NASA decides against using Starliner to return astronauts—deals another blow to Boeing

NASA’s announcement on Saturday that it will not use a troubled Boeing capsule to return two stranded astronauts to Earth is another setback for the struggling company, although the financial damage may be less than the reputational damage.

Once a symbol of American engineering and technology, Boeing has seen its reputation damaged since two 737 Max planes crashed in 2018 and 2019, killing 346 people. The safety of its products was re-examined after a panel exploded on a 737 Max during a flight in January.

And now NASA has decided it’s safer to keep astronauts in space until February than risk using the Boeing Starliner capsule to take them to the International Space Station. The capsule is plagued by problems with its propulsion system.

NASA Administrator Bill Nelson said the decision to return the Boeing capsule to Earth empty was “a result of safety commitments.” Boeing has asserted that the Starliner is safe based on the latest tests of simulators in space and on the ground.

The space capsule program represents a small portion of Boeing’s revenue, but carrying astronauts is a high-profile job—just like Boeing’s work building Air Force One for the president.

“The whole thing is another black eye” for Boeing, aerospace analyst Richard Aboulafia said. “It’s still going to sting for a while, but it’s nothing they haven’t dealt with before.”

Boeing has lost more than 25 billion dollars since 2018 as its aircraft manufacturing business took place after those accidents. For the time being, the company’s defense and real estate side has provided a partial cushion, posting solid profits and flat revenue in 2021.

As of 2022, however, Boeing’s defense and aerospace division has also stumbled, losing $6 billion—slightly more than the company’s aircraft side during the same period.

The results were dampened by several fixed-price contracts for NASA and the Pentagon, including an agreement to build the president’s new Air Force One aircraft. Boeing found itself in trouble as the cost of those projects rose significantly above the company’s estimates.

The company recorded 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 rate improvement plans that we just have to finish before we do them,” former CEO David Calhoun said last year. “Don’t do it again.”

In 2014, NASA awarded Boeing a $4.2 billion fixed-price contract to build a vehicle to carry astronauts to the International Space Station after the space shuttles retire, and a $2.6 billion SpaceX contract.

Boeing, with more than a century of experience building airplanes and decades as a NASA contractor, was seen as the favorite. But the Starliner ran into technical issues that caused it to cancel some test launches, fall behind schedule and over budget. SpaceX has won the race to transport astronauts to the ISS, which it will accomplish in 2020.

Boeing was finally ready to carry astronauts this year, and Butch Wilmore and Suni Williams boarded the Starliner in early June for what was intended to be an 8-day stay in space. But a thruster failure and a helium leak led NASA to park the vehicle on the space station while engineers debated how to return it to Earth.

The company said in a regulatory filing that the latest collision with the Starliner caused a loss of $125 million through June 30, pushing the cumulative cost of the program to more than $1.5 billion. “The risk remains that we could record additional losses in the future,” Boeing said.

Aboulafia said the Starliner’s impact on Boeing’s business and finances would be modest — “not really a needle-moving project.” Even NASA’s $4.2 billion, multi-year contract is a tiny fraction of Boeing’s revenue, which reported sales of $78 billion last year.

And Aboulafia believes Boeing will enjoy a grace period with customers such as the government now that it is under new leadership, which has reduced the risk of losing major contracts. NASA Administrator Nelson said on Saturday that he was “100% confident that the Starliner will fly with the crew again.”

Robert “Kelly” Ortberg replaced Calhoun as CEO this month. Unlike the company’s recent CEOs, Ortberg is an outsider who once led aircraft manufacturer Rockwell Collins, where he developed a reputation for walking among workers on factory floors and building relationships with airline and government customers.

“They went from the worst leadership to some of the best,” Aboulafia said. “Given the changes in the regime, I think people will slow down a bit.”

Boeing’s defense division recently won major contracts. It is slated to supply Apache helicopters to foreign governments, sell 50 F-15 fighter jets to Israel for a total of $20 billion, and build surveillance planes for the Air Force under a $2.56 billion contract.

“Those are strong headwinds, but it’s going to be a while before they (Boeing’s defense business) return to profitability,” Aboulafia said.

-David Koenig, Associated Press business writer