NASA Prioritizes Safety, Rejects Boeing Capsule for Astronaut Return

NASA's recent decision to avoid using Boeing's troubled capsule to bring back two astronauts marks another setback for the company. The financial impact might be less severe than the reputational damage. Once a symbol of American engineering, Boeing's reputation has suffered since two 737 Max crashes in 2018 and 2019, which killed 346 people.

NASA's Safety Concerns

NASA has opted to keep the astronauts in space until February rather than risk using the Boeing Starliner capsule. The capsule has faced issues with its propulsion system. NASA administrator Bill Nelson stated that sending the capsule back empty reflects a commitment to safety. Despite Boeing's insistence on the capsule's safety based on recent tests, NASA chose caution.

Boeing has experienced significant financial losses since 2018, amounting to over USD 25 billion due to its aircraft-manufacturing business struggles. The defence and space division had provided some relief with strong profits until 2021. However, since 2022, this division has also faced challenges, losing USD 6 billion.

Financial Struggles

The company's results have been negatively affected by several fixed-price contracts for NASA and the Pentagon. These include a deal to build new Air Force One jets. Rising costs for these projects have put Boeing in a difficult position. In the second quarter alone, Boeing recorded a USD 1 billion loss from fixed-price government contracts.

In 2014, NASA awarded Boeing a USD 4.2 billion contract to build a vehicle for astronaut transport to the International Space Station (ISS). SpaceX received a USD 2.6 billion contract for the same purpose. Despite Boeing's long history with NASA, technical setbacks delayed Starliner's progress, allowing SpaceX to win the race by ferrying astronauts in 2020.

Technical Setbacks

Boeing was finally ready to carry astronauts this year, and Butch Wilmore and Suni Williams launched aboard Starliner in early June for an intended eight-day stay in space. However, thruster failures and helium leaks led NASA to park the vehicle at the ISS while engineers debated how to return them to Earth.

The latest issue with Starliner caused a USD 125 million loss through June 30, pushing cumulative cost overruns on the program to more than USD 1.5 billion. "Risk remains that we may record additional losses in future periods," Boeing noted in a regulatory filing.

Impact on Business

Aerospace analyst Richard Aboulafia commented that Starliner's impact on Boeing's business and finances would be modest, calling it "not really a needle-mover." Even the USD 4.2 billion multi-year NASA contract is relatively small compared to Boeing's reported sales of USD 78 billion last year.

Aboulafia believes that under new leadership, Boeing might enjoy a grace period with customers like the government, reducing the risk of losing big contracts. Robert "Kelly" Ortberg replaced David Calhoun as CEO this month. Ortberg is known for his hands-on approach and building strong ties with airline and government customers.

New Leadership

"They are transitioning from perhaps the worst executive leadership to some of the best," Aboulafia said. "Given the regime change underway, I think people are going to give them some slack." Ortberg previously led aerospace manufacturer Rockwell Collins and is expected to bring positive changes.

Boeing's defence division has recently secured significant contracts, including providing Apache helicopters to foreign governments and selling 50 F-15 fighter jets to Israel as part of a USD 20 billion deal. Additionally, they will build prototype surveillance planes for the Air Force under a USD 2.56 billion contract.

Aboulafia noted that while these are strong tailwinds, it will take time before Boeing's defence and space business returns to profitability.