Boeing Takes Another $250 Million Charge for Starliner

Boeing is taking another $250 million charge against earnings to pay for cost overruns on the Starliner commercial crew program. The company is operating under a $4.2 billion fixed price contract with NASA through a Public-Private Partnership where Boeing retains ownership of the spacecraft and NASA purchases services once it is certified as safe for transporting NASA astronauts. That step remains elusive after three test flights and Boeing must cover the extra costs. The company now has spent $1.85 billion of its own money on the program.

New Boeing President and CEO Kelly Ortberg presented the company’s third quarter 2024 financial results today, but he had forewarned investors two weeks ago about the losses incurred on Starliner and other fixed-price government contracts in the Defense, Space & Security (BDS) division.

Then and again today Ortberg made clear that major changes are needed at Boeing to restore its legacy and position itself for the future.

But clearly, we are at a crossroads:

• The trust in our company has eroded.
• We’re saddled with too much debt.
• We’ve had serious lapses in our performance across the company which have disappointed many of our customers.

But, by the same token, we have great opportunities ahead:

• Our company backlog is roughly half-a-trillion dollars.
• We have a customer base that want us and need us to succeed.
• We have employees who are thirsty to get back to the iconic company they know, setting the standards for the products that we deliver.

His remarks did not address Starliner specifically, but the company’s third quarter 2024 10-Q filing with the Securities and Exchange Commission provided some detail including that another $250 million charge was taken in the July-September 2024 period.

On June 5, Starliner launched to the International Space Station with two NASA astronauts, Butch Wilmore and Suni Williams, on the Crew Flight Test (CFT) that NASA and Boeing hoped would lead to certification of the spacecraft in time for the first operational flight early next year.

The CFT flight followed two uncrewed tests. The first Orbital Flight Test (OFT) in 2019 did not go as planned, necessitating a second uncrewed test. The second test, OFT-2, in 2022 went well two-and-a-half years later. More problems emerged thereafter, however, and it was another two years before CFT.

High hopes that CFT would turn the program around quickly wavered as Starliner experienced helium leaks and thruster anomalies when docking with the ISS the day after launch. Ultimately NASA decided to leave Butch and Suni on the ISS and bring Starliner back to Earth empty.  Starliner landed safely on September 6, but Boeing now needs to diagnose and remedy the problems.

NASA Administrator Bill Nelson made clear that NASA wants, needs and expects Boeing to fix Starliner and Ortberg assured him they will.

Boeing confirmed to SpacePolicyOnline.com in July that they’d spent $1.6 billion at that point. Today’s $250 million charge brings the total to $1.85 billion. Boeing’s SEC filing warns: “Risk remains that we may record additional losses in future periods.”

NASA contracted with Boeing and SpaceX in 2014 to build two dissimilar crew space transportation systems to ferry astronauts to and from the ISS through Public-Private Partnerships. Boeing was awarded $4.2 billion, SpaceX $2.6 billion. The agency wanted two systems in order to ensure redundancy in case one was grounded for any reason, and competition since they were not buying the vehicles themselves, but services under a Firm Fixed Price contract. The companies have to pay for any cost overruns, not the government.

The agency agreed to buy a minimum of six flights from each company. The companies were expected to find non-NASA customers to close their business cases. SpaceX is succeeding in that regard, with five non-NASA missions (Inspiration4, Polaris Dawn, and Axiom-1, -2 and -3) accomplished already and more planned.

ISS crews rotate on roughly six-month schedules and NASA’s goal is to have one Starliner and one Crew Dragon per year, but with Starliner still not operational, it’s purchasing additional Crew Dragons.

Before CFT, NASA hoped for the first operational Starliner flight in February or at least August 2025, but already has decided to use Crew Dragon for those crew rotation flights.  Last week it updated its commercial crew plan saying that the “timing and configuration of Starliner’s next flight will be determined once a better understanding of Boeing’s path to system certification is established.”