Boeing Takes Additional $185 Million Earnings Charge for Starliner

Boeing Takes Additional $185 Million Earnings Charge for Starliner

Boeing released its third quarter 2021 financial statement today revealing that it is taking another charge against earnings to pay for the second uncrewed test flight of its Starliner commercial crew spacecraft. Boeing is still troubleshooting what went wrong in August when the OFT-2 test flight was delayed because of a problem with propulsion system valves. Starliner is being developed under a fixed price contract with NASA.

Brian West, Boeing Executive Vice President and Chief Financial Officer, said at the financial briefing today that third quarter revenue for its defense, space, and security sector was down slightly to $6.6 billion “primarily due to a $185 million earnings charge on our commercial crew Starliner program driven by the second uncrewed orbital flight test now anticipated in 2022 and the latest assessment of remaining work.”

Today’s action means the company has committed $595 million of its own money to pay for OFT-2, which was not part of the NASA contract. Boeing is flying the mission because of significant software and communications failures the first time it tried in December 2019.

OFT-2 is also proving to be a challenge.

Almost 20 months after the original OFT, Boeing was finally ready to launch OFT-2 on August 3, 2021. The spacecraft, with no one aboard, was on the pad at Cape Canaveral Space Force Station in Florida atop a United Launch Alliance Atlas V rocket. Then, just two hours before launch, Boeing announced a scrub because 13 oxidizer valves in the propulsion system failed to open.

Boeing’s uncrewed Starliner capsule atop a United Launch Alliance Atlas V rocket on the launch pad at Cape Canaveral Space Force Station the night before the scheduled Orbital Flight Test-2 (OFT-2) launch. August 2, 2021. Screengrab.

NASA is procuring Starliner and its SpaceX competitor, Crew Dragon, through Public Private Partnerships (PPPs) to ferry crews to and from the International Space Station (ISS).  NASA planned to use its space shuttle to resupply ISS with crews and cargo throughout its lifetime, but in 2004 President George W. Bush decided to terminate the shuttle as soon as construction of the ISS was completed. The agency had to come up with alternatives.

NASA created the commercial cargo and commercial crew PPP programs where they told companies what capabilities were needed and allowed the companies to decide how to fulfill them instead of dictating specifications and signing cost-plus contracts as in the past. This time NASA would share the development costs and guarantee purchase of a certain level of services. The agency envisioned a robust commercial economy in low Earth orbit with many companies needing cargo and crew services that would close the business case.

NASA insisted on two providers to ensure redundancy in case one of the systems failed and to keep prices down for future services through competition. Fixed price development contracts were awarded in 2014 — $4.2 billion to Boeing and $2.6 billion to Space X.

SpaceX Crew-3, L-R:  Raja Chari (NASA), Thomas Marshburn (NASA), Matthias Maurer (ESA), Kayla Barron (NASA). Photographer: Robert Markowitz

SpaceX’s Crew Dragon is already operational. The next flight, Crew-3, is awaiting launch on October 31 with three astronauts from NASA and one from the European Space Agency. One non-NASA mission, Inspiration4, has flown already and another, Ax-1, is coming up in February.

Starliner is far behind.

Each company had to conduct an uncrewed test flight demonstrating launch, rendezvous and docking with the space station, and landing, followed by a similar test flight with a crew. SpaceX completed those tests in 2019 and 2020. Its first operational mission, Crew-1, launched in November 2020.

Boeing flew its uncrewed Orbital Flight Test (OFT) in December 2019, but it did not go as planned and the company decided to refly it before putting people aboard. Since it is a fixed price contract, Boeing must absorb all the costs of the reflight, OFT-2.

Boeing’s Starliner capsule being moved into a protective tent after landing at White Sands, New Mexico following its Orbital Flight Test, December 2019. Screengrab. The spacecraft landed safely, but significant software and communications failures led Boeing to decide to refly the uncrewed mission before putting people aboard.

Boeing took a $410 million charge against earnings in the fourth quarter of 2019 shortly after OFT in case it decided on a reflight, as it later did.

With today’s $185 million, that makes $595 million the company is paying from its own resources. John Vollmer, Boeing Vice President and Program Manager for Commercial Crew, said at a briefing last week that the company is fully committed to executing the program:  “I will say we are 100% committed to fulfilling our contract with the government and we intend to do that.”

Troubleshooting the OFT-2 problems is taking time. NASA and Boeing announced last week that it will not launch until the first half of 2022. Three of the astronauts (two from NASA, one from JAXA) who were going to fly on the first two crewed Starliner flights, the Crew Flight Test (CFT) and Starliner-1, were recently reassigned to a SpaceX mission next fall.

A Boeing spokesperson told today that the “safety of the Starliner spacecraft, our employees and our crew members remains our number one priority and we are taking the time to work through the process now to set this system up for success on OFT-2 and all future Starliner missions.”

Vollmer said last week Boeing wants six months between flights. If OFT-2 is in the first half of 2022, CFT would not fly until the end of that year and Starliner-1 in 2023.

Boeing remains upbeat. It apparently believes it can still make a profit from selling Starliner services to NASA through the lifetime of the ISS and to users of whatever low Earth orbit space facilities succeed it. On Monday, Boeing joined with Blue Origin, Sierra Space and other companies in announcing plans to build an ISS successor, Orbital Reef, a “business park in space.” Starliner would be one of the two space transportation systems serving the facility (Sierra Space’s Dream Chaser is the other).

Illustration of Starliner approaching the Orbital Reef space station. Screengrab from Orbital Reef video.

They plan to have the baseline configuration in orbit later this decade, before the ISS reaches the end of its lifetime. The United States is currently committed to operating ISS with its international partners (Russia, Canada, Japan and 11 European countries) through 2024, but it is widely expected that will be extended to 2030.

NASA has embraced PPPs for many of its future human spaceflight endeavors, including a “commercial LEO” successor to ISS. Orbital Reef will be one of the contenders for that fixed price contract.

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