Boeing Takes Another Financial Hit Due to Starliner

In its quarterly earnings report today, Boeing acknowledged that delays in the Starliner program have cost it another $125 million. The company has had to spend more than $1 billion of its own money under a fixed-price contract with the government to develop the Starliner capsule to ferry astronauts to and from the International Space Station. The Crew Flight Test currently underway is a step towards certifying Starliner for operational flights, but technical challenges will delay the first post-certification mission at least until August 2025.

NASA entered into fixed-price contracts with Boeing and SpaceX in 2014 to develop “commercial crew” space transportation systems through Public-Private Partnerships. The government and the companies shared in development costs with the companies retaining ownership of the systems and NASA guaranteeing to purchase a certain amount of services. The companies were expected to find non-NASA customers to close the business case. SpaceX was awarded $2.6 billion, while Boeing got $4.2 billion.

The arrangement is working out for SpaceX, which has been flying Crew Dragon missions for NASA as well as private astronaut flights since 2020.

Boeing is struggling, though. An uncrewed Orbital Flight Test (OFT) in 2019 exposed significant technical problems. It was almost two years before the company was ready to repeat the uncrewed test in August 2021, but it was scrubbed just hours before launch because of corroded valves. That second uncrewed test, OFT-2, ultimately was successful in 2022 and Boeing and NASA were getting ready for a test flight with a crew, Crew Flight Test (CFT), in 2023 when additional problems emerged delaying it until last month.

CFT finally launched on June 5 with NASA astronauts Butch Wilmore and Suni Williams, who were supposed to dock with the ISS and stay for eight days. They remain aboard right now on an extended mission, however, while Boeing conducts tests to determine the cause of thruster failures and helium leaks during the one-day trip to the ISS. A date for their return has not been set.

Because it’s a fixed-price contract, Boeing has to pay for overruns. Between the fourth quarter of 2019 (the time of the OFT flight) and the second quarter of 2023 (when CFT was indefinitely delayed) it reported $1.14 billion in losses.

Today it released second quarter 2024 financial statements and held an earnings call. Nothing specific was said about Starliner during the presentation, but Boeing’s 10-Q Securities and Exchange Commission filing included the news about the additional $125 million loss.

Commercial Crew

National Aeronautics and Space Administration (NASA) has contracted us to design and build the CST-100 Starliner spacecraft to transport crews to the International Space Station (ISS). In the second quarter of 2022, we successfully completed the uncrewed Orbital Flight Test. During 2023, we increased the reach-forward loss by $288 primarily as a result of delaying the Crewed Flight Test (CFT) following notification by a parachute supplier of an issue identified through testing. The CFT launched on June 5, 2024, and docked with the ISS. The Starliner spacecraft had a minimum mission duration of 8 days. Its return to Earth was delayed to allow time to perform further testing of propulsion system anomalies. As a result of the CFT delays, during the three months ended June 30, 2024, we increased the reach-forward loss on the program by $125. At June 30, 2024, we had approximately $238 of capitalized precontract costs and $148 of potential termination liabilities to suppliers related to fixed-price unauthorized future missions. Risk remains that we may record additional losses in future periods.  – Boeing 10-Q SEC Filing, July 31, 2024. [dollars are in millions]

Space journalist Joey Roulette calculates that since 2016 the losses total “just over $1.6 billion.” He also reports that change orders by NASA added $326 million to the contract value.

This brings Boeing’s total Starliner costs to just over $1.6 billion since 2016, according to a tally from all its quarterlies. And Boeing’s NASA contract – awarded at $4.2 billion in 2014 – has increased by $326 million, according to contract modification data.

— Joey Roulette (@joroulette) July 31, 2024

Boeing confirmed the $1.6 billion figure to SpacePolicyOnline.com.

As part of the original contract, NASA agreed to buy six crew launch and reentry services each from SpaceX and Boeing, with the goal of flying one of each every year to support the 6-month crew rotations that keep the ISS permanently occupied. NASA wanted two systems to ensure redundancy and competition.

NASA must certify the spacecraft as safe for NASA astronauts before those operational or “post-certification missions” begin. SpaceX’s version of the Crew Flight Test, Demo-2, was in 2020 and the first operational flight, Crew-1, quickly followed. Their ninth, Crew-9, will launch next month.

Because of the Starliner delays, NASA had to buy additional Crew Dragons, a total of 14. SpaceX also flies non-NASA astronauts to orbit. Four missions with four crew members each — some private citizens, some government astronauts from other countries — have flown already and two more are scheduled this year.

By contrast, Boeing’s Starliner hasn’t been certified yet. NASA had hoped to begin operational flights next February, but announced last Friday that it will use another SpaceX Crew Dragon for the February crew exchange as Boeing continues to resolve the problems identified on CFT.  Starliner-1, the first operational mission, will wait for the next crew exchange in August 2025, although NASA is double-booking another Crew Dragon in case Starliner isn’t ready then either.

Boeing said in its SEC filing today that “Risk remains that we may record additional losses in future periods.”

Boeing’s Vice President and Program Manager for Commercial Crew Mark Nappi has said repeatedly that Boeing remains committed to the Starliner program.

The ISS will be decommissioned and deorbited around 2030 so NASA’s requirement for crew exchange services is dwindling and the agency likely will not need more than the six  post-certification missions it originally agreed to buy. Commercial space stations are expected to replace the ISS, however, and could be a market in the future.

Boeing reported second-quarter losses on other government fixed-price development contracts as well, a total of $1 billion in their Defense, Space, and Security segment for the KC-46A Tanker, T-7A, VC-25B, and commercial crew.

 

Note: this article was updated to state that Boeing has spent $1.6 billion of its own money on Starliner, a figure that was confirmed to SpacePolicyOnline.com by Boeing. As noted, the information was originally reported by Joey Roulette of Reuters who added that NASA also added $326 million to the contract due to change orders.