NASA won’t use Boeing’s Starliner to fly astronauts home, another setback for the company

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

Once a symbol of American engineering and technological prowess, Boeing has seen its reputation tarnished since two 737 Max passenger planes crashed in 2018 and 2019, killing 346 people. The safety of its products has come under renewed scrutiny after a panel on the Max exploded during a flight in January of this year.

And now NASA has decided it would be safer to keep the astronauts in space until February than risk using the Boeing Starliner capsule that delivered them to the International Space Station. The capsule is plagued by propulsion system problems.

NASA Administrator Bill Nelson said the decision to send Boeing’s capsule back to Earth empty “is a result of a commitment to safety.” Boeing has insisted that the Starliner is safe, based on recent engine tests both in space and on the ground.

The space capsule program makes up a tiny fraction of Boeing’s revenue, but ferrying astronauts is a prestigious job — like Boeing’s work building the presidential aircraft Air Force One.

“This whole thing is another black spot” for Boeing, said aviation analyst Richard Aboulafia. “It’s going to hurt a little longer, 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 the disasters. For a while, the company’s defense and space business provided a partial cushion, posting strong profits and flat revenue through 2021.

But Boeing’s defense and space division also suffered losses as of 2022, losing $6 billion — slightly more than the company’s aerospace division during the same period.

Results were dragged down by several fixed-price contracts for NASA and the Pentagon, including a deal to build new presidential aircraft, Air Force One. Boeing found itself in a difficult position as costs for those projects rose far beyond the company’s estimates.

In the second quarter alone, the company reported a $1 billion loss on fixed-price government contracts, but the problem is not new.

“We have some 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 firm contract to build a vehicle that will carry astronauts to the International Space Station after the space shuttles are retired, and a $2.6 billion contract to SpaceX.

Boeing, with more than a century of experience building aircraft and decades as a NASA contractor, was seen as the favorite. But Starliner suffered technical setbacks that caused it to cancel some test launches, fall behind schedule and run over budget. SpaceX won the race to ferry astronauts to the ISS, which it did in 2020.

Boeing was finally ready to carry astronauts this year, with Butch Wilmore and Suni Williams launching aboard Starliner in early June for eight days in space. But engine failures and helium leaks forced NASA to park the vehicle at the space station while engineers debated how to get them back to Earth.

The company said in a regulatory filing that the latest Starliner issue had caused a loss of $125 million through June 30, bringing the program’s cumulative cost overrun to more than $1.5 billion. “There is a risk that we could record additional losses in future periods,” Boeing said.

Aboulafia said the impact of Starliner on Boeing’s operations and finances will be modest—“not really a dealbreaker.” Even NASA’s multiyear contract, worth $4.2 billion, is a relatively small slice of revenue for Boeing, which reported sales of $78 billion last year.

Aboulafia believes Boeing will be able to enjoy a grace period with customers such as the government now that the company has new management, reducing the risk of losing major contracts.

Robert “Kelly” Ortberg replaced Calhoun as CEO this month. Unlike recent CEOs, Ortberg is an outsider who previously ran aerospace manufacturer Rockwell Collins, where he gained a reputation for walking among employees on factory floors and building relationships with airline and government customers.

“They’re going from probably the worst executive leadership to one of the best,” Aboulafia said. “With the regime change that’s going on, I think people are going to cut them some slack.”

Boeing’s defense division has recently won several huge contracts. It is in line to deliver Apache helicopters to foreign governments, sell 50 F-15 fighter jets to Israel as part of a $20 billion deal and build prototype surveillance planes for the Air Force as part of a $2.56 billion deal.

“These are some positives, but it will take some time before (Boeing’s defense and space business) becomes profitable again,” Aboulafia said.

— DAVID KOENIG, AP Business Writer