NASA’s announcement Saturday that it will not use its troubled Boeing capsule to return two astronauts to Earth was another setback for the struggling company, though the financial damage is likely to be less than the reputational damage.
Boeing, once a symbol of American engineering and technological ingenuity, suffered a tarnished reputation when two 737 Max planes crashed in 2018 and 2019, killing 346 people. The safety of its products came under renewed scrutiny after a panel on a Max exploded during a flight this January.
And now NASA has decided it’s safer to keep the Boeing Starliner capsule that takes astronauts to the International Space Station in space until February than risk using it. The capsule has been plagued with problems with its propulsion system.
NASA administrator Bill Nelson said the decision to send the Boeing capsule back to Earth empty was “a result of a commitment to safety.” Boeing has claimed the Starliner is safe based on recent thruster tests both in space and on the ground.
The space capsule program accounts for a tiny fraction of Boeing’s revenue, but transporting astronauts is a notable business, as is Boeing’s work building the Air Force One presidential jets.
“This whole thing is another black mark for Boeing,” said aviation analyst Richard Aboulafia. “It’s going to hurt a little bit more, but it’s nothing they haven’t dealt with before.”
Boeing has lost more than $25 billion since 2018 as its aircraft manufacturing business collapsed after those accidents. For a while, the company’s defense and space side provided a partial cushion, posting strong profits and steady revenue through 2021.
But since 2022, Boeing’s defense and space division has also stumbled, losing $6 billion — slightly more than the company’s aircraft side lost over the same period.
The results have been dragged down by several fixed-price contracts for NASA and the Pentagon, including a deal to build new Air Force One presidential jets. Boeing has found itself in hot water as costs for those projects have ballooned far beyond the company’s estimates.
The company reported a $1 billion loss on fixed-price public contracts in the second quarter alone, but the problem is not new.
“We have several fixed-price development programs that we should just finish and never do again,” then-CEO David Calhoun said last year. “Never do again.”
NASA awarded a $4.2 billion, firm-fixed-price contract to Boeing and a $2.6 billion contract to SpaceX in 2014 to build a vehicle to carry astronauts to the International Space Station after the retirement of the space shuttles.
Boeing, with more than a century of experience building aircraft and decades as a NASA contractor, was seen as the favorite. But Starliner has suffered technical glitches that have forced it to cancel some test launches, fall behind schedule and over budget. SpaceX won the race to ferry astronauts to the ISS, which it accomplished in 2020.
Boeing was ready to carry astronauts by the end of the year, and Butch Wilmore and Suni Williams boarded the Starliner in early June for an eight-day stay in space. But thruster failures and helium leaks have led NASA to park the craft at the space station while engineers debate how to get them back to Earth.
The latest Starliner-related setback caused a loss of $125 million through June 30, the company said in a regulatory filing, bringing the cumulative cost overrun on the program to more than $1.5 billion. “There remains a risk that we may record additional losses in future periods,” Boeing said.
Aboulafia said Starliner’s impact on Boeing’s business and finances would be modest, “not really going to move the needle.” Even the $4.2 billion, multiyear NASA contract is a relatively small chunk of revenue for Boeing, which reported $78 billion in sales last year.
Aboulafia believes that Boeing will enjoy some exemption from dealing with customers such as the government under new leadership, thus reducing the risk of losing major contracts.
Robert “Kelly” Ortberg replaced Calhoun as CEO this month. Unlike the company’s recent CEOs, Ortberg is an outsider who previously ran aerospace manufacturer Rockwell Collins and gained a reputation for circling workers on factory floors, building ties with airline and government customers.
“They are transitioning from perhaps the worst executive leadership to one of the best,” Aboulafia said. “I think people will show them some tolerance, considering that regime change is underway.”
Boeing’s defense division has won some big contracts recently, including to supply Apache helicopters to foreign governments, to sell 50 F-15 fighter jets to Israel as the bulk of a $20 billion deal, and to build prototype surveillance aircraft for the Air Force under a $2.56 billion contract.
“These are strong tailwinds, but it will take some time to get (Boeing’s defense and space business) back to profitability,” Aboulafia said.