NASA’s announcement on Saturday that it will not use a damaged Boeing capsule to return two stranded astronauts to Earth is a further setback for the struggling company, even if the financial damage is likely to be less than the reputational damage.
Boeing was once considered a symbol of American engineering and technology prowess, but its reputation has been ruined since two 737 Max planes crashed in 2018 and 2019, killing 346 people. The safety of its products came under renewed scrutiny after a panel blew out of a Max during a flight in January.
And now NASA has decided it would be safer to keep the astronauts in space until February than to risk using the Boeing Starliner capsule that carried them to the International Space Station, which suffered from problems with its propulsion system.
NASA Administrator Bill Nelson said the decision to send the Boeing capsule back to Earth empty was “the result of a commitment to safety.” Boeing had insisted that Starliner was safe both in space and on the ground based on recent engine tests.
The space capsule program accounts for only a tiny fraction of Boeing’s revenue, but transporting astronauts is a prestigious task – as is Boeing’s work building the Air Force One presidential jets.
“The whole thing is another slap in the face” for Boeing, said aviation analyst Richard Aboulafia. “It’s going to hurt for a little while longer, but it’s nothing they haven’t experienced before.”
Boeing has lost more than $25 billion since 2018, when its airplane manufacturing business collapsed after those crashes. For a time, the company’s defense and aerospace division provided a partial cushion, posting strong profits and stable revenue through 2021.
Since 2022, however, Boeing’s defense and aerospace division has also been weakening, recording losses of six billion dollars – slightly more than the company’s aircraft division in the same period.
Results were dragged down by several fixed-price contracts with NASA and the Pentagon, including a contract to build new Air Force One presidential jets. Boeing has now had to foot the bill itself as costs for those projects have risen far beyond the company’s estimates.
The company posted a $1 billion loss on fixed-price government contracts in the second quarter alone, but the problem is not new.
“We have a few fixed-price development programs that we just have to end and never do again,” then-CEO David Calhoun said last year. “We can never do that again.”
In 2014, NASA awarded Boeing a $4.2 billion fixed-price contract to build a vehicle that would carry astronauts to the International Space Station after the Space Shuttles are retired, and it also awarded SpaceX a $2.6 billion contract.
Boeing, which has been building aircraft for over a century and has worked for NASA for decades, was considered the favorite. However, Starliner suffered technical setbacks that resulted in some test launches being canceled, missing its schedule, and going over budget. SpaceX won the race to transport astronauts to the ISS, which it did in 2020.
Boeing was finally ready to carry astronauts this year, and Butch Wilmore and Suni Williams launched aboard the Starliner in early June for a planned 8-day stay in space. But engine failures and helium leaks forced NASA to park the vehicle at the space station while engineers debated how to return it to Earth.
The company said in a regulatory filing that the recent Starliner mishap caused a loss of $125 million through June 30, pushing the program’s cumulative cost overruns to more than $1.5 billion. “The risk remains that we may incur additional losses in future periods,” Boeing said.
Aboulafia said Starliner’s impact on Boeing’s business and finances will be modest – “not really a game-changer.” Even the $4.2 billion, multi-year NASA contract is a relatively small portion of revenue for Boeing, which reported $78 billion in revenue last year.
And Aboulafia is convinced that under new leadership, Boeing can enjoy a grace period with customers such as the government, thereby reducing the risk of losing major orders.
Robert “Kelly” Ortberg replaced Calhoun as CEO this month. Unlike previous company leaders, Ortberg is an outsider who previously ran aerospace manufacturer Rockwell Collins, where he earned a reputation for walking among workers on the factory floor and building relationships with airline and government customers.
“They are in transition from perhaps the worst leadership to one of the best,” Aboulafia said. “Given the regime change that is going on, I think people will give them some leeway.”
Boeing’s defense division has recently landed some major contracts, including supplying Apache helicopters to foreign governments, selling 50 F-15 fighter jets to Israel (a key part of a $20 billion deal) and building prototype surveillance aircraft for the Air Force as part of a $2.56 billion contract.
“These are strong tailwinds, but it will take some time for them (Boeing’s defense and aerospace business) to return to profitability,” Aboulafia said.
— DAVID KOENIG, AP business writer
