little impact on Boeing’s business and finances — “it’s not really a needle mover.” The $4.2 billion multi-year contract with NASA is worth a relatively small chunk of revenue for Boeing, which reported sales of $78 billion last year.
And Aboulafia believes Boeing will enjoy a grace period with customers like the government now that it is under new leadership, reducing the risk of losing major contracts.
Robert “Kelly” Ortberg replaced Calhoun as CEO this month. Unlike the company’s recent chief executives, Ortberg is an outsider who previously headed aerospace manufacturer Rockwell Collins, where he developed a reputation for walking the talk among workers on the factory floor and building connections with airline and government customers .
“They’re transitioning from possibly the worst executive leadership to some of the best,” Aboulafia said. “Because of the change of regime that is taking place, I think people will be slow to reach them.”
Boeing’s defense division has recently won several huge contracts. It is set to supply Apache helicopters to foreign governments, sell 50 F-15 fighter jets to Israel as part of a $20 billion deal, and build a prototype surveillance plane for the Air Force under a $2.56 billion contract.
“These are some strong tailwinds, but it’s going to take a while before they get (Boeing’s defense and space business) back to profitability,” Aboulafia said.
