 "Boeings, Starliner capsule, Starliner capsule, Starliner")
However, Boeing’s defense and aerospace division has also been weakening since 2022. At $6 billion, it lost slightly more than the company’s aircraft division during the same period | (Photo: PTI)
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 as prestigious a task as Boeing’s work building Air Force One’s presidential jets.
The whole thing is another blow for Boeing, said aviation analyst Richard Aboulafia. It will hurt for a little while longer, but it is 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.
However, Boeing’s defense and aerospace division has also been weakening since 2022. At $6 billion, it lost slightly more than the company’s aircraft division during 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 finish and never do again,” then-CEO David Calhoun said last year. “Never do them 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 been a NASA contractor for decades, was considered the favorite. But Starliner suffered technical setbacks that resulted in some test launches being canceled, it missed its schedule, and went 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 Sunita Williams launched aboard the Starliner in early June for a planned 8-day stay in space. However, 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 resulted in 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 could incur additional losses in future periods,” Boeing said.
Aboulafia said Starliner’s impact on Boeing’s business and finances will be modest but not truly disruptive. Even the $4.2 billion, multi-year NASA contract is a relatively small portion of revenue for Boeing, which reported revenue of $78 billion 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.
While these are strong tailwinds, it will take some time for Boeing’s defense and aerospace business to return to profitability, Aboulafia said.
(Only the headline and image of this report may have been edited by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
First published: August 25, 2024 | 7:07 am IS
